We're going over the fiscal cliff.

[30 cal slut]

Q: What is the fiscal cliff?
A: The simultaneous expiration of Bush era personal income tax cuts, automatic cuts in government spending, and discontinuation of extended unemployment benefits.

Q: Why should I care about the fiscal cliff?
A: We will be thrown into another recession.

The Economy = Consumer Spending + Business Investments + Government Spending + Net Exports.

Following this simple math:

If tax cuts expire, folks will have less money to spend on stuff, so Consumer Spending goes down.

With automatic spending cuts (sequestration), Government Spending goes down.

Therefore The Economy goes down, holding everything else constant. That's the definition of a recession.

As an aside, the defense companies and related service companies are going to get hit very hard and very suddenly. Not good news for contractors.

Mods, sorry don't have a link for this story, it's off my Bloomberg terminal.




Bowles Says U.S. Fiscal Cliff Deal Unlikely by End of This Year

2012-11-28 14:50:55.753 GMT

By Heidi Przybyla

Nov. 28 (Bloomberg) -- The co-chairman of President Barack Obama’s 2010 fiscal commission said it’s unlikely the president and Congress will reach a deal by the end of this year to avert the so-called fiscal cliff.

Erskine Bowles, co-chairman of the fiscal panel and a former chief of staff to President Bill Clinton, estimated there is a one-third probability the sides will strike a deal by the end of this year.

Speaking today at a breakfast in Washington sponsored by the Christian Science Monitor, he said there’s another one-third chance that all sides will reach a deal early in 2013.

Bowles isn’t involved in the budget negotiations, though he said he met with Obama yesterday. He also plans to join a group of company leaders in a meeting with House Republicans today.
Bowles didn’t describe his conversation with the president.

The “sticking points” on a budget deal are the president’s call for $1.6 trillion in new tax revenue and the fact that “there’ve been no serious discussions” so far over changes to entitlement programs, Bowles said.

For Related News and Information:
Top Stories: TOP <GO>

--Editors: Laurie Asseo, Jodi Schneider

To contact the reporter on this story:

Heidi Przybyla in Washington at +1-202-624-1955 or hprzybyla@bloomberg.net

To contact the editor responsible for this story:

Jodi Schneider at +1-202-654-7362 or
jschneider50@bloomberg.net

[montanadave]

I suspect you're right.

Democrats are intransigent about entitlement reform. Republicans are intransigent about taxes. Stalemate.

Frankly, I think it's another contrived deadline created to get everybody riled up. It's the SOS. The big dogs know the score and aren't going to be persuaded by band-aids at this point. And that's all these humps are capable of doing at this point--taping a band-aid on a hemorrhaging stump.

IF we go over the "cliff," Republicans will have some cover to adjust tax rates while technically "lowering" taxes for a large number of people.

And Democrats can claim they "restored" entitlement programs.

The fact that tax rates will be higher and entitlement benefits are lower than they are currently will be drowned out in all the noise.

[30 cal slut]

Frankly, I think it's another contrived deadline...

It is absolutely contrived and artificially imposed. No other country in the world has anything mechanically similar.

In other countries, the assumption is that if additional borrowing is needed to cover deficit spending, the executive branch has the power to lift the debt ceiling.

Not so here.

[Doc Safari]

We all know they will not fix any of this until our country is literally on the verge of coming apart, and by then it will be too late.

All of this fiscal cliff stuff is just drama. The monetization of the debt, the massive layoffs due to the election results and the implementation of Obamacare, a possible looming war in the Mid East: all of these things are going to cause a recession in 2013. The fiscal cliff will just be more misery.

[theblackknight]

Democrats are intransigent about entitlement reform. Republicans are intransigent about taxes. Stalemate.

This is what I cant stand. No one has the maturity to put it all on the block and chop it. They'd rather roost around and complain about how the other side is destroying america and point the finger, convinced their side is the "correct" one. Things like cutting defense spending and drilling for oil shouldnt require compromise or a % strangle hold on the house or senate.



sent from mah gun,using my sights

[Mjolnir]

Lets see... A depression is three consecutive quarters of negative economic growth, right? We've had negative economic growth since the days of Bill Clinton.

