US POLITICS - Fiscal Cliff & the Debt Ceiling

[DaveRoid]

Since the last thread is hitting 20 pages here is a new one. And happy new years to all :)

Right now 3 hours to go to the fiscal slope. Post your predictions.

Edit: updated title, Fiscal cliff is resolved for now :)

[danm_999]

Apparently, a deal has been brokered.

• Tax rate returning to Clinton era 39.6% for those households above $450,000 and individuals above $400,000.
  
• Planned sequester of $109 bn delayed until end of Feb.
  
• $5 million exemption level for estate tax, to be indexed to inflation.
  
• Doc Fix will continue, will not be paid for by ACA.
  

[The Marquis de Leech]

Frankly, I have my fingers crossed that the Republican crazies in the House will yet again save Obama from himself. The Fiscal Cliff (in this case, really the Austerity Bomb) is the lesser evil when compared with the sort of things Obama is willing to give up.

(This reminds me of the anecdote of how Tip O'Neil was invited round to breakfast at the White House after Jimmy Carter was sworn-in. O'Neil took one look at the breakfast and said, "You know, we won, Mr President.").

[danm_999]

Well it seems, so far, that Obama's Dec 18 offer was vindicated and he got his tax rise on the wealthy. Not the 250,000 like he wanted, but by the nature of negotiations means you can't always get all that you want, and he came out ahead in public perception too.

But other than that, the can has largely been kicked two months down the road, and Congress looks completely fucking hopeless given that they sorted out in the eleventh hour something they basically had the terms for 10 days ago.

What I'm interested in is how House Republicans will react. They knocked back Boehner's Plan B, which set the threshold at $1 million, so why would they accept $450,000? Since McConnell brokered this with Biden, I expect Senate Republicans will fall in line, but will it be enough for the House to accept an ostensibly worse deal for the GOP?

Or is Boehner going to have to get the Tea Party freshman Reps together and show them another Ben Affleck directed movie to sway them (I'm thinking Argo!). Best case scenario for the Democrats; this deal passes with support from Democrats and moderate Republicans, establishing a rift between them and Tea Party Reps.

[The Marquis de Leech]

But also keep in mind that while the Democrats do have more leverage, it's not like the Republicans don't own a branch of Congress.

The Republicans only control the House via obscene gerrymandering (ironically, the Senate has become a better reflection of popular will than the House!).

[Fez]

So hungover... happy new years!

Gotta admit, I'm surprised the Senate managed to get a deal together (and pass it so overwhelmingly). It is essentially the deal that was being discussed earlier yesterday according to this WaPo cheat sheet and the NYT's rundown; although there are some extra provisions I didn't see before and some changes.

The estate tax exemption ended up being set at $5 million instead of $10 million (although it was indexed to inflation, so it can rise).

There was a nine-month extension of the current farm bill. Reform here is needed, but milk prices doubling this month really needed to be avoided.

Restored pay freeze on members of congress and federal employees.

The sequester was delayed for only two months instead of a full year. The cost of the delay will be evenly split between more focused cuts (that will be half and half defense and nondefense) and additional revenue raising through encouraging people to shift from traditional IRAs to Roth IRAs.

The more I think about it, I realize that this is actually a deal I can live with. The best way to think of it is that, compared to going over the cliff, Democrats traded away revenue in exchange for extending a bunch of individual and business stimulative tax credits, stopping the massive Medicare pay cut for another year, extending the farm bill, permanently fixing the AMT, and extending the unemployment insurance expansion for another year. Additionally, getting Republicans to vote for tax increases for the first time in decades is an important step; hopefully it won't be quite so insanely difficult to get them to do it again next time.

And as for that revenue, its a lot less than what would've come in from going over the cliff. However, mostly offsetting the higher rate only being on incomes over $400/$450k, is that personal exemptions will phase out at $250k and the limitation on itemized deductions is set at $300k. Those provisions will bring in a large amount of the lost revenue from not having the higher rate set at $250k. I still wish that the capital gains would be raised more than it is, but I appreciate the lower exemption for the estate tax.

