Posts tagged ‘John Boehner’

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)

December 22, 2011

Boehner Concedes On Payroll Tax Cut Extension

Finally… The President Kicked their ass!

December 20, 2011

Great News! – The Tea Party Tax Increase is Coming – Don’t You just LOVE those IDIOTS!

Led by the Tea Partiers in the Republican Party – the House of Representatives is expected to vote down a 2-month extension of the payroll tax cut for 160 million Americans. It was an extension agreed on by both Republican and Democratic Senators – one that was approved by the White House – and one that Boehner himself supported when it initially passed on Saturday. Shortly after though – his Tea Party Republicans went into revolt. They’re unhappy that the plan is only a 2-month extension – and unhappy that a lot of the far right-wing goodies had been stripped out of the bill in the Senate. So, Tea Party Republicans voted to screw-over 160 million Americans tonight with a $1,000 tax hike that kicks in in two weeks, and is ONLY paid by people making less than $106,000 a year. You can call it the “Tea Party Tax Increase”!

November 18, 2011

“Honest Graft” – How Our Representatives enrich themselves through Congressional Insider Trading

Did You Know that Members of Congress can legally make trades on non-public information they obtain during their official duties?  CBS News’ ‘60 Minutes‘ reported this on Sunday night. Branded ‘honest graft,’ lawmakers can use market-moving information that they learn in congressional committees to trade on the stock market — actions that likely would carry stiff jail and civil penalties if they did not hold public office.

In one example, Steve Kroft reports that Rep. Spencer Bachus (R-AL), now the chair of the House Financial Services Committee, bet against the market in the days before the 2008 financial crisis hit — after getting ‘apocalyptic briefings’ from Fed Chairman Ben Bernanke and then-Treasury Secretary Hank Paulson. Kroft also raises questions about the trading patterns of Speaker of the House John Boehner and House Minority Leader Nancy Pelosi — and the real estate purchases of other senators and representatives.

The report relies heavily on the work of Peter Schweizer, a fellow at the conservative Hoover Institution, whose work ’60 Minutes’ independently verified. “This is a venture opportunity,” Schweizer told ’60 Minutes.’ “This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family.”

Nancy Pelosi fires back at report on ‘insider trading’ CBS raises questions of conflict of interest among Republicans and Democrats alike in Congress msnbc.com and NBC News updated 41 minutes ago A television report that questioned whether members of Congress are making investment decisions based on insider information drew a heated response from former House Speaker Nancy Pelosi, one of those highlighted. A report on CBS’ “60 minutes” on Sunday said Pelosi was among several lawmakers — including Republicans such as House Speaker John Boehner — who had profited from transactions that raised the possibility of conflicts of interest.

November 13, 2011 7:06 PM Congress: Trading stock on inside information? (CBS News) Washington, D.C. is a town that runs on inside information – but should our elected officials be able to use that information to pad their own pockets? As Steve Kroft reports, members of Congress and their aides have regular access to powerful political intelligence, and many have made well-timed stock market trades in the very industries they regulate. For now, the practice is perfectly legal, but some say it’s time for the law to change. The following is a script of “Insiders” which aired on Nov. 13, 2011. Steve Kroft is correspondent, Ira Rosen and Gabrielle Schonder, producers.

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