Can anyone say "AUSTERITY MEASURES"?

http://img.tapatalk.com/d/12/11/29/u3adequ4.jpg

[VooDoo6Actual]

Wow this group is slooooowwwwwwwww.......

[Mo_Zam_Beek]

While I highly doubt there are many here like me who will read this in its entirety, I suggest all read enough to get the gist of MMT as it is the 'why' behind dominate policy winds. If you're like me there will be some things that you fundamentally disagree with. However, it is important to understand the motivation behind policy.

http://neweconomicperspectives.org/p/modern-monetary-theory-primer.html

The super nutshell - there is not such thing as too much debt / we have weak employment b/c we have not spent enough money / fiat money is legitimized by taxes - thus taxes (and at a stiff rate) are good / the issuance of gov bonds is a courtesy and is not necessary to the financial operation of gov nor the setting of interest rates / soveriegns that issue their own fiat, tax in their own fiat, and allow the value of the fiat to float - can never go broke.

In several corners of the web where Econ and Finance are discussed, Modern Monetary Theory (MMT) is euphemisticly known as Magic Money Tree

Second and most importanly - we need to stop paying attention to media contrived bullshit. As a Nation lets dispense with the trivial (like the fiscal cliff that we went over more than a decade ago - 1998 total public & private debt was 257% of GDP; today it is 350%) and get to the root of the issues - fractional reserve lending, the FED, pervasive corruption and cronyism.

Right / Left paradigm - two sides of the same coin. EVERYONE in the Nation needs to clue in - NOW.


Good luck

[Business_Casual]

I will make some predictions, as I did on the Mars news:

1) We will have a deal on the "fiscal cliff" by December 23rd, including higher taxes
2) Obama has seen the projected economic numbers for fourth quarter and it will show growth (mostly in housing and energy)
3) The growth will be used in 2013 to validate the higher tax rates

bc

[duece71]

One side will cave in and a deal will be reached, no doubt about it. It already sounds like the Republicans are thinking about letting some stuff go to get a deal and then fight on other issues after the fiscal cliff is only a memory. I wouldn't mind seeing what happens if a stalemate is reached. Some hard truth will be more visible, thats for sure.

[SMETNA]

Spending needs to be cut drastically. I don't really care how they do it at this point. I'm not in favor of raising anyone's taxes because it won't bring in the kind of revenue they'll need, among other reasons. They need to cut spending by about 40%.

Allow me to repost an old post here?:




1) When the US federal government spends money, expenses are officially categorized in three different ways.

Discretionary spending includes nearly everything we think of related to government– the US military, Air Force One, the Department of Homeland Security, TSA agents who sexually assault passengers, etc.

Mandatory spending includes entitlements like Medicare, Social Security, VA benefits, etc. which are REQUIRED by law to be paid.

The final category is interest on the debt. It is non-negotiable.

Mandatory spending and debt interest go out the door automatically. It’s like having your mortgage payment autodrafted from your bank account– Congress doesn’t even see the money, it’s automatically deducted.

2) With the rise of baby boomer entitlements and steady increase in overall debt levels, mandatory spending and interest payments have exploded in recent years. In fact, the Congressional Budget Office predicted in 2010 that the US government’s TOTAL revenue would be exceeded by mandatory spending and interest expense within 15-years.

That’s a scary thought. Except it happened the very next year.

3) In Fiscal Year 2011, the federal government collected $2.303 trillion in tax revenue. Interest on the debt that year totaled $454.4 billion, and mandatory spending totaled $2,025 billion. In sum, mandatory spending plus debt interest totaled $2.479 trillion… exceeding total revenue by $176.4 billion.

For Fiscal Year 2012 which just ended 37 days ago, that shortfall increased 43% to $251.8 billion.

