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The Liberal Take On The Fiscal Cliff

Liberals on the fiscal cliff. The White House is negotiating tough. We’ll hear the liberal view of the cliff and its meaning.

Cliff Diving in Portugal. (AP)

Cliff Diving in Portugal. (AP)

Washington’s in a lather about the fiscal cliff. So is Wall Street. So, if markets tell the story, may be the world.

The President’s put out his solution. Yesterday, the Republicans put their bid on the table.

But there is a view out there that says the whole cliff is a hustle. A liberal view that says it’s an artificial crisis, built to stampede Americans into surrendering entitlements that don’t need surrendering. Paul Krugman argues, go over the cliff. He’s with us today. More, too. But what about the deficit?

This hour, On Point: liberals on the fiscal cliff.

-Tom Ashbrook

Guests

Lisa Mascaro, covers Congress for the Los Angeles Times.

Stephanie Kelton, founder and editor-in-chief, New Economic Perspectives.

Paul Krugman, columnist for the New York Times. Professor of economics and international affairs at Princeton University.

Stan Collender, national director of financial communications at Quorvis.

From Tom’s Reading List

Business Insider ”Kelton says a “Grand Bargain” really just means “austerity,” and she says there is an alternative to the “Grand Bargain” that would put people back to work, upgrade U.S. infrastructure, and put the American economy on a better trajectory in the long term.”

The New York Times ”And one thing to think about: if the next two years are, as they seem likely to be, one long Republican tantrum, the 2014 election is not going to be a normal midterm. It will instead be a referendum on GOP obstructionism, which may attract a lot more attention — and much higher turnout — than normal.”

 

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  • 2Gary2

    Dear Conservatives, the voters have spoken. They want to tax the rich. They like Barack Obama better than you. Your “Southern Strategy” and hardcore base of pissed off white guys who are bad at math has collapsed. Nearly a month after the re-election it is totally obvious that you haven’t learned a damn thing. I understand this is hard for you.

    This is the Gilded age of Wall Street on steroids. Guess what, Republicans; you built that. Republicans can not talk to the rest of us until they realize that those “job creators” are vulture capitalists destroying labor and wages. Republicans who long for the strong economy of their parents world must be forced to recognize that labor unions and Democrats who fought for FDR’s New Deal policies made that possible. Republicans need to understand that it is not just their candidates who suck, it’s their policies that suck too.

    When you have a base of know-nothing idiots who watch Fox News all day, they nominate idiots to run for office.

    This is Doomsday for the GOP. They are certainly not on the populist
    side of this issue and everyday they have to be brought dragging and
    screaming on behalf of the top 2% -is another day they diminish
    themselves in the eyes of the public.

    So, Republicans are once again proving that they are willing to raise
    taxes on the middle class to give more tax cuts to the richest among
    us. Of course, they voted against the payroll tax cut a year ago.
    House and Senate Republicans have voted for Ryan’s budget numerous times
    that raises taxes on the poor and middle class to give more tax cuts to
    the wealthy.

    • Flytrap

       The voters have spoken and gave us divided govt, explain that.

      • StilllHere

        In fact, they gave us the status quo.  I think they must be happy.

        • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

          “The biggest choice to make evah!” and the Presdient won overwhelmingly, and the Dems took a bunch of Senate seats, and gerrymandered GOPers in the house lost some seats.

          I’ll just keep bringing up what everyone said was at stake. You just keep pretending a Dem’s win doesn’t change anything.

      • johnfdavidson

        If you look at the actual votes for the House of Representatives you will see more people chose Democrats.  Gerrymandering is undemocratic and voting districts should determined by neutral authorities not political appointees. 

    • Don_B1

      Not only did the voters reelect President Obama, but they increased the Democratic members of the House by 8 (and maybe another to come with the resignation of Jo Ann Emerson from Missouri to head a lobbying firm), gained 2 Senators in the Senate.

      Also, note that the aggregate vote for Democratic members of the House exceeded that for Republicans by about 1 MILLION votes; the Republican edge comes largely through the gerrymandering that has been going on for decades but got a big jump with the state results in 2010, which gave Republicans a lot of state control for the decadal apportionment process. Note particularly the 12 Republicans and 4 Democrats from Pennsylvania where there were more votes for Democratic representatives than Republicans, and similarly in Ohio.

      • Vigilarus

        Same in North Carolina too- more voted for Dem representatives but a state GOP majority will be seated in the House.

        • LinRP

           Exactly. Welcome to the world of gerrymandered districts.

    • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

      Gary,
      “Your “Southern Strategy” and hardcore base of pissed off white guys who are bad at math has collapsed.”

      Obama has proposed to raise “revenue” through means of higher taxes which will only pay for <10% of our deficit.  Yet he only wants to cut spending by 1.5%.  Who's bad at math again?

      Raising taxes is not a solution.  It's just a trick for you to buy thinking it's going to help you.  How does it feel to be tricked?

      • DrewInGeorgia

        “How does it feel to be tricked?”

        I don’t know but I’m certain you’re in a prime position to fill us in. Obviously you believe that people are benevolent and that the more they have the more they’ll help their fellow man. How’s that worked out for us the past thirty plus years?

      • Don_B1

        @2Gary2:disqus @facebook-1817301953:disqus 

        Raising taxes ALONE is not THE solution, but it is a NECESSARY PART of the solution.

        When considering the economy’s problems, the deficit is the swamp that must be drained. But unemployment (and income inequality) is the aligator that must be dealt with BEFORE the swamp can be drained.

        First, the claim that raising taxes on the over $250,000/year income earners will lead to job loss is FALSE when used to reduce the deficit in a BALANCED way between revenue INCREASES and spending CUTS. See:

        http://jaredbernsteinblog.com/the-high-income-rate-increases-dont-lose-jobs/

        Just dropping the unemployment rate to under 6% would cut the deficit by 1/3 to 1/2 with increased GDP and decreased safety net expenditures (from unemployment compensation to food stamps and Medicaid). This is why President Obama is proposing some short-term spending to push the economy into a stronger recovery mode. (See below for what the AJA could have done.)

        The Bush era tax cuts were not “paid for” then because REPUBLICANs KNEW that the spending cuts would be and still are highly UNPOPULAR among ALL voters (almost 70% of Republican voters reject cutting Medicare). So Republicans have decided to try to trap Democrats into making those cuts and then they will attack them for making the cuts that Republicans demanded.

        What a “heads I win, tails you lose” proposition!

        If the Republicans had allowed passage of the American Jobs Act when it was proposed in September of 2011, unemployment would be under 7% now with a more strongly improving economy. But Republicans wanted a weak economy for their presidential ambitions and for the support of business executives who are taking advantage of high unemployment to keep wages low.

        To see where the deficits come from, read:

        http://krugman.blogs.nytimes.com/2012/12/04/three-card-budget-monte/

        Note how the Bush tax cuts portion of the deficit GROWS after 2017 or so. Some of that is the tax cuts for the middle class and at that time those will have to go also, as long as the unemployment rate is near the NAIRU level.

        The Republicans have accomplished the first step in their “Starve the Beast” program of cutting taxes (revenue) until the deficit rises to the point where they can claim the country cannot “afford” the social safety net costs, which therefore must be “cut.”

        If the tax cuts had actually done what Republicans had claimed, boost employment and generate a strong economy for ALL, it might be a reasonable bargain. But all that has been accomplished by the Reagan and subsequent tax cuts is to increase the income of the top 10% by 15% and reduce the income of the remaining 90% by 15%.

        What growth occurred in the middle of the 2000s was due to the housing bubble. While that was the result of several combined actions of the Bush administration (stimulus by tax cuts heavily weighted toward the wealthy and unwise deregulation), it was definitely NOT sustainable, as the 2007-2009 Great Recession proved.

  • Ed75

    The Republicans concede that the rich have to pay more in taxes. But at the same time they realize that this extra tax will not solve the problem of the deficit so it has to be balanced by spending cuts. The administration has to offer commensurate spending cuts, not done so far.

    • 1Brett1

      Noo-ho-ho-ho, Ed. A couple of Republicans said something along the lines of the need for some tax increases but were quickly admonished by their own leadership/colleagues. The “official” Republican “proposal” (which is not serious and has not been written down) has some general, unspecified ideas about closing deductions, and entitlements, and nothing about raising taxes. 

      Besides, the name of this show is the LIBERAL take on the so-called fiscal cliff! ;-)

    • http://www.facebook.com/leonard.bast.90 Leonard Bast

      The books were balanced when Democrats handed over the government to Bush II in 2001. The current deficit exists as a result of two Republican projects: (a) tax cuts that overwhelmingly benefited the very wealthy, and (b) two needless wars. Why should anyone else have to pay now to get the canoe upright except those who benefited in the first place: the filthy rich and the military. Raise taxes on the rich and reduce military spending: those who made the mess get to clean it up.

      • Gregg Smith

        I disagree with your entire premise. The deficit is Obama’s. It began as a result of the banking crises but his “fixes” resulted in trillion dollar deficits and the unemployment rate hasn’t budged. But forget that. Say your right. You’re still wrong.

