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View Diary: What is the Fiscal Cliff, and Why do they Fear it? (55 comments)

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  •  IMO, it's a manufactured excuse to keep pouring (10+ / 0-)

    money on the Pentagon while stripping it from everywhere else - especially from any program that might actually help someone who needs it. IOWs, I'm right there with you jamess.

    •  They created the Problem (7+ / 0-)

      They need to solve it.

      They need to Raise the Revenues to solve it.


      thanks OPOL.


      Isn't it time to fix the Filibuster?
      -- Here's how.

      by jamess on Thu Nov 08, 2012 at 05:59:44 AM PST

      [ Parent ]

      •  Please explain how to raise (2+ / 0-)
        Recommended by:
        nextstep, VClib

        $728 billion or so in revenue in the next year.  The President's proposal to raise taxes on two-income families over $250,000 raises somewhere around 1/10 of that.

        It would help if the proposal were something that has a snowball's chance in hell of getting through Congress.

        I say this because I think diaries like this are counterproductive.  They lead people to think that all we have to do is "tax the rich" and that solves all the deficit/debt problem.  That argument simply ignores math.  People need to have realistic expectations.  Increased taxes on the rich are only a very small part of any solution.  Any realistic proposal by the President is also going to have to include significant spending cuts, as he himself repeatedly recognized (the "balanced" approach).

        •  I keep thinking back to the Clinton years. (1+ / 0-)
          Recommended by:
          northsylvania

          How'd they balance the budget back then? I remember it as being a pretty good time economically. I remember paying higher taxes than now, but it seemed just fine because everything seemed to be on a sustainable path. I was making about $50 k at the beginning of the Clinton Administration and $60 or 65 k at the end of it, and I seem to remember my state + federal tax bill as being around $10 to $12 k towards the end.

          If we had just kept going with that (and not gone into Iraq, at least) we would have much less debt now, if not zero debt, and we could actually countenance a legitimate lower revenue rate. Maybe not as low as now, but significantly lower.

          The present situation just seems so insane.

          Moderation in most things.

          by billmosby on Thu Nov 08, 2012 at 06:34:10 AM PST

          [ Parent ]

          •  The Clinton analogy doesn't work (2+ / 0-)
            Recommended by:
            EthrDemon, VClib

            First of all, the deficits were not nearly as large as they are now.  So there wasn't as much ground to make up.  If we only had deficits of, say, $500 billion a year instead of $1 - $1.3 trillion, sure you could get to where you needed to go largely through tax increases (although they couldn't just be tax increases on the rich).

            Second, there were also spending cuts.  

            Third, pretty much all economists agree that a significant amount of the increased revenue was due to the "dot.com" boom of the late 1990's.  In the late 1990's, you had economic growth of well about 4% each year.  It would be nice if we had something like the dot.com boom happen again, but I don't see it on the horizon (our annualized growth right now is around 1.3% of GDP and is not projected to be much better in the foreseeable future. No sane person expects 4% any time soon.)  

            And, if you didn't count the Social Security Surplus (remember Gore's "lockbox"?) the budget surpluses of the Clinton years were smaller.  

            FactCheck sums it up this way:

            The Clinton years showed the effects of a large tax increase that Clinton pushed through in his first year, and that Republicans incorrectly claim is the "largest tax increase in history." It fell almost exclusively on upper-income taxpayers. Clinton’s fiscal 1994 budget also contained some spending restraints. An equally if not more powerful influence was the booming economy and huge gains in the stock markets, the so-called dot-com bubble, which brought in hundreds of millions in unanticipated tax revenue from taxes on capital gains and rising salaries.

            Clinton’s large budget surpluses also owe much to the Social Security tax on payrolls. Social Security taxes now bring in more than the cost of current benefits, and the "Social Security surplus" makes the total deficit or surplus figures look better than they would if Social Security wasn’t counted. But even if we remove Social Security from the equation, there was a surplus of $1.9 billion in fiscal 1999 and $86.4 billion in fiscal 2000. So any way you count it, the federal budget was balanced and the deficit was erased, if only for a while.