In other words, they could cut the entirety of the Federal Government’s discretionary budget– no more military, SEC, FBI, EPA, TSA, DHS, IRS, etc.– and they would still be in the hole by a quarter of a trillion dollars.

4) Raising taxes won’t help. Since the end of World War II, tax receipts in the US have averaged 17.7% of GDP in a very tight range. The low has been 14.4% of GDP, and the high has been 20.6% of GDP.

During that period, however, tax rates have been all over the board. Individual rates have ranged from 10% to 91%. Corporate rates from 15% to 53%. Gift taxes, estate taxes, etc. have all varied. And yet, total tax revenue has stayed nearly constant at 17.7% of GDP.

It doesn’t matter how much they increase tax rates– they won’t collect any more money. See the Laffer Curve for further evidence of this: http://en.wikipedia.org/wiki/Laffer_curve

5) Our Debt/GDP ratio currently sits at 106%, while GDP growth prospects are tepid at best. Facing so many headwinds like quickening inflation, an enormous debt load, and debilitating regulatory burdens, the US economy is barely keeping pace with population growth.

6) The only thing registering any meaningful growth in the US is the national debt. It took over 200 years for the US government to accumulate its first trillion dollars in debt. It took just 286 days to accumulate the most recent trillion (from $15 trillion to $16 trillion).

Last month alone, the first full month of Fiscal Year 2013, the US government accumulated nearly $200 billion in new debt– 20% of the way to a fresh trillion in just 31 days.

7) Not to mention, the numbers will only continue to get worse. 10,000 people each day begin receiving mandatory entitlements. Fewer people remain behind to pay into the system. The debt keeps rising, and interest payments will continue rising.

8) Curiously, a series of polls taken by ABC News/Washington Post and NBC News/Wall Street Journal show that while 80% of Americans are concerned about the debt, roughly the same amount (78%) oppose cutbacks to mandatory entitlements like Medicare.

9) Bottom line, the US government is legally bound to spend more money on mandatory entitlements and interest than it can raise in tax revenue. It won’t make a difference how high they raise taxes, or even if they cut everything else that remains in government as we know it.

This is not a political problem, it’s a mathematical one. Facts are facts.

[glocktogo]

From his grave, Andrew Jackson is laughing at us all... :(

[Belmont31R]

Good. We have a false economy when we are reliant on our government spending 1.2-1.5 TRILLION in deficit spending a year. Time to come back down to reality, and we need to start paying higher taxes to pay for the government we elected.



If you look at a 'socialist' country like Germany their deficit this year, per capita, is about 1/12th what ours is.


Or did you guys think spending well over a trillion a year in new debt could just keep going on forever?

[SMETNA]

From his grave, Andrew Jackson is laughing at us all... :(

So is TJ, JM, GW, PH, SA, etc

[Magic_Salad0892]

I will make some predictions, as I did on the Mars news:

1) We will have a deal on the "fiscal cliff" by December 23rd, including higher taxes
2) Obama has seen the projected economic numbers for fourth quarter and it will show growth (mostly in housing and energy)
3) The growth will be used in 2013 to validate the higher tax rates

bc

I've been thinking this way for the last 5 months or so.

[NWPilgrim]

While our road to collapse was paved in 1913 with the Fed, and boosted on the way in the 1930s with FDR socialism, it seems to me that the 2008 TARP was really the point we went over the precipice. Never before in the history of mankind has so much wealth been transferred from the citizens of a country to a private cartel with no accountability or hope of return and done so quickly. Both parties proved they are mere puppets on the global stage and have long abandoned any pretense of representing "the people."

Since TARP we have had multiple "stimulus", govt confiscation of companies, redistribution to cronies, lack of prosecution for gross violations of SEC and banking laws, and the debt just keeps piling up faster. We now have something like $80 TRILLION in unfunded liabilities.

No amount of tax increase could possibly hope to make even a dent in the "on the record" debt so it is ridiculous to even debate tax rate changes. Taxes are not the problem in terms of the debt. As SMETNA points out it is a SPENDING problem and only a 40% or greater IMMEDIATE CUT will just get to a balanced budget or slight pay down on the debt, i.e, tread water. Of course no one will support such drastic cuts although that would be about the same as the 2003 budget. We can't even bear going back just nine years to achieve a balanced budget?!!!

