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The Fiscal Cliff? Let's Pass Right Over It
RCM ^ | 07/24/2012 | William Gale

Posted on 07/25/2012 5:03:47 AM PDT by SeekAndFind

At the end of this year, the U.S. economy faces the so-called "fiscal cliff": the Bush tax cuts will expire, and as a result of the 2011 deal that raised the debt ceiling, automatic spending cuts will begin. Policymakers are considering how to respond, given the weak prospects for the economy in the short-run, and the dismal prospects for the federal budget in the medium - and long-term. President Obama has proposed extending most of the Bush-era tax cuts, but not the tax rate cuts for the highest-income households, whereas Congressional Republicans would like to extend all of the tax cuts.

A better approach would be to go over the fiscal cliff - that is, let the tax cuts expire and the automatic spending cuts occur - and to enact a temporary stimulus package.

Going over the cliff is the only way to get the economy on a good long-term budget path with a deficit reduction package that balances revenue increases and spending cuts.

It would put the economy on a better long-term path through cutting deficits by about $4 trillion over the next 10 years relative to current policy and by stabilizing the ratio of debt to GDP. This is no small feat. It would be the opposite of "kicking the can down the road," which is what Congress has done in the past and has been roundly criticized by experts and others.

It is the only way to get a deficit reduction package that is fairly balanced between spending cuts and revenue increases. About 90 percent of Republicans in Congress have signed the "No New Taxes" pledge. This is a mainstream Republican position, not some fringe part of the party. The signers pledge to oppose any net tax increases, regardless of the situation. (Think about this: even if we were being invaded and needed revenues to defend the homeland, the Pledge would require its signees to eschew tax increases.)

That means that, although an overwhelming majority of Americans - 70 percent in a recent Pew survey - would like to see revenues account for a significant share of a long-term budget agreement, there is no way to achieve that outcome via a budget "deal" in the current situation. Going over the cliff solves that problem, raising revenue by about $2.8 trillion over the next decade. And, of course, we don't need a vote to achieve that. Just doing nothing - letting the tax cuts expire - suffices.

Going over the fiscal cliff does create two problems, however, both of which are solvable.

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TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: fiscalcliff

1 posted on 07/25/2012 5:03:58 AM PDT by SeekAndFind
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To: SeekAndFind

The “fiscal cliff” was engineered by the progressives. It’s designed to force the republicans to “compromise” or else the economic chaos will be blamed on them.


2 posted on 07/25/2012 5:18:22 AM PDT by DBrow
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To: DBrow

I don’t really know what will happen if we go over the fiscal cliff, but I doubt it will be as bad as people fear. I’m willing to take the chance and put up with the tax increase half of the deal to get real spending cuts


3 posted on 07/25/2012 7:13:18 AM PDT by Stirner
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To: SeekAndFind; ding_dong_daddy_from_dumas; stephenjohnbanker; DoughtyOne; Gilbo_3; NFHale; Impy; ...
RE:”At the end of this year, the U.S. economy faces the so-called “fiscal cliff”: the Bush tax cuts will expire, and as a result of the 2011 deal that raised the debt ceiling, automatic spending cuts will begin. Policymakers are considering how to respond, given the weak prospects for the economy in the short-run, and the dismal prospects for the federal budget in the medium - and long-term. President Obama has proposed extending most of the Bush-era tax cuts, but not the tax rate cuts for the highest-income households, whereas Congressional Republicans would like to extend all of the tax cuts.
A better approach would be to go over the fiscal cliff - that is, let the tax cuts expire and the automatic spending cuts occur - and to enact a temporary stimulus package.
.......
It is the only way to get a deficit reduction package that is fairly balanced between spending cuts and revenue increases. About 90 percent of Republicans in Congress have signed the “No New Taxes” pledge. This is a mainstream Republican position, not some fringe part of the party. The signers pledge to oppose any net tax increases, regardless of the situation. (Think about this: even if we were being invaded and needed revenues to defend the homeland, the Pledge would require its signees to eschew tax increases.)
That means that, although an overwhelming majority of Americans - 70 percent in a recent Pew survey - would like to see revenues account for a significant share of a long-term budget agreement, there is no way to achieve that outcome via a budget “deal” in the current situation. Going over the cliff solves that problem, raising revenue by about $2.8 trillion over the next decade. And, of course, we don't need a vote to achieve that. Just doing nothing - letting the tax cuts expire - suffices.

This seems to be the plan.
I fully expect a re-elected Obama to veto an extension and blame Republicans. If Republicans take the Senate (and keep the house) they can re-pass the tax cuts using budget reconciliation so they dont need 60.

But the bigger problem is that Republicans wont have the guts to cut spending, except maybe these ‘automatic’ spending cuts that they passed and now disown part of (the Defense cuts.) Lots of fingerpointing coming.

4 posted on 07/25/2012 7:29:32 AM PDT by sickoflibs (Romney is still a liberal. Just watch him. (Obam-ney Care ))
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To: SeekAndFind

The tax cuts expiring will hurt my company. So much we have been spending money this year, knowing that we will not be spending any where near that if the cuts expire.


5 posted on 07/25/2012 8:22:12 AM PDT by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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