          •  Ugh. Dems need to learn the basics of national (1+ / 0-)
            Recommended by:
            EthrDemon

            accounting.

            We're great at lambasting repubs for hating math, so we have a particular duty to educate ourselves.

            Unless there's a trade surplus, if you balance the budget, then the private sector will go further in debt.

            Which is exactly what happened under Clinton.

            Every dollar is both a public liability and private asset.

            Reduce public liability, you reduce private assets.

            Each balanced budget in American history has been followed by a recession.  Really.  Look it up.

            It's simple, double entry accounting.

          •  Uh... (0+ / 0-)

            The tech bubble was not "a sustainable path"

            Those who support banning cocaine are no better than those who support banning cheeseburgers

            by EthrDemon on Thu Nov 08, 2012 at 09:44:24 AM PST

            [ Parent ]

            •  Ok, everybody, thanks for the conversation on this (0+ / 0-)

              I wasn't really expecting to reach a conclusion about what should be done now. I support ending the Bush tax cuts because I remember taxes in the 90s as being reasonable and not particularly onerous and whatever else one might think there seems to be a consensus that a lot more revenue is needed.

              Beyond that I don't see what else might work, at least from what I'm reading here.

              I don't even have a feel for whether or not there is even a real fiscal problem or something we can muddle through.

              Moderation in most things.

              by billmosby on Thu Nov 08, 2012 at 11:17:29 AM PST

              [ Parent ]

          •  bill - the federal budget has grown 80% (0+ / 0-)

            from 2000 to 2012 while revenues have only grown 20%. To return to Clinton era budget levels we would need to cut the US federal budget by more than 50%. We would however, have a surplus, based on current revenues and 2012 tax rates.

            "let's talk about that"

            by VClib on Thu Nov 08, 2012 at 08:05:46 PM PST

            [ Parent ]

        •  ten years of low taxes (3+ / 0-)

          (the lowest in 50-60 years) plus unfunded wars is what got us into the mess.  To say we need to do drastic cutting now to solve what was created over a longer term is an excuse to cut our most vital programs.  The three biggest causes of the increased deficit were the Bush tax cuts which reduced revenues, two unfunded wars which increased costs, and the current economic situation which has reduced revenues.  Increasing revenues is a major portion of the solution.

          The fiscal cliff is a manufactured crisis that was created as a way to impose austerity.  Two of the three causes are solvable and the third will only be exacerbated by austerity.
          Numerous economists have said this is exactly the wrong time for austerity.  

          If you want to see a budget that actually solves these problems and cuts the deficit, I suggest you take a look at the People's Budget.

          "Growing up is for those who don't have the guts not to. Grow wise, grow loving, grow compassionate, but why grow up?" - Fiddlegirl

          by gulfgal98 on Thu Nov 08, 2012 at 06:45:59 AM PST

          [ Parent ]

          •  I'm very familiar with the People's buget (2+ / 0-)
            Recommended by:
            billmosby, VClib

            it raises taxes on everyone, not just the rich.  That's probably necessary, but not politically popular.  That makes a significant difference in the revenue you raise.  (Bush tax cuts expiring on the rich is another $70 billion or so next year.  Bush tax cuts expiring on everybody is another $300 billion next year.  Expiration of the Bush tax cuts on families UNDER $250,000 raises much more revenue.)

            It also relies heavily on significant changes to our health care system -- a strong move toward more of a single payer system - that is not going to happen (the President hasn't proposed it, and there's not a majority in either House for it).  Also, if relies heavily on a financial transactions tax, which also is probably not going to happen (if you just enact it in the U.S., you'll move financial transactions overseas).

            But -- much more importantly -- the People's Budget (even if that was what the President backed, which is not what is happening) is completely in accord with my main point:   raising taxes on the rich is only a small part of any overall solution.  The People's Budget reaffirms that raising taxes on the rich alone is not sufficient.

            •  Taxes don't fund fed gov spending. Period. (1+ / 0-)
              Recommended by:
              gulfgal98

              the US has had a fully fiat monetary system since 1972.