        (a) The poor made out better than the rich. 6 million quit paying altogether and the lowest rate was dropped 5 percentage points. The top rate was dropped only 4.6. The top payers took up the slack for the 6 million and paid a higher percentage of the overall bill (38% to 40%). Hate the cuts but there is no logical way to say the rich benefitted more than the poor.

        (b) The wars were not needless, they were unavoidable.

        • JGC

          Part(b):  Iraq was totally avoidable. 

          Prime Minister Jean Chretien wisely kept Canada out of that pig’s breakfast of the “coalition of the willing.”  The benefits could be more clearly seen during the aftermath of the 2007/2008 financial crises, where the wasteful spending on the unnecessary war further dragged the U.S. into a debt/death spiral.

        • OMA_OPINES

          You disagree but you are wrong. Two unfunded (and unfounded) wars made the deficit SOAR. The ultrawealthy continued to add huge amounts to their sheltered wealth.  Ther reason the poor may have “quit paying” is because they made so little they did not have an income tax but continue to pay other things -sales, etc. Let’s listen to the show with receptive minds.

          • Gregg Smith

            The poor quit paying because of the expansion Bush made to the EIC. Where do you guys get this stuff?

        • Don_B1

          The deficit is the result of

          1) the Bush tax cuts

          2) the wars in Afghanistan and, particularly, Iraq

          3) the unregulated mortgage market that led to the housing bubble, which crashed the economy and left a large portion of homeowners in debt which led to a large drop in aggregate demand and thus a crash in employment and business investment in capital goods and hiring. Thus the drop in GDP and revenue from taxes and the increased spending for the social safety net.

          4) the major spending effort by Obama was the ARRA (stimulus) of 2009 and the extensions of the unemployment benefits and the reduction of the F.I.C.A. witholding. These underfunded actions did stop the economic free-fall taking place when he took office and has provided a small push in the upward direction. Passage of the American Jobs Act in September 2011 would have resulted in an unemployment rate at least 1% LOWER.

          5) the refusal of Republicans to pass sufficient spending to get the economy growing. It is easy to draw the conclusion that many Republicans (or their wealthy sponsors) like the high unemployment rate which allows them to deny a share of the growth in productivity and profits to the workers who helped make that happen. Faster recovery would have generated the growth that Republicans now claim THEIR tax cut policies would help reduce the deficit. In other words, the deficit would now be lower if it had been higher for the first two or three years of the Obama administration.

          —————

          The proportion of responsibility for the current and future deficits is shown here:

          http://krugman.blogs.nytimes.com/2012/12/04/three-card-budget-monte/

          —————

          As for who benefited most from the tax cuts, see:

          http://krugman.blogs.nytimes.com/2011/09/20/taxes-and-the-wealthy/

          which accounts for the gains only up to early 2011; by now it would look even worse for the lower income levels.

          —————-

          I have pointed this out before, but of course, you are like one of those inflated clowns with a weighted base, which when hit just bounces back up without learning anything. You NEVER respond to the facts, just repeat worthless Republican “talking points.”

          Are you really the “intellectual” you seem to claim or just a clever operative/hack?

          • Gregg Smith

            I responded 100 times. Your analysis is bizarro land. Krugman is a krackpot. It’s a waste of time to argue all of that revenue is still sitting there in the vacuum world where 9/11 and the Clinton recession never happened.

          • Don_B1

            ANYONE, repeat ANYONE, who calls Professor Krugman a crackpot is the one who is the crackpot.

            I doubt YOU have ever even read any of Professor Krugman’s work, not to even go so far as respond to it in ANY MEANINGFUL way.

            But you have such a woeful (mis)understanding of macroeconomics, you could NOT pass Macro101. But you will not even try, since you would have to abandon certain aspects of your crass ideology of social darwinism to avoid the headaches of cognitive dissonance that would accompany a real understanding.

            You can take solace in not being alone, I suppose. But it is disappointing to know so many people who are WILLFULLY ignorant.

            Try reading this article from The American Conservative on the “epistemological closure” that is sinking the intellectual ability of “conservative” Tea/Republican Party members.

            http://www.theamericanconservative.com/articles/revenge-of-the-reality-based-community/

            But admitting your errors would take a bigger man than you have so far shown yourself to be, at least on this blog.

            And no, you have not responded to my points in ANY meaningful way. You may have posted a comment, but they are usually just snide points from Republican “Talking Points,” not any analysis of WHY your proscriptions will actually result in the goal you pretend to desire, not the hidden agenda of the most wealthy in this country, which is to increase THEIR wealth no matter what it costs anyone else.

  • 1Brett1

    What I don’t like, coming from each side, is this idea that there is going to be a type of midnight bargain struck using Medicaid, Medicare, Social Security, tax “loopholes,” taxes for the wealthy, taxes for middle income and taxes for those of low income in a toxic stew of political hostage-holding to make the deal. These various components of fiscal health don’t have to be traded off, “last minute,” with each other in a compromise of concessional grants/yields, and they shouldn’t be evaluated this way. They are each best served examined and evaluated individually rather than used as bargaining chips and ransom-like transactions.

    Neither side can be taken too seriously; neither side has put anything in writing. I’d say this first round has been mostly posturing. My guess is that we’ll see nothing of real substance or compromise for another couple of weeks.

    The Repubs say they’ve given the White House a serious proposal and that what they’ve given the White House is even what Erskin Bowles has proposed (this is designed to sound nonpartisan because Erskin is a Democrat). Of course, Bowles has said that this is completely false; what they’ve sent out has no specifics in it and is NOT what he (or Simpson) has proposed.   

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      Tangent: Bowles and Simpson are making $40k a pop touring in a “rockshow” performing their austerity and fiscal restraint act for CEOs. These guys are like the new Justin Bieber to the Beltway Inbreds.

      It’s nice to know we’ve got two someones ready to fill in for Blowmentum when his Senate term is mercifully over.

      But as the “left” of the debate? Screw that idea.

    • Don_B1

      Absolutely!

      The problem is that the spending cuts will be extremely unpopular, so Republicans refuse to name any explicit cuts they want, so that if the Democrats name them, they can blame the Democrats for the cuts in the next election. So why would the Democrats supply the rope for their own hanging? [Unfortunately, in the past, some did, and they are now gone.]

      Note my earlier post in response to 2Gary2 where I commented on the election results.

  • ttajtt

    heard last night.  if raising taxes on the top 2% will hurt our economy.  but obooma says its “only fair”.  he did talk to mitt.

    under stand ALL us ones is are under this fix.  its just whom has not been “in evolved physically”, we’ll pay but give us this back?  this for that trade off on paper?   why not a straight up no string attachment deal.  its only paper, or we talking gold.   can’t print more of that? 

    the world is watching

    • http://www.facebook.com/leonard.bast.90 Leonard Bast

      Is us just trade that for this paper is not gold? mittttt comes to obooma and then all us ones is coming apart? lets get us a deal under bicycles that come up solvent. give us our pay and then straight up we know everyone sees us right?

      • JGC

        (Ummm…don’t know if you are aware of ttajtt’s back story…TBI, just in case you didn’t know.)

  • Coastghost

    Well, after hearing “Morning Edition’s” eye-opening account of employer-offered health insurance coverage exemption from Federal taxation, taxing it as income looks appealing for those anxious to cultivate (further) increases to government revenue and government spending. (Begin taxing charitable contributions that support public broadcasting, too, double taxation never hurt anyone.)

    • JGC

      All charitable donations should be taxed. Romney’s idea about a bucket of total deductions is workable to me. It could be phased in over a number of years, say $50,000 per adult in 2014 and then decreasing by $10,000 a year until it ends up at $10,000 in the final year. It should be adjusted to the interest rate increases/decreases or cost of living.  That would cover charitable donations, mortgage interest payments, employer-offered health insurance, all that stuff.   

      Employers are already offering less and less in the way of health care coverage, and as people move to Obamacare, there will be less reliance on employer’s insurance. And people will have an incentive to pay off that mortgage as quickly as possible.  The faster it is paid off, the more room a person has in their deduction bucket in case they want to do more in the way of charitable donations.

      This is not to exclude the need for higher income taxes. Raise the rate on the wealthiest earners for now, increase it a small amount on the middle class as the economy improves, and get rid of that “carried interest” freebie enjoyed by hedge fund managers.

  • Shag_Wevera

    Democrats control the Senate, and a democratic president just won reelection.  While running for reelection, the current president ran on no issue any more strongly than the idea that the 1-2% NEED TO PAY MORE as a piece of a balanced financial solution.  What would have to happen for the House of Representatives to stop stonewalling and preventing the will of the American people?  I usually hate it when people use the phrase “what the American people want”, but in this case polls and the current election seem fairly clear.

    I’d like to know why conservatives whine so over a return to Clinton era tax rates.  The 1-2% are masters of avoiding taxes anyway.

    Here is what this liberal wants.  Rich folks and republicans need to give SOMETHING on this issue.  Threatening Social Security and Medicare WITHOUT the rich giving anything measurable is UNACCEPTABLE.  And please don’t feed me any bullshine about closing loopholes.  That is an even easier dodge than higher marginal tax rates.

    • William

       Where are the spending cuts?

      • Shag_Wevera

        I think spending cuts are part of a balance solution.  I think foreign aid and the military should be cut long before old age pensions.