The major downside of the deal of course is that it sets up a massive fight in two months when the debt ceiling needs to be raised and the sequestration looms again. However, I like the precedent of the sequester being offset through an even combination of cuts and new revenues. I'd prefer it to just be canceled, but that wasn't going to happen; so getting new revenues is preferable.

We'll see if the House will pass it before the new Congress is sworn in it, but if it does, it is a livable deal. Time to gear up for the next fight.

[Ormond]

Since the last thread is hitting 20 pages here is a new one. And happy new years to all :)

Right now 3 hours to go to the fiscal slope. Post your predictions.

If you really want this thread to replace the last one, either you or a moderator need to put the prefix "US Politics" in front of your title.

[IheartTesla]

The more I think about it, I realize that this is actually a deal I can live with. The best way to think of it is that, compared to going over the cliff, Democrats traded away revenue in exchange for extending a bunch of individual and business stimulative tax credits, stopping the massive Medicare pay cut for another year, extending the farm bill, permanently fixing the AMT, and extending the unemployment insurance expansion for another year. Additionally, getting Republicans to vote for tax increases for the first time in decades is an important step; hopefully it won't be quite so insanely difficult to get them to do it again next time.

This was what I wanted to post yesterday but went out instead. Obama wanted a balanced approach, so the 250K red line probably wasnt as red as thought. Philosophically he didnt give up his cherished principles like republicans had to. All the other fixes sound good to me too.....

We'll see how the House reacts.

[Fez]

One other thing I want to point out is that thanks to a somewhat-forgotten-ACA-provision-due-to-all-the-fiscal-cliff-ruckus is that today a new 3.8% tax on capital gains over $250k was implemented. So between that and this deal, capital gains of over $400/$450k are going to be taxed at 23.8% (and at 18.8% for $250k-$400/450K, and remain at 15% for below $250k); that's still not on par with earned income rates, but its getting closer.

Also, Obama didn't get his wish in this deal; we're not passed the budget fights yet. In fact, between the debt ceiling, the sequester, and the current continuing resolution expiring in March, the next fight is going to be even bigger than this one. Its true that Democrats will have lost some leverage in that fight since Republicans no longer have massive, looming tax hikes hanging over their heads; but its not totally one-sided. We still don't know if Obama meant it when he said he won't negotiate over the debt ceiling anymore, Republicans will want to avoid a government shutdown since that never ends well for them, and the sequester still contains all those pesky defense cuts Republicans hate.

Even if the House rejects the deal that fight will still have to happen since the debt ceiling and continuing resolution fights need to be resolved and would have to be done under the backdrop of the fiscal cliff really kicking into high gear by that point.

Somehow, I don't get the sense that gun control or immigration reform will get done this year.

[Fez]

Double post, but its been like 4 hours and there's another point to make.

Something I've seen a few people mention, and that I agree with, is that, assuming the House passes the deal, it really emphasis how vital the Vice Presidency has become recently. They've each gone about it differently, but I think it could easily be argued that Gore, Cheney, and Biden are the 3 most active and influential Vice Presidents the US has ever seen and each has done more than the last. Its not necessarily precedent setting of course, I doubt that the next VP will have the extensive Senate ties that Biden has for instance, but it is an interesting trend nonetheless.

And, assuming the result of this deal now isn't a total misfire on the next fiscal fight, I think its definitely setting Biden up to be a strong position for 2016 if he wants it.

I also find it interesting that the only reason the federal government can do anything anymore is because of a couple of old buddies named Joe and Mitch.

[Alcibiades]

lol, I hear Cantor is blowing up the deal. House conservatives want to amend in a bunch of spending cuts and send it back to the Senate. Question is: can they pass it. If they attach spending cuts, Democratic support will vanish. If they're totally reliant on Republican votes, they shouldn't have enough, since they couldn't pass Plan B (a more conservative plan).

