Posts tagged ‘White House’

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 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”!

December 6, 2011

Befriend a Congressman, Get a Pardon

ProPublica has released an extensive report, statistically analyzing nearly 500 pardon applicants during the Bush administration, and found that white applicants, were nearly four times as likely to receive pardons as all minorities combined. Applicants with a member of Congress in their corner were three times as likely to win a pardon as those without such backing, and marital and financial stability of applicants plays a heavy role in the final decision. Is this just another sign that our justice system isn’t exactly fair? Kevin Zeese, President of Common Sense for Drug Policy weighs in.

November 22, 2011

Allison Krauss, Darius Rucker, Lyle Lovett and other legends of Country Music perform at The White House

The President and First Lady host music legends and contemporary artists at the White House for a celebration of country music.

 

November 22, 2011

Despite Super Committee setback President Obama still hopes Republicans will eventually do the right thing

Despite In an interview today, President Obama says to Al Sharpton: ‘My Religious Faith‘ Makes Me Believe Republicans Will Agree to Raise Taxes

 
November 18, 2011

Obama heralds ‘remarkable’ Boeing deal, largest sale in Boeing history!

US President Barack Obama claims a share of the credit as Boeing sealed its largest-ever commercial aircraft order to build 230 jets worth $21.7 billion for Indonesia‘s Lion Air

October 26, 2011

That 80’s Show: Herman Cain’s Creepy Media Blitz

Chief of Staff Mark Block is featured in a bizarre, unlisted video posted on Herman Cain's official YouTube page.

”Smoke ‘em if you got ‘em.”  Herman Cain launches a new media blitz beginning with a strangely creepy campaign ad starring his campaign manager

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