      • Don_B1

        President Obama indicated exactly where and how much tax revenue should be increased and he also indicated how much further Medicare could be cut, plus some other additional cuts beyond the $1 trillion ALREADY cut in the debt limit ceiling debacle.

        Now Speaker Boehner should indicate exactly what tax deductions and marginal tax rate cuts [changes] plus the spending cuts in what programs he wants.

        All that the Republicans have done is wave magic wands at revenue increases and spending cuts without providing ANY indication of exactly where and how much the amounts will actually be. And even where some general class is indicated, the amount claimed is more like double what could be practically achieved.

        Note that even REPUBLICANS are more than 60% in favor of raising taxes on the wealthy and almost 70% of them are adamantly AGAINST cutting Medicare or Social Security.

        And there is just about zero chance that Democrats are going to agree to any cuts in SS, which had nothing to do with growing the deficits. The shortfall of income to the SS Trust Fund is due to the slower growth of workers’ wages, due to the lack of sharing of productivity profits with the workers. The wealthy are enjoying the high unemployment levels because it helps keep wages low.

    • Flytrap

      If we can return to Clinton levels of govt spending, I am sure the top 1-2% will happily pay a few % more in taxes.  http://www.breitbart.com/Breitbart-TV/2012/12/03/Jake-Tapper-To-White-House-Obama-Didnt-Campaign-On-This-Fiscal-Plan

      • Kathy

        How about the Clinton era spending on the bloated military. That would be a 50% cut, which seems about right to me.

      • OnPointComments

        Obama Should Return To Clinton-Era Spending Levels
        http://news.investors.com/ibd-editorials/120312-635563-clinton-era-spending-levels-not-tax-rates.htm 
         
        “Obama argues that to avoid the fiscal cliff we must return to Clinton-era tax rates for wealthy households, with a top marginal rate of 39.6% vs. the Bush-era 35%. Clinton’s was an age of balanced budgets and economic growth.  But it was also an era of budgetary restraint in which both parties, not just the GOP, still produced budgets.  Clinton, federal spending averaged 19.8% of GDP. In contrast, spending under Obama over the past four years has averaged 24.4% of GDP.”

        • Don_B1

          The Clinton administration did NOT have to deal with a Great Recession where an 8% drop in GDP led to a big drop in revenue and a near doubling in unemployment, with necessary increased safety net spending, without President Obama having to do a thing. That is where the majority of the increased PERCENTAGE of GDP comes from.

          President Obama DID get Congress to pass the ARRA, an underfunded stimulus bill, which DID halt the economic free-fall the economy was in when he took office, but it was not enough to get a strong recovery, and every attempt he has made to change that has been fought tooth-and-nail by the Tea/Republicans.

          A larger deficit in the first two or three years of his term could have decreased safety-net spending resulting in a lower deficit now.

    • BHA_in_Vermont

      “What would have to happen for the House of Representatives to stop stonewalling and preventing the will of the American people? ”

      They still control the House, even though they lost seats.  Boehner thinks that gives him a mandate.

      “And please don’t feed me any bullshine about closing loopholes. That is an even easier dodge than higher marginal tax rates.”

      Yep, I am surprised the people with money aren’t saying “go with the tax rate increase now and revamp the tax codes next year”. It gives them time to be like Romney, figure out how to work your way around any tax changes so you pay a lower percentage than the average middle class person.

  • MadMarkTheCodeWarrior

    Someone explain to me why the Republicans are willing to risk financial ruin on protecting a very small segment of society that has actually prospered during the Great recession. Warren Buffet, one of the wealthiest men in America has said this upside-down entitlement for the wealth is unfair and unhealthy. Many billionaires and billionaires stand behind him.

    Many in businessmen will tell you that personal taxes have no effect on business investment. The consumers who drive this economy are the 99% of the population. Taxing the lower and middle classes will slow the economy.

    So why are Republicans threatening to fall on their swords for Grover Norquist who has never been elected to any office. Are these ideologues still willing to risk the country falling into a depression for the ideology that was a big part of getting us into this mess? Are these guys insane?

    This may be the final nail in the coffin of the extreme right Republican party.

    • OnPointComments

      You’re going to buy a new home — cash only, no mortgage.  You have $25,000.  Maybe you’ll get a used mobile home.  On a whim, you buy a lottery ticket and win $1 million dollars.  Are you still going to buy a mobile home?  Or does the amount of cash you have available have an effect on the amount of your investment?
       
      Saying that personal taxes have no effect on business investment is ridiculous on its face.  Name some of those “many in businessmen” who have made that statement.  80% of America’s businesses are sole proprietorships, and the individual owner pays personal taxes on the business’s profits.  Do you really think that the government can take whatever portion of the business profits it wants in taxes and it will have no effect on business investment?

      • MadMarkTheCodeWarrior

        There is a distinct difference between business income and personal income. Until you take that money out of the business as a paycheck or a benefit, it’s not personal income.

        • OnPointComments

          You are wrong.  For the 80% of businesses that are sole proprietorships, business income is reported on an individual income tax return just as W-2 wage income is reported on an individual income tax return.  The owner pays individual income taxes on the profit whether it’s taken out or left in the business.

          • MadMarkTheCodeWarrior

            Granted business taxes are not simple, but it depends on how you structure your business and run it. So if you do it the way you’re saying, you’re paying personal income tax rates on all expenses and reinvestment? So I’ve got greater demand than I can meet so I elect to invest $500,000 on leasing a 5 axis CNC machine, I’m paying income tax on the new lease payment?

          • OnPointComments

            Let’s say you’re a sole proprietorship (like 80% of the businesses), and make a profit in 2012 of $300,000 before deducting lease payments.  If you leased a $500,000 5 axis CNC machine on 01/01/2012, you’d be able to deduct the lease payments, say about $90,000 a year.  You would still pay individual income taxes on $210,000 ($300,000 minus the $90,000 lease payments) – that’s the tax law.

          • hennorama

            Ah… nothing like a 5-A CNC.  Vertical or horizontal?

            Kinda fun to program ‘em to machine spiral inclines, but now I’m digressing…

          • MadMarkTheCodeWarrior

            We have been in agreement from the beginning that if you take money out of your business as personal income you’re going to pay personal income taxes on it weather you’re a sole proprietorship, pllc, llc s-corp…
            Regardless when you take business revenue as personal income that is a business decision not to re-invest it into growing the business.

            There is no causal link here. This tax fight is not about folks with 6 figure incomes. It’s about guys like my next door neighbor who was worth 250m 10 years ago and was against the Bush tax cuts for the wealthy and I quote – “People like me don’t
            need these tax cuts!”

            Here’s a billionaire telling the truth about job creation.
            http://www.youtube.com/watch?v=bBx2Y5HhplI

          • OnPointComments

            I think you’ve gone off on somewhat of a tangent here, and you may have a basic misunderstanding.  For 80% of the businesses, an individual owner will pay personal income taxes on the profits from the business whether or not he takes any money out of the business.  If the business makes a profit, and the business owner doesn’t take a paycheck and never takes a penny from the business accounts, when the owner files his own individual income tax return Form 1040, he will pay individual income taxes on the business profit.  And the amount of those individual income taxes paid on business profit certainly affects the amount of funds available for the business to invest.

          • Don_B1

            Since the profit of some 97% of “small businesses” is LESS than $250,000, most of your 80% of businesses do NOT have the problem you allude to.

            I do Venn diagrams, so I know the two groups do not necessarily overlap perfectly,but those that earn more than $250,000usually are single or low employee operations, not large “job creators,” either.

          • Gregg Smith

            Our horse farm grosses in the top bracket but it does not go far after expenses. We pay $25K a year for hay alone which is cheaper than the grain bill. Some machinery and a few employees in addition  to everything else and it doesn’t leave us laughing all the way to the bank.

            We get our stall bedding from the shavings produced by a carving machine similar to the one you cited. The ones I’ve seen take an operator but do 20 legs at a time. Cool stuff.

          • MadMarkTheCodeWarrior

            So then are they not paying over twice the tax rate that the wealthy pay with their deductions and 15% rate on capital gains?

        • hennorama

          Business PROFITS are taxed MMTCW, not the gross income, as OPC said.  Income minus expenses equals profit, which is then subject to taxation.

          (Please note that this simplified discussion exclude Gross Receipts Taxes that some states and municipalities impose on certain businesses.)

          • OnPointComments

            Actually, I specifically said that the individual pays taxes on the business profits.

          • hennorama

            OPC – my sentence construction certainly could have better shown my agreement with you, and my correction of MMTCW: “As OPC said, Business PROFITS are taxed MMTCW, not the gross income.

      • BHA_in_Vermont

         ”individual owner pays personal taxes on the business’s profits.”

        And the vast majority of those people are not even CLOSE to making $250K taxable and would not be affected one iota.

        Let’s hear from all the On Point posters who own businesses. How many of you have more than $250K in taxable income from your business?

        And of those who do (if any) how many jobs will you cut if you have to pay a couple % more on the amount over ~ $330K?