Of course, it could be different now that it's January 1, and everything is unequivocally a tax cut on the revenue side.

[Fez]

lol, I hear Cantor is blowing up the deal. House conservatives want to amend in a bunch of spending cuts and send it back to the Senate. Question is: can they pass it. If they attach spending cuts, Democratic support will vanish. If they're totally reliant on Republican votes, they shouldn't have enough, since they couldn't pass Plan B (a more conservative plan).

Of course, it could be different now that it's January 1, and everything is unequivocally a tax cut on the revenue side.

Yeah, I saw that. I'm somewhat surprised by this. It passed the senate 89-8, the House GOP has no cover.

[Kelli Fury]

I don't think the senate is going to allow much in the way of amendments. But go ahead, I say, nothing would please me more than seeing house Republicans take the blame for torpedoing the deal and looking like the assholes they are, especially when they reelect every two years. 2014 is not far off.

[Mudguard]

I would prefer both increased taxes and lower spending. Medicare spending and healthcare spending overall has not been close to efficient in a long time and are badly in need of reform. The insurance system and the bars to entry imposed by the American Medical Association have caused gross distortions to the healthcare market. Obamacare was a step in the right direction, but I don't think it goes far enough. Unfortunately, I don't think it's a high priority in Obama's second administration to revisit healthcare. Military spending is also excessive and hugely inefficient and needs systematic reform.

Regarding taxes, extending the tax cuts to the 99%, or even the 98% as originally proposed by Obama, seems excessive if the ostensible rationale of not extending the tax cuts to the top earners is to raise revenue to reduce the deficit. Taxing the top 2% or 1% was driven by political considerations, by which I mean not pissing off voters, and not really driven by who could really afford it. Households in the top 10%, that make roughly $120K/year, could have absorbed a take hike back to the original Clinton levels. Probably could have taxed the top 20%. Starting the negotiations at 80K rather than 250K might have resulted in a better compromise, or not.

I'm also not in favor of permanently extending any Bush tax cuts. Don't see why we need all the tax cuts when the economy recovers. Like some others, I would prefer a return to Clinton tax rates across the board when the economy recovers, and making the tax cuts permanent will make it much harder down the road to raise the rates given how opposed the Republicans are to raising the tax rates. A major reason we are getting a deal at all is that because the tax rates automatically increased at the beginning of this new year, it has allowed the Republicans to spin the new tax bill as a tax cut rather than a take hike, which allows them to keep their ridiculous pledge to never raise taxes.

My guess is the debt ceiling will get resolved at the last minute again after a whole lot of political posturing from both sides (much like this tax deal), with no permanent resolution. We'll have to revisit the issue every year or so until we can balance the budget and start paying down the deficit.

[Lion of Judah]

Good news, we have a deal. Bad news, see you later this month to discuss the debt ceiling.

[Lion of Judah]

The House has not officially said yes yet. Stay tuned. We do not yet know that this deal is done.

Oh boy, they got Obama to up the limit for families who would face a tax increase from 250,000 to 450,000. I say that's a win for the republicans, unless they get greedy I hope this gets settled sooner rather than later.

[DaveRoid]

lol, I hear Cantor is blowing up the deal. House conservatives want to amend in a bunch of spending cuts and send it back to the Senate.

That means the deal would be dead. If they amend it they are the dumbest folks on the planet as they will be getting a much worst deal in the next couple of weeks.

[Bronson]

That means the deal would be dead. If they amend it they are the dumbest folks on the planet as they will be getting a much worst deal in the next couple of weeks.

If their intention was to create another recession.They succeeded :frown5:

[Lion of Judah]

It's gotten to the point where I don't want a deal to be done, let's go over the cliff. Screw it.

[Bronson]

It's gotten to the point where I don't want a deal to be done, let's go over the cliff. Screw it.

We were just coming out of a recession , this means we go back into recession as a result. How does this benefit anyone?