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The Fiscal Cliff

 
Bert Bates
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Over the years in M.D., we've had difficulty keeping discussions of interesting topics civil. It's been hard to discuss politics, religion and so on.

Here's maybe a slightly different approach. Below is a link to a page from MoveOn.org that discusses the specific implications of the "looming fiscal cliff". I guess most people would say that MoveOn tends to lean democratic. With that said, it does seem that this "5 points" discussion ought to be pretty darned verifiable. Assuming the MoveOn article is accurate, then it seems folks could have meaningful discussions based on facts, not so much on partisanship.

I guess there has been a consistent thread running through politics for a while now for "fact checking" and for the notion of debate that's fact-based on spin based. My guess is that if everyone limited their debates and discussions to facts, we'd still have our disagreements, but maybe we'd end up with better results?

So, here's the link:

http://front.moveon.org/so-what-the-heck-is-that-fiscal-cliff-thing-all-about-anyway/?sdf=sdfds

Should we be afraid of the "fiscal cliff" or should we welcome it as a way to break Washington gridlock?
 
Bear Bibeault
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Required reading for participating in this topic:



(I wish I had this in a higher resolution. Anybody?)
 
Ulf Dittmer
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Both, I think.

Afraid, because if both the spending cuts and the expiration of the tax cuts come to pass -as is currently the law- another recession seems unavoidable.

Welcome, because presumably this acts as a wake-up call to politicians in DC.

As regards the article, I think it's disingenuous towards the GOP by blaming it pretty much exclusively for bringing about the present situation. Neither side was (is?) in the mood for compromise, so both agreed to point a loaded pistol at the US economy at a time after the election, when presumably all the pre-election rhetoric could safely be ignored (GOP lawmakers had already taken all but an oath not to raise taxes at the time). It was a short-term solution born out of political expediency, for both sides. As such, it's not dissimilar to various schemes employed across the EU to keep a number of Euro economies afloat, all the while hoping that they don't blow up before more drastic measures become palatable to voters at some later point in time. It's wishful thinking all around, and IMO impossibly hard to say what chance of success it has.
 
Greg Charles
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There are only two ways to cut the deficit: decrease spending and raise revenue. Neither is ever popular. It's the kind of thing politicians lose their jobs over, even if they were only trying to be realistic and responsible, so they try to weasel out of it if they can. So that's nothing new.

That said, I think it's time for Republicans to compromise on increasing taxes for the wealthy. The tax codes were confiscatory towards ultrahigh incomes when Reagan reformed them, but subsequent Republican administrations trying to emulate Reagan's success have now skewed the tax code way too far in favor of the wealthy, and certainly much more than is the case anywhere in Europe. It's time to re-balance. Republicans argue that many of the wealthy are job creators, and raising their taxes will affect jobs, but they provide very little evidence to support this claim. The economists I've seen quoted consider a modest tax increase geared towards upper incomes to be the least impactful of the deficit reducing measures.
 
Pat Farrell
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Move-on.org is not democratic, but rather Democratic. Its a pro-Democratic party, left-oriented site. Which is cool if you want that, but we should be careful with the terms.

Its not a cliff. That is a silly metaphor that media has glommed onto because they can't write well enough to explain complex ideas to the voters, or maybe to the readers and watchers. Its a deadline that our politicians set for themselves because they are too venal to actually decide policy. Of course, deciding (by voting) on policy is what their jobs are. Most politicians seem to think that their jobs are to get themselves re-elected.

My betting line is:
60% chance that they will extend the deadline
20% chance they will do a half-assed job and declare that the deadline was met.
10% chance they will actually do a credible job of setting a policy that with tweaks will actually work on matching income (taxes) with spending.
10% chance that they do nothing and we fall over "the cliff" and into a giant recession

 
Pat Farrell
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Greg Charles wrote: The tax codes were confiscatory towards ultrahigh incomes when Reagan reformed them


Lets put this into some perspective. I graduated from college in 1974. By 1978 or so, I had 4 years of experience. I was good, but I wasn't senior. And while I made good money, I was by no means in a "ultra high income". I was making about what other four years out of college folks were making. Maybe I was smarter, better looking, and worked harder, but I was not making much more than all my buddies.

At lunch in 1978, we always talked about tax shelters. We didn't talk about the new Porsches, Audis, Lincolns and Cadillacs, that we were going to buy, we talked about buying railroad cars and leasing them to the railroads and how to buy rental real estate.

Reagan convinced Congress to lower rates and remove loopholes. It was a great deal for all. It worked and the economy grew.

But over the past 30 years, Congress has written literally tens of thousands of pages of new loopholes for which ever set of fat cats were giving money to whichever side was in power. Both the Democrats and the Republicans have done this, over and over. Its equal opportunity graft.

The Democrats got huge amounts of money from the unions, Wall Street, trial lawyers and Hollywood types, and put in tons of loopholes for them. The Republicans got huge amounts of money from business PACs and more recently billionaires, and put in tons of loopholes for them.

 
Martin Vajsar
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Bear Bibeault wrote:(I wish I had this in a higher resolution. Anybody?)

Using Google Image Search I landed here: http://i.imgur.com/aTi7B.jpg

Is it big enough?
 
Peter Rooke
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Should we be afraid of the "fiscal cliff" or should we welcome it as a way to break Washington gridlock?

Think we should always be wary of Politicians!
I cannot express a meaningful opinion on American politics or economic matters, but this sounds like the classic Hayek / Keynes argument...

Your a banker - Yes Minster, BBC
 
Pat Farrell
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Peter Rooke wrote: this sounds like the classic Hayek / Keynes argument...


One can dream, but there are no well founded intellectual arguments in the US fight. The GOP claims to be fiscally responsable, but their last President pushed for (1) Medicare Part D (drugs) a huge unpaid for entitlement expansion (2) a huge increase in Federal employment (TSA and DHS) (3) two unpaid for wars and (4) tax cuts. One might argue that Bush was Keynesian. In contrast, the Democrats will tolerate no changes to Medicare and Social Security when demographics shows that without either raising taxes a huge amount, or cutting benefits, the retiring baby boomers will crush the programs and the US economy.

I'd love a good Keynes vs Hayek argument, but instead, we get pandering.
 
Peter Rooke
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And more dept!
 
Andy Jack
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Bigger Image -
Here - Love these !

I had committed some of these myself and it helps to keep my thinking clear.

 
Frank Silbermann
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Pat Farrell wrote:Move-on.org is not democratic, but rather Democratic. Its a pro-Democratic party, left-oriented site. Which is cool if you want that, but we should be careful with the terms.

Rather than leaning towards the Democratic Party I would say that among members of the Democratic voter base it leans towards the left side of that group.
 
Frank Silbermann
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We have to raise taxes for the wealthy and cut spending. I don't think it's as big a fiscal cliff as people think, because most of the investments wealthy people make with their profits these days seems to be overseas anyway.
 
I agree. Here's the link: http://aspose.com/file-tools
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