        And how much income will you LOSE by cutting those jobs? If you make $100 on the job you will cut and you pay $35 in tax or $39 in tax, you still MAKE MONEY because that job exists. If the job didn’t make you any money, your tax rate could be ZERO and you would still cut the job (assuming you have a brain).

        • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

          It’s another RWPCF: Right Wing Poster Child Fail*.

          Just like Terry Schiavo, or Joe the Plumber, or the Faux-Death Tax, they are giving away the disease of frightenment of things that (statistically speaking) there’s nothing there.

          Or akin to putting women and children in front of an army: Hey, Ma and Pa storekeeper in Muncie, you know who else has few enough employees to be a “small business”? Donald Trump! Or some multimillionaire who finds fake commonality.

          (Yes, I’d say “Republican”, but we all know there are NoRepublicansHere.)

      • Shag_Wevera

        Those blessed job creators could always open shop in Belize, or stay stateside and work at Walmart.

  • Gregg Smith

    The democrats want it.

    • Shag_Wevera

      “Everybody wants some, I want some too…”  -Van Halen

    • Don_B1

      The Democrats see the Republicans demanding deficit reduction (so there will not be job creation and unemployment reduction), so they are calling the Republicans’ bluff and say, correctly, that if you are really going to reduce the deficit, the mathematics of the process and the limits on spending cuts that the voters will accept requires more revenue.

      It has been shown empirically over the last two to three decades and over the last century that raising taxes on the wealthy has negligible effect on job creation. Since the wealthy have put Republicans in the position of demanding deficit reduction instead of job creation, the reasonable response is to raise taxes as well as cut spending. But the spending cuts cannot come immediately without hurting job creation, so now the Republicans are trying to get out of the box they put themselves in. Much like Senator McConnell having to filibuster his OWN bill!

  • StilllHere

    What’s the liberal view on the debt ceiling?  My guess, they don’t care.

    • Gregg Smith

      Obama wants complete control with no limit. He cannot be serious.

      • Prairie_W

         I think you mean the Republicans want complete control with no limit.  That’s the history of the past four years and why they’re so bitter at the moment.  They really expected to achieve total control and gave themselves no safety net.  It’s our obligation to sanity that we now laugh at them in their disarray.

      • Gary Trees

        Source?

        • StilllHere

          Obama’s proposal would allow him to raise the debt ceiling by executive order.  No debate.

          • BHA_in_Vermont

             Gives him something to “concede”. I really doubt anyone in DC would contemplate giving 1 person the ability to raise the debt ceiling.

            Although: The reason they raise the debt ceiling is Congress passes a budget that doesn’t fit under the current ceiling. They should de facto raise the ceiling at the same time the budget is signed. Voting to pass the budget is a vote to raise the ceiling.

          • MrNutso

            There is no reason to have a debt ceiling.  Just one more way for our elected representatives to abdicate their duties by creating a regulation that makes them do something rather than just doing it.

      • Don_B1

        Even Republican/Libertarian Alan Greenspan agrees that the Debt Ceiling Limit is a ridiculous double requirement that only enables a minority to blackmail the majority over the fiscal health of the country: failure to agree to pay the bill for what you have agreed to buy and have, or will have, received is a violation of financial integrity and responsibility.

        I thought you where a stalwart supporter of being responsible for your actions!

        • Gregg Smith

          Being responsible means not living beyond your means in the first place.

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      No more than every Republican and every media figure did when Shrub raised it continually.

      Surely this “debt ceiling” “crisis” isn’t your hole card.

      (And save your “We hundreds of millions of TruePrincipledConservatives didn’t like it then” schtick. You don’t statistically exist.)

  • Gregg Smith

    “But since this election, there’s been — I think it’s the Democrats are the ones who are really trying to rub it in and almost humiliate the Republicans, and that’s not going to get to a bargain.  Again, I think it has to be win-win. … You hear among some Democrats right now, and it’s disturbing, that maybe we ought to just take it over the cliff, that’ll, we’ll score political points against the Republicans, that will force their hands in the new year.  That is a very, very, dangerous risk.” -David Gergen

    • TomK_in_Boston

      If letting the disastrous bush tax cuts expire is the only way to get the top rate up, that’s what has to be done.

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      David Gurgle?

      Surely you can do better. He is pure Beltway Inbred.

      And the next time Gurgle doesn’t need smelling salts when faced with the possbility of a 39.6% top rate, let us know.

  • http://twitter.com/BocaRatso Boca Ratso

    Seems to me, the GOP may be heading for 
    the fiscal banana peel 
    if this is more supply side bunkum.

    • Don_B1

      It is not only “more supply side bunkum,” it is PURE supply side bunkum.

      It is also an elaboration of the devious deception and “magic asterisks” used by Romney in his campaign to lower tax rates by 20% without decreasing revenue by eliminating tax expenditures (loopholes). What cannot be reconciled is that the expenditures “eliminated” would greatly affect the middle class (and those in the $250,000 to $400,000 income range) big time, while having little effect on the really wealthy, unless they make little change in revenue.

  • Jim Cant

    Here’s a question I think appropriate to today’s topic (at 10:00) which I’ve never heard discussed.

    What
    are the requirements for avoiding the fiscal cliff. On would assume
    that in the legislation that established the cliff, the Congress would
    have included the criteria for avoiding it.  Is ti raising revenues to
    some specified level?  Decreasing expenditures?  Swerving sharply left
    or (hopefully not) right just before the cliff?  Passing new legislation
    that says the cliff has been avoided.

    Without such criteria in mind, how would one know how to avoid the cliff?

    • MrNutso

      The term fiscal cliff is just a scare tactic.  If nothing is done, the large tax increase and massive defense cuts will result in a drastic reduction in the deficit and future debt.  This may cause a new short term recession.  

      The reason scare tactics are throw around is Republicans don’t want to be blamed for increasing taxes and cutting defense spending.  Amazing that these are the same people railing about the deficit.

      Republicans are really about cutting back benefits for the 47% and not reducing the future wealth of the 1%.

      • BHA_in_Vermont

         ”reducing the future wealth of the 1%.”

        ??

        What policies have the Republicans put forward that would reduce the future wealth of the 1%?

        • MrNutso

          Opps.  Should have been a not in there.

  • http://www.facebook.com/profile.php?id=1043274337 Sara Moore Giannoni

    Please talk about the Laffer Curve and the debate regarding where the peak is.  I hope that we get and understanding of both the liberal and conservative point of view if possible.
    Thanks

  • TomK_in_Boston

    Tough? Not caving as in the past, yes, which is something. Tough, no.

    With top tax rates at historic lows, why is a little increase anything but obvious? Tough would be increasing them a lot more than to clinton era values. Tough would be a financial transactions tax.

    Geez, President Obama campaigned on the little hike in the top rate. The public, even republicans, favor it. The only reason it’s even being discussed is the GoP agenda of redistribution to the top.

    The GoP attacked the dems over “taking” (not) $ from medicare and now they want medicare cuts. Of course they say they want cuts to “save” medicare but a 10 yr old can see through that con. The public overwhelmingly do not want cuts. What’s the big deal about defending medicare? “Tough” would be extending medicare to younger people. Since medicare is the most efficient part of our crazy health care system, that would lower overall costs.

    SS is the most fiscally sound program on planet earth and does not contribute to the deficit. Why is it being  ”tough” to take SS off the table? “Tough” would be raising the cap.

    The GoP has basically proposed the program that lost them the election. Actually, since the etch-a-sketch redrew into a defender of medicare, it is even more class warfare than the romney campaign. Good luck to the TeaOP fighting hard to cut medicare (cutting to “save” medicare, of course :)) and SS. May the circular firing squad continue!

  • Amy Kim

    Quite frankly, I am now tired about hearing about this cliff all day, every day. I’ve also heard that there will be no dramatic “falling off the cliff” results anyway, but rather a gradual change if I deal is not stuck. So, lets just change the term to “fiscal slope” and not get so sucked up into the drama. 

    • TomK_in_Boston

      Amen! It’s standard righty scare tactics, “framing” an issue with scary terminology.

    • Prairie_W

      Exactly!  I’ve been looking for the right image for days, weeks. This morning:  “dung heap.”  Bush should get a mention …

      I’d like to add Paul Krugman’s take on the Republicans’ efforts:

      “… Even as Republicans demand “entitlement reform”, they are dead set against anything like that. Bargaining over drug prices? Horrors! The Independent Payment Advisory Board? Death panels! They refuse to contemplate using approaches that have worked around the world; the only solution they will countenance is the solution that has never worked anywhere, namely, converting Medicare into an underfunded voucher system.”

    • StilllHere

      I believe Bernanke came up with it because the Fed is doing all it can to stimulate the economy.  Tax increases and spending cuts will likely have a negative impact on economic growth, perhaps precipitating a recession.  It already appears that the uncertainty is leading to less hiring and business investment.  I’m with you on the slope nature of the crisis itself but we need to consider the indirect effects as well.

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        Look up “demand” in the dictionary.

        And Bernanke’s Fed is “doing all it can”? No. Bernanke’s Fed is continually making noises about doing something eventually. They’re like the fire department which is really good at putting out foundations. Too late of a response, doesn’t matter what they do at that point.

