Posts tagged ‘Government’

December 28, 2012

The Never-ending Fiscal Cliff Negotiations for Dummies (Updated)

The Never-ending Fiscal Cliff negotiations

President Obama has cut his trip to Hawaii short to meet with congressional leaders in hopes of a last-minute effort to avoid the upcoming “fiscal cliff”.

The Fiscal Cliff Explained

“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.

Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, a rollback of the “Bush tax cuts” from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron’s, over 1,000 government programs – including the defense budget and Medicare are in line for “deep, automatic cuts.”

In dealing with the fiscal cliff, U.S. lawmakers have a choice among three options, none of which are particularly attractive:

  • They can let the current policy scheduled for the beginning of 2013 – which features a number of tax increases and spending cuts that are expected to weigh heavily on growth and possibly drive the economy back into a recession – go into effect. The plus side: the deficit, as a percentage of GDP, would be cut in half.
  • They can cancel some or all of the scheduled tax increases and spending cuts, which would add to the deficit and increase the odds that the United States could face a crisis similar to that which is occurring in Europe. The flip side of this, of course, is that the United States’ debt will continue to grow.
  • They could take a middle course, opting for an approach that would address the budget issues to a limited extent, but that would have a more modest impact on growth.

Can a Compromise be Reached?

The oncoming fiscal cliff is a concern for investors since the highly partisan nature of the current political environment could make a compromise difficult to reach. This problem isn’t new, after all: lawmakers have had over a year to address this issue, but Congress – mired in political gridlock – has largely put off the search for a solution rather than seeking to solve the problem directly. In general, Republicans want to cut spending and avoid raising taxes, while Democrats are looking for a combination of spending cuts and tax increases. Although both parties want to avoid the fiscal cliff, compromise is seen as being difficult to achieve – particularly in an election year. Currently, it appears that a meaningful deal won’t be reached until after the December 31 deadline.

The most likely outcome is another set of stop-gap measures that would delay a more permanent policy change. Still, the non-partisan Congressional Budget Office (CBO) estimates that if Congress takes the middle ground – extending the Bush-era tax cuts but cancelling the automatic spending cuts – the result, in the short term, would be modest growth but no major economic hit.

Possible Effects of the Fiscal Cliff

If the current laws slated for 2013 went into effect permanently, the impact on the economy would be dramatic. While the combination of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion, the CBO also estimates that the policy would reduce gross domestic product (GDP) by four percentage points in 2013, sending the economy into a recession (i.e., negative growth). At the same time, it predicts unemployment would rise by almost a full percentage point, with a loss of about two million jobs.

A Wall St. Journal article from May 16, 2012 estimates the following impact in dollar terms: “In all, according to an analysis by J.P. Morgan economist Michael Feroli, $280 billion would be pulled out of the economy by the sunsetting of the Bush tax cuts; $125 billion from the expiration of the Obama payroll-tax holiday; $40 billion from the expiration of emergency unemployment benefits; and $98 billion from Budget Control Act spending cuts. In all, the tax increases and spending cuts make up about 3.5% of GDP, with the Bush tax cuts making up about half of that, according to the J.P. Morgan report.” Amid an already-fragile recovery and elevated unemployment, the economy is not in a position to avoid this type of shock.

The Term “Cliff” is Misleading

It’s important to keep in mind that while the term “cliff” indicates an immediate disaster at the beginning of 2013, this isn’t a binary (two-outcome) event that will end in either a full solution or a total failure on December 31. There are two important reasons why this is the case:

1) If all of the laws went into effect as scheduled and stayed in effect, the result would undoubtedly be a return to recession. However, Congress continues to work toward a deal that will alleviate the effects in some form.

2) Even if the deal does not occur before December 31, as appears likely, Congress can – and almost certainly will – act to change the scheduled laws retroactively to January 1 after the deadline.

At the same time, even a “solution” isn’t necessarily positive, since a compromise will likely involve higher taxes or reduced spending in some form – both of which would help reduce the debt, but would be negative for economic growth.

With this as background, it’s important to keep in mind that the concept of “going over the cliff” is largely a media creation, since even a failure to reach a deal by December 31 doesn’t mean that a recession and financial market crash would necessarily occur.

(Source – About.com)

January 30, 2012

Andrew Breitbart: Champion of Right Wing Hollywood. Cross Burning Victims? Not So Much.

Anti-racist author, activist and teacher Tim Wise on racism, the history and social perception of government programs, group based failure and more talk about everyone’s favorite whipping boy, Andrew Breitbart.

For the rest of the Tim Wise interview…

check out: http://majority.fm/2012/01/30/130-tim-wise-on-racism-obama-ron-paul/

December 11, 2011

Clash of the Intellectual Midgets – Another GOP debate provides much comic relief

One thing is for certain, there have been so many GOP debates, it’s starting to feel like watching a pro sports season.  Maybe they should make their own league, but what the hell would they call it?  Surging frontrunner Newt Gingrich fought off heavy attacks in a presidential debate from Republican rivals who questioned his judgment.

December 8, 2011

“It’s Beginning to look alot like Gingrich” a fantastic Christmas parody about ole’ Newt

A Merry Gingrich and a Happy Newt Year!!! Tis the season of the GOP Primaries, and they are desparately searching for a Chosen One. I hope this one doesn’t have any baggage.

December 2, 2011

Republican’s trying to Keep torture in the hands of Congress

There is a bill in the US Senate called The National Defense Authorization Act that is being debated in Congress. The bill could give the president the power to imprison American citizens without a court hearing. President Obama has said he will veto the bill if it should pass. But how will Senate Bill 1867 affect Americans at home and abroad? Doctor Jeff Kaye, blogger and TruthOut Contributor, tells us what this could mean for Americans. 

November 27, 2011

Democracy in China = Limited choice in China’s village ballots

This year, like every year since the early 1980s, Chinese villages will hold local elections. The practice, which began during the country’s period of political and economic reforms, allows anyone over the age of 18 to run, but in many villages the ballot sheet is limited to a single candidate.  Despite the lack of choices, elections still move forward, with even unopposed candidates campaigning as in any other election.

November 20, 2011

Ron Paul: Flawed U.S. policy contributed to 9/11

Rep. Ron Paul, who is statistically tied in first in the Iowa polls among the 2012 GOP presidential candidates, spoke with Bob Schieffer on how America‘s flawed policies contributed to 9/11, his stance on dealing with Iran, and the dismantling of key government institutions.

November 17, 2011

You Gotta Be Kidding Me…Rick Perry wants to debate Nancy Pelosi…. How Can You have a battle of wits with an unarmed man?

Republican presidential candidate Gov. Rick Perry challenged House Minority Leader Nancy Pelosi to a debate, but on Thursday she listed several reasons why she can’t.

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