              Gold standard thinking is factually wrong.  Get with the times Dems, including the peopless budget.

            •  Bush tax cuts (2+ / 0-)
              Recommended by:
              Sandino, jamess

              I have been on record many times in the past that I believe the Bush tax cuts should expire for everyone.  Then if Congress wants to write new legislation to help those in the lower brackets, fine.  Taxes are the price we pay for civilization and you get what you pay for.  Our taxes are the lowest that have been in decades.  

              One of the biggest problems with our tax code is the treatment of unearned income which is taxed at a lower rate than income earned via labor.  This is one of the main contributors to income disparity in this country.  Also the massive corporate loopholes that allows very profitable major corporations to pay no taxes or even get rebates is obscene.

              Just to reiterate, my main point is that the precipitous rise in the deficit did not happen in the last two years.  It was ten years in the making.  To ask the American people to now accept massive cuts in programs across the board to just to lower the deficit at this time is ridiculous.  We all know who will be bearing the brunt of those cuts and it will not be those who are most able to do so.

               

              "Growing up is for those who don't have the guts not to. Grow wise, grow loving, grow compassionate, but why grow up?" - Fiddlegirl

              by gulfgal98 on Thu Nov 08, 2012 at 10:27:25 AM PST

              [ Parent ]

              •  Taxes should be used to tax away free lunches, (0+ / 0-)

                thus both reducing inequality and rewarding productivity.

                Taxes however, do not fund fed gov spending.  Once people fully understand this, it will be politically impossible to make claims on those least able to afford it.

                We have untaxed FIRE and have increased taxes on labor.  That's our tax problem.

        •  What is the deficit problem exactly? (2+ / 0-)
          Recommended by:
          One Pissed Off Liberal, katiec

          That their is one? That there is debt?  The deficit panic is itself a fabricated crisis intended to justify further looting of the crumbling social and physical infrastructure.

          •  I'll direct you to a couple of sources to explain. (1+ / 0-)
            Recommended by:
            VClib

            See here, for example. or here.  

              Some debt is fine.  Too much has bad consequences.  How much is too much is debatable.  

            More significant than the current deficit is the projected future deficit and debt, due largely to what the CBO calls the "unsustainable" growth in Medicare and Medicaid.  there's a summary of articles you can read here.

            •  So no crisis, as I said (3+ / 0-)

              just some possible long term concerns that could be largely addressed by single-payer healthcare or other rationalizations of the health care system. Sometimes you have to invest to fix the economy. The myth of government debt preventing job creators from saving us is yesterday's Romneyganda.

              •  Apparently, the vast majority of elected officials (1+ / 0-)
                Recommended by:
                VClib

                on both sides -- including the President -- disagree with you.  

                People who agree with you have a long, long way to go in terms of convincing even Democrats that there's no need to address the long-term deficit/debit situation.  

                •  Sly the way you mix (1+ / 0-)
                  Recommended by:
                  katiec

                  'crisis' and 'long-term'. Make up your mind. Is there a long-term problem with growing medical costs, or a crisis because of the deficit?

                •  They either don't understand, or intentionally (0+ / 0-)

                  mislead, regarding the profound difference switching from tge gold standard to a fiat monetary system has on national accounting.

                  As far as the average pol is concerned, it's probably ignorance.

                  But if YOU want to better understand national accounting, listen to Greenspan, Bernanke, Timmy.  They get it far better than the politicians.

                  And no, I don't like any of them.  But they at least have a batter understanding of tge fact that with a fiat system, money is no object, just a unit of account.

                  And because the US is a monetary sovereign and owes all liabilities in it's own unit of account, it can always make good on it's liabilities.

                  Even the stupid bond markets know the difference between Greece a and the US.

                  Dems should too.

                •  And we should listen to them cuz they've done (0+ / 0-)

                  such a fine job over the past 30 years?

                  How has inequality increased so profoundly?  pART of the answer is to be found in keeping tge populace ignorant of just what money is.

          •  Yes, the deficit is an accounting of every dollar (0+ / 0-)

            in the private sector being saved.  That's all it is.

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