    • Don_B1

      What the debt ceiling legislation did was to establish arbitrary “across-the-board” (excluding Social Security. Medicare and Medicaid) spending cuts on Defense and non-Defense “discretionary spending” which in combination with the expiration of the Bush Administration tax cuts would impose a sudden shock of austerity of up to 5% of GDP, where the way each component is delayed could increase or decrease its effect.

      That would be more than enough to plunge the country back into recession (the Great Recession was the result of an 8% drop in GDP) and, since the economy is still in the Lesser Depression, this could make it even harder to recover from.

      In that sense, going over the “fiscal cliff” is really experiencing an “austerity bomb.”

      There is a blog post from the Center for American Progress that gives some comparisons between Obama’s plan, current law (going over the “cliff”), versions of Simpson-Bowles, etc. But the one effect of all these plans NOT provided is the effect on GDP of these different approaches. And since what they have provided in five figures is results as a percent of GDP, but since GDP could be quite different under different plans, I am not sure how valuable they are:

      http://thinkprogress.org/progress-report/no-magic-beans-required/

  • JGC

    Obama is my shepherd; I shall not want,
    Even if he leadeth me to the edge of the fiscal cliff.

    Yea, though I walk through the valley of the shadow of debt,
    I will fear no Norquist.

    Simpson and Bowles: they comfort me.

    If we can avoid the fiscal cliff and have a blend of fair tax increases, targeted budget cuts and tax code overhaul then 

    my 401K will runneth over,
    and I will dwell in my mortgage-free house forever. 

    • Gary Trees

      Yes, we get it. Deifying Obama. So clever.

  • Flytrap

    I think something that needs more airtime is the Senate’s lack of a budget for the past 3+ years.  They should be debating the budget in the open, not using a parliamentary trick to fund the govt.  The Reps want to cut social spending, let’s hear about in debate.  The Dems want to cut defense and raise taxes, let’s hear about it in debate. 

  • Flytrap

    If Jake Tapper was correct yesterday? questioning Jay Carney, the administration is touting proposals it didn’t run on.
    http://www.breitbart.com/Breitbart-TV/2012/12/03/Jake-Tapper-To-White-House-Obama-Didnt-Campaign-On-This-Fiscal-Plan

    • TomK_in_Boston

      Ooooh how horrible. Shocking! 

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      If you’re quoting something that’s for real, can’t you get it from somewhere else than Breitbart? You’re not really doing yourself credit with that tendency.

      • Flytrap

         Click the link, it’s just a video snippet from the press conference.  Your bigotry towards sources from a different perspective is disturbing.  I disagree with the DailyKos and MotherJones, but if they have info I disagree with that checks out, they have good info.

        • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

          Bigotry? Pfft.

          No more Breitbart dot com, please. Don’t “click pimp” any of that crap here.

          Breitbart, his site, and his legacy are a boil on the “mainstream” media. The NYT Mag should be ashamed of the fluff piece they gave him. Every place that pretends it’s interested in truth should have printed blank pages or transmitted a test pattern than anything with that human scab’s name on it.

          He was a crackpot with an agenda. He was no journalist. He was no “jester”, doing outlandish things in the name of getting at bigger truths. IIRC, pimping the pimp FeloniousJamesO’Keefe was Breitbart’s high-water mark.

          And the more you want to compare a place that actually does some journalism (like Mother Jones) to any hack website with Breitbart’s name on it, the more you show yourself.

          Glad old Breitbart’s been dead long enough that we don’t have to pretend any longer that he possessed personal manners or professional scruples.

  • BHA_in_Vermont

    The way both parties are handling the “cliff” is a joke and why the peoples’ trust in Congress is lower than a snake’s belly.

    Both say they want to “raise revenues”.
    White House says MUST raise tax rates.
    Republicans say “CAN’T raise tax rates, cut deductions.”

    How do these people NOT UNDERSTAND that BOTH raise the amount of money people pay in taxes?  It is ALL SEMANTICS. Bunch of lawyers.

    Frankly *I* don’t care how the > $250K people pay a bit more in taxes. Raise the rates or cut their deductions. IT DOES NOT MATTER! They will pay a bit more in taxes either way which will raise revenue. ISN’T THAT THE POINT????????

    They WASTED a year where they COULD have figured this all out. There is NO WAY they will come to agreement in 2 weeks on what deductions to cut. They would have trouble doing that in a year. At this point, raising the rate on the > $250K is probably the only way to raise revenues this year.

  • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

    So is this gonna be an hour of real liberals and that’s it? Or will anything said on air in this program become something I hear at the NPR news blurbs every hour?

  • MrNutso

    Well Senator Graham, please show me someone who has actually created a job.

    • http://netbacker.tumblr.com Netbacker

      Good point. Spending creates jobs. Unless the middle and low income people have extra money to spend, the economy is not going to recover. Spending cuts and tax increases take money out of the economy. Asking them to take on more debt only helps these corrupt bankers. The people are broke, but as a sovereign nation the US is NOT broke.  Only when we understand this, can we as a nation prosper.

  • http://wh.gov/IVp4 Yar

    Quit focusing on the money, look at jobs.  My solution is to have two years of public service for all youth.  Is this a liberal idea or a conservative one?

    https://petitions.whitehouse.gov/petition/create-requirement-all-us-residents-between-ages-18-and-24-serve-two-years-public-service/CTCfT6yL?utm_source=wh.gov&utm_medium=shorturl&utm_campaign=shorturl

    • hennorama

      It’s both, so it obviously won’t go anywhere, as no one can score political points saying it was solely their idea (other than you, of course).  Might have a better chance if it was 1 year (which you are free to take complete credit for, BTW).

      Rock on, Yar!

  • jefe68

    Understanding the Fiscal Cliff in (2 minutes and 30 seconds)

    http://robertreich.org/

    • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

      So basically, Robert Reich is saying to continue spending and raise the taxes on the wealthy so they pay their “fair share”.  This is laughable.

      No amount of reasonable tax increase is going to pay down our deficit.  Obama current tax increase proposal is only 10% of the deficit.

      Spending is our issue.  But Obama only wants to cut 1.5% of our deficit spending, sigh.  That’s not a plan.  

      Unfortunately, the Republicans are playing games too.  Don’t be part of the dumb electorate.

  • Prairie_W

    Paul Krugman is the indispensable person in the crowd who’s the first — every time! — to yell, “The emperor is wearing no clothes.”  We need to listen to him and listen closely.

    • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

      The moron also wants more stimulus.  Enough said

      • Gregg Smith

        He said the first one was too small, more debt is what we need. Brilliant.

        • http://netbacker.tumblr.com Netbacker

          Even though, I don’t agree with how the stimulus was implemented, it was the first stimulus that saved the US, else we would have been worse that Europe.
          They tried the same old “trickle down” theory and the elites made off like bandits. Now these pigs want more and are using this fake crisis to privatize Social Security and Medicare. Annually we pay around $900 Billion into those programs, now wall street wants it as their play money.
           

          • Gregg Smith

            I think the entire stimulus was doomed no matter the dismal implementation. I think TARP was also badly implemented but it did some good.

  • Davesix6

    I am curious to know what Mr Krugman’s thoughts are on Capitalism and Free Markets.

    Does he believe that both have failed?

    If so, what would he like to see in their place?

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      Wow, a sixth-grade level zinger so totally pwned Krugman!

  • Prairie_W

    Something we need from NPR:  the end of hard breaks. The cohesion of really important discussions is repeatedly broken by something as old-fashioned as radio station breaks.  There’s a reason for it but it doesn’t work anymore.

  • http://profile.yahoo.com/YMV2HJ2TBKMCN2QRAVI3I2OOGM Jim Jim

    We voted to tax the rich. Its overwhelmingly popular. NOW ‘JUST DO IT’.

    • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

      Jim can you explain to me in detail how you think taxing the rich is going to help our problem?  Obama wants to raise taxes on the wealthy to hypothetically bring in <10% of our deficit over 10 years, sighhh.
      The spending is the real issue here.  No amount of tax "revenue" is going to correct our problem.  Obama is only proposing to cut spending by 1.5%.  Give me a break.

      • http://profile.yahoo.com/YMV2HJ2TBKMCN2QRAVI3I2OOGM Jim Jim

        Actually I would love cuts in Defense, Corporate tax loop holes, and would vote tomorrow for a flat tax. You give me a break, Ryan. 

        • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

          What about entitlements?  Pensions?  Government agencies?  Non-performing programs?

          • http://profile.yahoo.com/YMV2HJ2TBKMCN2QRAVI3I2OOGM Jim Jim

            I would love to see congress cut their own entitlements first. 
            Once that is finished, they could work on all of the Bottomless Pit contracts to build “next Generation’ weapons that never even get through Proof of Concept phase of development. Or Contractors that are supposed to build ‘infrastructure in Afghanistan or ______’ that wont even end up building the simplest well. 
            Then get started on Agribusiness subsidies that are supporting chemical companies and the seed patent mafia which keep family farmers from getting real value from the products, maintain soil quality, and empower local communities.Reform healthcare.rebuild public educational infrastructureencourage compassion. 
            etc. etc.