We are so freaking doomed!! :D

Before we get angry with pitchforks and tar, just remember who brought this on. Those who are hiding beyond the politicians and even on other shores. When we hit bottom and feel like burning something down, let's not forget the Fed and its hidden manipulators. As much fun as it might be to tar and feather your Representative or Senator and light them up, they are just hapless, immoral puppets. Let's not let the real manipulators who profited by the stimulus, TARP, and taxpayer backed derivatives (wild ass gambling bets) stay smugly safe in their estates enjoying the show of the rabble burning their own neighborhood so to speak. I would really like to see a list of just who those parties are and where they reside. For educational purposes only.

[Moose-Knuckle]

http://img.tapatalk.com/d/12/11/29/u3adequ4.jpg

And it always hurts . . .

[SMETNA]

A majority of Americans went for this.

It's going to take a majority to step back from it.

That majority will not exist anytime soon. Not until millions upon millions have a "come to Jesus" moment and admit they made their country worse. The ability to humble oneself and admit error is not a popular one.

[VooDoo6Actual]

It's not who cast's the votes it's who counts the votes......
Planned many years ago as well.

[Business_Casual]

Who is John Galt?

http://www.telegraph.co.uk/news/politics/9707029/Two-thirds-of-millionaires-left-Britain-to-avoid-50p-tax-rate.html

bc

[SMETNA]

Who is John Galt?

He's an Ayn Rand character. :D

[Mo_Zam_Beek]

On the note of spending cuts - you will NEVER see meaningful cuts. Why? Obviously the question is like an onion, but it suffices to say that it would take a radical shift in the very basic means of the power structure here in the US.

Two great examples of what I am talking about - Davis Bacon and the Post Office. In the case of Davis Bacon - that is a straight up Union give away that cost tax payers 35% + on EVERY job over $2,000 that involves Gubbermint money. Consider that by the time you're done investigating, drafting, complying, and factoring in Davis Bacon - a Gubbermint project costs roughly 2x what a private sector project costs.

USPS - the single largest gov employer. Unionized at the middle and lower rungs. At the top, full vesting come is just a few years. They are hopelessly f*cked and needed to be privatized nearly two decades ago.

Real spending cuts means the wholesale dismantling of the Fed Gov.. Between the employment that it generates, the unions that benefit from such employment, the politicians that get re-elected by doling out pork, the FSA, the satisfaction of Corporatocracy, and the bureaucrats that actually run the show - no one is going to give an inch. Gubbermint entities were traditionally penalized if they did not exhaust their annual budgets so they could always show just cause for expansion of the dept and thus expansion of power.

The only way it changes is if the people tear it down (so unlikely it isn't even worth discussing), or the dollar implodes (and we will see several small and even a world scale war before 'they' let that happen). By the way anyone watching Turkey about to get their hand slapped for trading Iran gold for nat. gas......


Good luck

[Business_Casual]

And they are laughing at us as it happens:

http://www.hawaiireporter.com/residents-alerted-to-obamas-hawaiian-holiday-plans/123

bc

[a1fabweld]

Hey, how about another war to stimulate the economy?

[The_War_Wagon]

Cliff, Cliff, Cliff, Cliff, Cliff, Cliff, Cliff!!!

GoooooooooooooooOOOOOO... CLIFF! :dance3:

Might as well bring on the revolution SOONER than later - while we're still young... :neo:

[nineteenkilo]

Another good one from the South.

Sessions (http://budget.senate.gov/republican/public/index.cfm/press-releases?ID=85d5741c-a9b6-42a3-9cd8-dba3fe153239)

[RogerinTPA]

Wow this group is slooooowwwwwwwww.......

LOL. Well, at least a thread on the topic is anyway. Anyone with a reasonable amount of SA should have saw this coming 4 years ago, at a minimum.