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wundayatta's avatar

How should we deal with the fiscal cliff? What do you think will happen?

Asked by wundayatta (58377 points ) November 13th, 2012

So Congress made a deal a while back. If they couldn’t come to an agreement about how to balance the budget and reduce the deficit, then there would be automatic budget cuts across the board and the Bush era tax cuts would be removed and everyone’s taxes would go up.

It’s the kind of economic medicine they gave to Greece. It results in a huge recession and steep loss in economic activity. We’d expect to lose as much as 5% of economic output for years. It’s very harsh medicine; more likely to kill the patient than save it.

So we want a gentler way to deal with the deficit. The Democrats want to tax wealthy people at a higher rate and make cuts in spending. The Republicans want to cut wealthy people’s taxes and make very steep cuts in spending that will hurt poor people more than anyone else.

How do you think we should solve this problem?

How do you think our politicians will end up resolving the problem?

If you want to help our President, this website may be a place to start. You can find an action kit to organize people to revoke the tax cuts for the richest 2%.

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14 Answers

bolwerk's avatar

The tax increases are generally good, since they pay down the debt these so-called conservatives keep complaining about.* The spending cuts are generally bad (right now) because they reduce economic activity and therefore shrink the economy.

* you know, after running it up largely on their own

jerv's avatar

As I recall, it was the sort of cuts that the Republicans propose that, if they didn’t cause the nosedive, they hit the afterburners on the way down.

Taxing the rich… well, if not for the fact that they do things that break the whole theory of progressive taxation in the first place, that would not be necessary. Hell Warren Buffet doesn’t do those tricks yet he wants his taxes to go up! Stiull, I think that the only real changes to taxes that are necessary are to return the capital gains tax back to 20% (possibly keeping it at 15% for the first $250k in long-term capital gains so as not to hurt the smaller investors), add some tax brackets so that those earning $20m pay a higher rate than those earning only $800k,
But much of it is businesses and not people. Make any multinational business that makes money here pay money here. If you want to conduct business here then you will be taxed based solely on your US revenue and your US overhead. Want to shuffle the books so that you look like you earned all of your money abroad, or like your expenditures here were deductible enough to bring your tax bill to zero? Close all your plants, offices, and stores here, and have your goods/services banned! And think of how many small businesses might actually see their taxes go down once BoA and the like start paying corporate taxes!

I don’t think any problems will get solved though. Politicians are more partisan than patriotic, and the two parties are evenly matched enough that gridlock is the rule rather than the exception. The corporations have too much to lose by solving anything.

Or we could just split the nation in half again and let the Republicans have their own nation to ruin without affecting us Americans. It seems that most of their worshipers already live someplace that is bitter about being forced back into the US >140 years ago anyways.

ETpro's avatar

@jerv Realistically, you won’t get much revenue from a new bracket taxing incomes of $20 million or more. I don’t know of anyone it would affect. People with income in that realm virtually all earn it on long-term capital gains, not wages, tips and salaries.

Polling between Nov 8 – 11 shows that if we do go off the cliff, 53% or the electorate will hold the Republicans in Congress to blame while only 29% say it would be the President’s fault. That would be a terrible legacy to carry into the 2014 mid-terms and the 2016 Presidential Race. If a deal doesn’t get done to avoid the carnage, the GOP can thanks their new-found love affair with the Tea Party and the crop of ideologues it propelled into the House of Representatives in 2010.

jerv's avatar

@ETpro Many earn enough to be well beyond the top tax bracket (the top bracket for 2012 is a mere $388,350), but you are correct that it would be negligible compared to returning the capital gains rate to 20%.

JLeslie's avatar

I think if the Republicans won’t budge Obama should let everything expire. Wasn’t it under Clinton that the republicans would not agree to his deal for the budget so the government shut down for a few days. Gingrich finally saw Clinton would not back down and the budget was passed. Or, do I have that confused with a different administration? If I am right, that is also the balanced budget the Republicans try to tout as being balanced because a Republican congress decided the budget. LOL what a joke.

bolwerk's avatar

It’s desirable to avoid that because it is incredibly wasteful, but, yes, Newt did pull that off. Democrats mostly cower in the face of Republikan opposition though.

Yetanotheruser's avatar

@bolwerk I think it’s Republicans who are cowering in the face of being “primaried” by the Tea Party.

JLeslie's avatar

@bolwerk You see it as Newt pulling it off? I see it as Clinton holding strong to Newt’s willingness to harm the country to get his way out of hate for Clinton and the Democrats and his own delusions about ballancing the budget.

Now I hear in the media the Republican politicians agree there needs to be more taxation of the top 1–2%. WTH does that mean? That they wanted to win by telling republican people at large that it doesn’t make sense to tax the top earners more because it hurts the economy, but now that the election is over they can stop telling that lie. It all seems like such total bullshit.

bolwerk's avatar

@JLeslie: To clarify, I see it as Newt pulling off a government shutdown, not achieving something useful. In regard to your second paragraph, I guess it has sunk in that their pre-election delusions of a power grab didn’t happen, and now they have to negotiate.

rojo's avatar

First offf, I am for a total elimination of the present tax system and implementation of a new one based on consumption. That being said, I would like to see a compromise with an increase of the tax rate on those over 250K to somewheres around, oh, lets say 100% on anything over said 250k and a 75% cut in military spending including closure of somewhere around 90% of all overseas bases. In addition I would like to see the elimination of such entitlement programs as free heath care for representatives, elimination of any kind of retirement benfits for them and the executive; no more free haircuts and heath spa’s and you only get three (3) assistants on our tab; any more you pay for out of your pocket. Finally, a ban on any kind of “gift” of any kind from anyone or any entity. We pay you a salary you fucks and anything else you get is a bribe! How hard is this to understand!

ETpro's avatar

@rojo A consumption tax is extremely regressive. Those who earn at or below the Federal poverty level must spend all their income on things that get taxed. Compare a hedge fund manager bringing in $1 billion per year. The extremely wealthy can live like kings, buying a new Ferrari every year, etc., and still spend just a tiny portion of their earnings on things that are subject to the sales tax.

jerv's avatar

@ETpro Don’t bring facts or math into it.

ETpro's avatar

@jerv I don’t think @rojo is one of those stuck in the alternate universe where down = up, massive deficit spending = fiscal responsibility and fair means a huge systemic advantage for those who have the most already.

jerv's avatar

@ETpro I didn’t mean to imply that. It’s just that these arguments tend to bring out the type of people that are, and (since this isn’t a private conversation) they may take exception to your words.

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