  • Kathy

    Going over the fiscal cliff would be a disaster, but not nearly as bad as any of the proposed solutions. The real answer is significant (50%+) long term cuts to the military and broad tax increases that need to touch the top 20%, not just the top 2%. We paid these rates back in the 90s and I seem to remember the economy doing just fine thanks back in the Clinton years. 

    Fix medicare and social security separately. Just cutting these programs does nothing except shift costs. The free market doesn’t work for health care when the alternative to a high price is dying. The problem with Medicare spending isn’t that it’s overly generous, it’s that our private health care system is resulting in out of control health inflation for all Americans.

  • Ellen Dibble

    Julie Rovner offered an interesting piece about national budgeting this morning on NPR’s Morning Edition.  There continue to be vital parts that are not center stage.  She says that since World War II when there were wage controls so that employers could only reward employees with health insurance, health insurance and health care has grown fat BECAUSE of the health insurance deduction.  She says we get health care at 60 cents on the dollar, so guess what happens.  But as that deduction disappears with Obamacare, more people will go into the newly created insurance baskets to buy their own insurance, and health savings will begin to be attractive.  Search Julie Rovner, NPR, health care deductions.  See this:  ”Believe it or not, dollar for dollar, the most tax revenue the federal government forgoes every year is from not taxing the value of health insurance that employers provide their workers.
    Yet most people don’t even realize that they don’t pay taxes on the value of those health benefits. That’s too bad, says MIT health economist Jonathan Gruber, because it represents a whole lot of money.
    “If we treated health insurance the same way we treat wages,” says Gruber, “we would raise about $250 billion per year more.” That not only makes the health insurance exclusion the federal government’s largest tax break, but it’s also “the third largest health care program in the U.S., after Medicare and Medicaid.”
    And just how much does $250 billion represent in health care terms? “If we ended the tax exclusion, we could cover every uninsured American with health insurance twice over,” Gruber estimates.

  • Ellen Dibble

    The link:  http://www.npr.org/blogs/health/2012/12/04/166434247/the-huge-and-rarely-discussed-health-insurance-tax-break

  • http://wh.gov/IVp4 Yar

    Thelma and Louise as in a movie stunt, where the actors don’t really get hurt?.  No, it isn’t like that at all the directors, (Congress) are demanding the poor and disenfranchised pay the price either way.  

    I watched a program last night where a conservative commentator simultaneously said the poor don’t pay any tax and if tax rates are raised then they will simple be passed on to the poor through higher prices.Which is it?

  • Prairie_W

    Stephanie Kelton about the process of developing this fake “fiscal crisis” deserves repeating over and over again.  She’s right. 

  • http://twitter.com/mls_classics Thomas Pinkerton

    The problem is that the liberals have framed this all wrong. Conservatives say that without austerity, we become Greece. But WITH it, we become Spain. Balanced budgets, but an economy so contracted that we sink even further into debt.

  • StilllHere

    $16 trillion of debt and $100+ trillion of unfunded liabilities versus a stagnant GDP of $13 trillion.

    Interest on debt consuming unprecedented portions of the annual budget when interest rates are at 70 year lows.  What happens of rates rise?

    How does increasing taxes create more jobs?

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      When you can’t use percentages like a real economist, resort to big scare numbers with no timeframe.

      Now if you’ll excuse me, I see by my earnings projection for the rest of my working life that I’m a multimillionaire. Time to hit up the Bentley dealership.

  • Michael Abrams

    The Dupublicans are trying to cover their debts with their big money supporters and their own large fortunes. This has been the problem all along. If we look at the big money contributors we can see the reason for Dupublican resistance to change.

    • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

      I don’t think the “Moocher” party is any better Michael.  Have you seen their proposal?  They want to raise taxes on the wealthy to hypothetically bring in <10% of our deficit over 10 years, sighhh.

      The spending is the real issue here.  No amount of tax "revenue" is going to correct our problem.  Oh and Obama is only proposing to cut spending by 1.5%.  Give me a break.  Who's the "Dupublican" now?

  • JGC

    From Barron’s this week (Jonathan R. Laing):

    Thankfully, European authorities finally have somewhat abandoned the Calvinist policies of punitive fiscal austerity and extreme monetary tightness that threatened to strangle the Continent.

  • DrewInGeorgia

    Why are we even discussing The Fiscal Myth? We’re going off because that’s the only way the Underwear Gnomes will get to keep their undies in a bunch. The Democrats will get at least some of the increased revenue that we NEED while simultaneously giving the Republicans the shiny new whipping post they want. Both get to stay up on their soapboxes and continue their fruitless b!tching while watching the rest of us circle the drain.

  • Roy-in-Boise

    On the numerator issue: One thing Grover Norquist is obsessed with is a federal budget that is 4-5% of GDP. In his own words he wants the federal government to be small enough to drowned in the bathtub. Pre Teddy Roosevelt size … How realistic is that and do we as a people want zero social net programs and the return of the Gilded Age?

    • JGC

      Another thing about Norquist, is ALL federal government is to be starved, not just the social side of it.  The Republicans have adopted his anti-tax pledge, and for their own purposes, only have policies that mean the social aspects must be cut. But the other thing that federal taxes cover is our huge military expenditures. Norquist doesn’t care about the military, either, because he is Libertarian. But you never hear the Republicans talk about how starving the federal government of tax money will also affect the military programs.

  • Coastghost

    “Austerity” in Europe is NOT leading to cuts in government spending: taxes and tax rates may be going up, but the rate of spending is NOT going down. Ditto for DC: your panelists bemoan the structural impediments to further Federal spending and barriers to increasing the rates of Federal spending.

  • NewtonWhale

    This is not a cliff.

    S&P downgraded the US credit rating on August 6, 2011. Nothing happened.

    On August 5, 2011 the Dow closed at 11,444.61.
    On August 15, 2011 it closed at 11,482.90.

    Let the Bush cuts expire, then pass the Obama tax cuts in January.

  • ToyYoda

    I’m all for stimulating the economy.  But isn’t economy’s global these days?  Won’t stimulating the economy just be stimulating foreign economies like China?

    • DrewInGeorgia

      So we shouldn’t help ourselves because it might benefit someone else? You may have just stated the root of this whole stinking mess without even realizing it. Think less China and more Political Opponents and Viola!

  • Ellen Dibble

    Wealth creation is SO important to this country, and yet people are trumpeting about how many 32 inch TV’s are being sold.  That is not “wealth.”  It is wealth if that money can be invested in bridges and factories and laboratories.  It is wealth if people can weather a fiscal storm without depending on the safety net, or weather a sickness or a need to go and retrain for a new skill — all that without the government having to be the hand holder. How to make that possible for the lower 43%?  How indeed.  I’d like to know what Krugman thinks.  A cheaper safety net means accessibility to stability and resources for everyone.

  • StilllHere

    What happens when interest and entitlements consume almost 65% of the budget as the OMB estimates in 10 years?

    • jefe68

      This is about revenue and working to control health care costs. Which the right is not interested in dealing with seriously. The GOP is going to end up a permanent minority party in ten years, that might help.

    • Steve__T

      SS was in good shape 2.6 T until congress started borrowing from it and putting in IOU’s that never got paid. The federal government has borrowed all of that trust fund money and spent it.

      I found this:

      In order for Social Security to pay full benefits after 2016, it will be necessary for the government to begin repaying the money it has spent on other things.  This will mean increased taxes and/or additional borrowing.  Neither of these is politically popular, and there is no assurance that future politicians will be willing to raise taxes to pay
      for the irresponsible behavior of past politicians.  If the money is not repaid in full, with interest, it will have been stolen by the government from working Americans who paid into the fund.

      Since Social Security would be fully funded until at least 2037 if the government had not used the money for other things, the only reason that
      politicians are advocating cuts in Social Security benefits is the fact that the government does not have the money with which to pay its debt to Social Security.  Given the fact that Section 13301 of the Budget Enforcement Act of 1990 made it a violation of federal law to use Social Security revenue for non-Social Security purposes, it is hard to justify using the word “borrow” to refer to any of the Social Security money spent after 1990, even if it is eventually paid back.

      Dr. Allen W. Smith Professor of Economics

  • jaypeprich

    I dislike the distinction between taxes versus spending.  The “spending” Republicans talk about cutting such as Social Security, Medicare, Medicaid, is largely transfers–from the young to the old and the healthy to the sick.  Transfers are negative taxes.  So, deficit reduction is really a question of taxes versus taxes. It’s a question of whose taxes are going up, i.e., whose after-tax income and consuming power is going down.  In this light, the Republican proposals so far, vague as they might be, share one common feature.  They put the tax burden on the those least able to bear it–the elderly, the sick, and the poor.

    • http://netbacker.tumblr.com Netbacker

       The thing is everyone started off with the wrong assumption that the deficit needs to be fixed and the only way to do that is by increasing the federal government revenue. All solutions are based on this incorrect assumption, so they all are a combination of tax increases and spending cuts.
      The reality is that as a free-floating non-convertible currency ISSUER, our federal government is NOT revenue constrained. It is the only legal entity that can create the US dollars. If it does not create enough of it, none of us will have any left after we pay our taxes.

      • http://netbacker.tumblr.com Netbacker

         What is the National Debt?

  • Thinkin5

    The caller is out of touch regarding his opinion that the unemployed don’t want to work. I know for a fact that a local hospital here in MA had more that 22,000 applicants last year. The caller is just repeating partisan spin.

    • StilllHere

      Or you are…

      • Thinkin5

         I have been applying to jobs every week this past year and am being told that places have hundreds, even thousands of applicants. Looks like people really want to work to me. At least the average worker actually EARNs their income by working. The wealthiest just make money on their money.

        • StilllHere

          You may be the exception, not the rule.  Do the applicants already have jobs?  Why do you hate retirees living off of a fixed income? 

          • Thinkin5

            I guess those “retirees living off a fixed income” are the people who just don’t want to work that that caller spoke of. You and he are the haters of people “who don’t want to work”.

          • StilllHere

            Having worked their whole lives and now living off of what they were able to save, they are entitled to our esteem not seen as hosts for the government to sustain parasitic slackers.

          • DrewInGeorgia

            Entitled…lmao

            The most parasitic people are those who never produce anything beyond their own personal gains.

          • jefe68

            Hyperbole.

          • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

            Wow. Way to warm-n-fuzzy your way with the under- and un-employed, or anyone who’s actually seen someone in those not-unique situations.

            You’re a regular Mitt Romney, bub.

        • Gregg Smith

          Do you really believe the wealthy don’t earn their money?

          • DrewInGeorgia

            Yes.

            Put any one of your ‘Geniuses’ in a part-time minimum wage job for a couple months and find out how ‘talented’ they truly are. Better yet, put them in two simultaneously. Then restrict them to the budget of this ‘crap’ work that only ‘stupid’ people take and watch them implode. Shuffling other peoples’ money around isn’t working hard, it’s hardly working.

      • jefe68

        Hyperbole.

  • J__o__h__n

    If the Bush tax cuts expire will the Republicans have to vote against Obama’s tax cuts for 98%?

  • StilllHere

    Greece was able to borrow at the same rate as Germany, until it couldn’t, and it ended ugly.  It’s possible that the US could lose lenders’ confidence as well.  That’s a fact!

    • J__o__h__n

      Greece should never have been able to borrow at that rate.  People should never have been confident. 

      • Gregg Smith

        Should people feel confident when investing in America?

    • jefe68

      Enough of with Greece already. We are not Greece nor are we Germany.  What is it with the right and their obsession with Greece?

    • StilllHere

      If interest rates double; that is, go back to where they were 5 years ago; interest and entitlements will consume 80% of the OMB’s budget.

  • Ellen Dibble

    I think the Depression era caller would have the poor do the saving and the wealthy do the spending, whereas Krugman would have the government, with access to the cheapest funds, do the spending.  If the wealthy do the spending, then we have industries that support their tastes, fancy cars, children’s books (I’ve noticed, a luxury, actually), yachts.  What does the economy need to be generating for the not-rich?  Education.  Health care that is not the emergency variety.  Merchandise that comes from American workers?

  • BHA_in_Vermont

    Even with no changes, my “taxable” income goes up next year because the max pre-tax income one can put in a Health Care Savings Account in 2013 dropped from $5,500 to $2,500. I have, and will continue to, spend well over $5,500 on medical costs not related to the cost of insurance. 

    • Ellen Dibble

      BHA, I used to think that unless I used schedule A and itemized deductions, medical expenses were really not deductible, but I called an accountant/lawyer last year who said there was a loophole for that, and that one can combine medical costs over several years, and the one year you claim them, they might be worth using schedule A.  I have my doubts, and no time to collect the swarm of receipts, but medical costs are sinking a lot of American families, and it’s easy to feel the cards are obviously stacked against us, why kick a stone wall.  But that’s what I heard.

      • BHA_in_Vermont

         So you are saying that if my medical expenses don’t exceed the floor (7.5% of income?? Don’t recall) in a single year, I can wait a year or two until they do and then claim? That would be nice. Probably be one of the first loopholes to get closed.

        The only reason I’m not complaining is because the HCSA drop is part of ObamaCare. Without the “kids can stay on parent’s health care” bit, I’m pretty sure my 19 Y/O couldn’t get insurance due to her existing medical conditions and if she could, it would be totally unaffordable.

        • Ellen Dibble

          That’s what our local tax guru told me.  It was late March, and the idea was I would meet him at a more leisurely time.  He has a weekly half-hour radio show, and if I can remember his  name maybe I can link so you can see who it is.

        • Ellen Dibble

          The lawyer apparently no longer does the radio show.  It never addressed anything remotely like my own fiscal situation.  But he seems to be in business, and has a Facebook page.  Attorney Bruce Fogel at Bacon & Wilson.  The phone number is easily available.  There must be somebody in Vermont with the same information, but I too expect this loophole to vanish.  I just do.

        • hennorama

          No no no no.  What Ellen was trying to describe was “bundling” your optional health care (HC) expenses into one tax year, in an effort to exceed the 7.5% of AGI deductibility threshold.  This only works if you itemize.

          For example, you pay for braces in January, your usual out-of-pocket HC costs (including insurance premiums not paid through work) during the year, then get new eyeglasses, or a hearing aid or other HC costs you can “bundle” into the same tax year.  This only helps if the total exceeds 7.5% of AGI, and only the amount over that limit adds to your other itemized deductions.

          HC expenses are the 2nd-most difficult thing to deduct, exceeded only by Casualty, Disaster, and Theft Losses, which have a 10% of AGI threshold.

    • hennorama

      You’re talking about a Flexible Spending Account (FSA), which your employer may call a “Health Care Savings Account.”  Indeed those contribution limits have come down, in order to pay for some of the stuff in the ACA.

      The reason I spoke up here is that there is a different health care-related tax-saving account called Health Savings Accounts (HSAs) that also have new limits, but those are going UP not down.  HSAs are combined with catostrophic high-deductible health insurance plans (HDHPs) that kick in once the high deductible is paid.  The idea is that you can get tax savings when contributing to an HSA, and TAX-FREE withdrawls if used to pay for health care expenses.  This can make your overall health care more affordable, especially since you pay lower premiums for the HDHP.

      The catastrophic HDHP insurance plans will likely be the model for the minimum coverages that will available under many of the state health care exchanges, once they are in place.

      You can find out more about FSAs and HSAs here:

      http://www.benefitspro.com/2012/05/08/2013-hsa-and-fsa-cheat-sheet

  • http://www.facebook.com/profile.php?id=100001969680540 Benjamin Franklin

    Sign this petition telling President Obama to “hold his ground” in any negotiations with Republicans.  The ultra wealthy must pay their fair share.   http://signon.org/sign/mr-president-please-properly

  • http://pulse.yahoo.com/_SDKEES3YIJ7KO3CDLFV2GMKBHE Richard

    Maybe the $50 billion is only a drop in the bucket but I would ask why not look to see if the $1 trillion deficit spending is being spent wisely.  How much of that amount is waste, patronage, etc.  My view is that much of that $1 trillion is being wasted on programs that do not benefit this economy on the whole, instead it is directed toward programs that reflect special interests groups such as the defense industry, homeland security agencies, farm programs for corporate farmers etc.  Even the infrastructure should be redefined so that high speed internet availability has the same priority as a road in a rural, poor area of this country.

  • Scott B

    That the Republicans are willing to take us off the cliff, refusing to even agree to help the 98% while working out a deal as  Rep Cole has suggested; sacrificing the 98% in order to protect the rich (that they only call “job creators”  these days) says everything you need to know about the Republicans in Washington these days.  They continue to ignore fact, history, and experience, and they’re going to keep wondering why they’re losing voters and elections.

  • dseesd

    Forgetting democrats or republicans, where will the long term growth come from? We are exporting jobs to India and China, where will the future American jobs come from?

    • StilllHere

      Taxes, apparently taxes create jobs.

  • Verdant J. Brennan

    Professor Krugman is a NOBEL winning economist and that warrants no mention???!!!  I count that as a inexcusable oversight.

    • StilllHere

      I think Nobel lost its cache when Obama got the Peace Prize and then started killing people right and left with drones.

  • Thinkin5

    I don’t see how a country the size of the U.S. with the biggest military in the world, and the usual ever escalating cost of goods and services can run a “small” government using numbers from a century ago. It just isn’t possible. It’s like deciding that you’re going to live in 1930′s  economic world of wages and prices. It just ain’t going to happen in 2012.

    • jefe68

      You think? Ask the small government types. They want to go back to the 1890′s or the 1950′s some want to go back to the 1830′s. It’s all very nostalgic and based on magical thinking. 

  • geraldfnord

    The only negative I can see about ‘going over the cliff’ would be that it would signal that the Republicans’ electoral losses have not moderated them to the point where they can make reasonable deals…but I think we knew that already.

    And, as I believe someone mentioned, once all the tax rises were in place, the Republicans could vote to _lower_ the taxes on the middle-class and the poor without violating their double-dog sacred pledge to seventh-grader Grover Norquist (a.k.a. ‘The Dramatic Hamster’).

  • FS8736

    Conservatives seem to treat the deficit as fueled by entitlement spending.  I wonder why the Bush Era wars are so rarely mentioned as deficit drivers. 

    • StilllHere

      Because in all the forecasts they are zeroed out and things still get worse.

  • m_mole

    We know that the bulk of our current deficit problem is the result of waging two wars over the last decade.  Any deal moving forward should include a war tax – from this day forward at least 80% of all war must be paid for through revenues – ie, if the President and Congress declare war, then they have to raise taxes to pay for it!  If taxes had been levied to go to war in Iraq and Afghanistan, do you think we would still be there now?

  • Annie Tye

    When I hear people comment on the purportedly growing class of people who are happy to live off of government ‘handouts’ and who don’t want to work, I can’t help but be curious about where they met these people.  I don’t doubt there are people who fit that description, but I haven’t met any.  I wonder how caller Bud became acquainted with them…

    • Ellen Dibble

      I’ve met a lot of them, and I’m thinking Obama probably met a lot of them as well, while he was a community organizer.  Young people growing up in these communities want to be like those in other communities, protected by the police, able to be honest in court, able to be proud of their work, skilled in a few things that are in demand.  But the step that goes from a panoply of government supports into the middle class proves to be too much.  ”It’s not worth it.”  They think if they grew up with a different social fabric they could manage a different way, but where they are, the best way to proceed is to work the system, and pray for your children. Many senior citizens I’ve met are in the same situation.  They could be productive and aim for profit and income, but they fall off that fiscal cliff and lose their benefits if they try.  So the fiscal cliff for a few classes of people is the cliff they fall off by working.

  • Prairie_W

    That’s perfect.  “Fiscal bluff!”

    • StilllHere

      Payroll tax cuts gone, extended unemployment benefits gone, Medicare cuts …  Some bluff.

      • Prairie_W

        Think bluff(s).

        “To impress, deter, or intimidate by a false display of confidence.”

        “A steep headland, promontory, riverbank, or cliff.”

        “Rough and blunt …”

        Ta-da!  Aren’t words wonderful!

  • Jengliu

    First they came for trying to get patients out of their sickbeds and put them on the treadmills to trim the fat, despite the fact that the patients were still on life support.

    Then they come to remove the life support because no one agees with what they said as remedy.   

  • boltshaker

     I was listening to a few of our leaders being interviewed and they were saying,”We have alot to do and get accomplished in a short amount of time” … SHORT AMOUNT OF TIME?!?! You fools were talking about this 3 years ago and there’s no reason to have kept pushing this off ’till the last minute.

    • MrNutso

      Their concept in time is on a glacial scale.

    • hennorama

      Great handle there, boltshaker.

      The reason the leaders  “have kept pushing this off ’till the last minute” is that they all wanted to keep their jobs.
      Republicans who dare to be honest and publicly say anything like “we need to raise taxes/revenues to get out of this mess” know they will pay a political price and will likely be “primaried” (challenged in the next primary election) by a “Tea Party”-supported or “Conservative” candidate.  Same thing with Democrats who dare to be honest and publicly say anything like “we need to adjust Social Security and Medicare to get out of this mess.”

      Fortunately, Congress painted themselves into this corner, and have to ACTUALLY TAKE ACTION to at least partially get themselves out, and to begin to solve the problem.

      It’s taken decades to get to where we are, so getting out will also take a long time.  But solutions are possible, and I’m modestly optimistic.

  • John Roberts

     Gradually, phase-out the mortgage interest deduction (e.g. over the next 5 years) with a lower slope for affordable housing (e.g. less-than $250,000 mortgages) and a steeper slope for more luxurious housing (e.g. greater-than $250,000 mortgages). Mortgage interest deduction played & plays an important role in people over-extending themselves and building unmanageable debt-to-equity ratios with their houses. One of the reasons why the housing bubble-and-bust had only a marginal effect on the economy (and real estste market) of our neighbors to the north (and most northern European countries) is because they’ve never been able to deduct mortgage interest.

    • hennorama

      The Canadian government has also been much more vigilant about monitoring home mortgage debt and preventing housing bubbles.  They’ve applied numerous restrictions since 2008,  to make it harder for Canadians to take out mortgages and to discourage unwise borrowing.

  • geraldfnord

    Many people desperately want to live in a world that were already just, in which everyone successful had earned it and everyone who suffered deserved it.  This is comforting two ways:  they may rest content in the knowledge that they deserve all their pleasures, and also need not do anything to help those below them.

    This way of thinking is very powerful, though at variance with reality. Not to get over-dramatic, and sorry for coming so close to tripping the Godwin Alarms, but I can’t help but recall that at least one group of troops liberated a death-camp and saw men starved and worked to death or nearly, some of them started asking, ‘What did they DO?  It must have been something TERRIBLE….’

  • http://www.facebook.com/profile.php?id=1443565335 Elizabeth Dowey

    The budget was last balanced, with surplus, under Clinton.  Then tax rates were reduced under Bush and deficits went up.  Who says increased tax rates are bad for the debt????? – Elizabeth

    • StilllHere

      All we need is a bubble then?  Great!  Let me know what it is.

      • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

        An economic boom would certainly help right now and maybe it is waiting for us in the energy sector.

        We need to focus on the spending.  Raising taxes is like shooting a BB gun trying to stop a freight train.  Obama’s proposed “revenue” increases only affect <10% of our deficit.  

        "Well what about the other 90% Ryan?"  Glad you asked!  It's the SPENDING!!!  90% of our problem is the spending.  Focusing on 10% of the problem is laughable.  We need to mean test entitlements, cut the defense budget (where necessary), and cut spending.  Obama only proposes to cut our deficit spending by 1.5%.  Pretty sad coming from our President.

        This is just a big game to politicians.  This is precisely what happens when the federal government grows to big.  Ok now I'm ranting…

    • http://www.facebook.com/ryan.hennings.1 Ryan Hennings

      The surplus under Clinton is a false claim.  Back then the .com boom was happening and the economy was roaring. We could afford higher taxes then.  The surplus was merely a projection based on the economy continuing to boom which is unrealistic.

      Bush screwed up by starting two wars and not properly funding them, but in my opinion he had no choice with the attacks.  Take away the wars and the deficit is shrunk drastically.
      Does that make sense?

  • neuropiepants

    We can only get ourselves unstuck by reversing the policies that got us into this mess: end all the Bush tax cuts and return military spending to pre-”9/11″ levels.

  • DrewInGeorgia

    It is more a Political Situation than it is an Economic Crisis. What’s new?

  • MadMarkTheCodeWarrior

    If the Republicans push us over the cliff, they’ll hurt themselves not just politically, but themselves and their wealthy constituents as the economy tanks.

  • JGC

    If all the numbers and information were fed into IBM’s supercomputer Watson, what sort of budget could it come up with?

    • MrNutso

      I think it will blow a diode.

      • Steve__T

         LOL

  • NewtonWhale

    S&P downgraded the US credit rating on August 6, 2011. 
    Here is a chart of the Dow from August 5, 2011 to date.
    If we go over the cliff then pass Obama tax cuts the market and the economy will be fine.

    • StilllHere

      What’s the history of Greece’s credit rating?

      • jefe68

        What’s Denmark’s? What’s Iceland’s or Norway’s?

        What’s Germany’s and Great Britain as well as Spain, Italy and Russia?

        We are not Greece. Get it?

      • NewtonWhale

        What’s yours? What do either of them have to do with that of the United States?

        The response of credit markets to the downgrade of the US rating was to send even more money to the US because it’s the safest economy in the world. The result is that interest rates are at historic lows.

        • StilllHere

          A credit rating is a slippery slope, and as it slips rates rise dramatically. What would be the impact of rising rates on the US budget, say 100 bps?

          • NewtonWhale

            Google is your friend. Learn to use it.

          • StilllHere

            Gotcha, you don’t know what you’re talking about!

          • http://twitter.com/joefirestonephd Joseph M. Firestone

            On the contrary, it’s you who doesn’t have a clue! The bond vigilantes don’t control interest rates. The Fed does and it’s targeting very close to zero.

          • StilllHere

            Bond vigilantes … who’s keeping vigil over the 30-year? The Fed controls short rates as does the ECB. 

          • http://netbacker.tumblr.com Netbacker

             Then can you explain why the 30-year is at historic lows when our “borrowing” is at a historic high and having its first downgrade in the history?

          • TomK_in_Boston

            No it didn’t. Investors ignored the downgrade by the corrupt agencies. Just more scare nonsense. 

          • http://netbacker.tumblr.com Netbacker

             Rates cannot increase unless the Fed WANTS it to. They control the rates and have said that they will hold steady until 2015 or until they see the economy recovering.

          • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

            Read this: “http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%E2%80%93-here%E2%80%99s-why.html”

        • TomK_in_Boston

          Still et al have an amazing ability to ignore facts. Wrong voodoo econ predictions never ever lead them to rethink.

          • StilllHere

            This from a guy who never met a fact.

        • hennorama

          Great for borrowers, and [expletive deleted] for savers.

      • http://netbacker.tumblr.com Netbacker

         Greece gave up its monetary sovereignty (drachma) that it could create when needed and adopted a foreign currency,Euro, which it cannot create and now has to beg & borrow to survive.
        The US is still a currency issuing sovereign nation. Big difference

        • StilllHere

          So the fact that we can print unlimited quantities to pay our debt warms the hearts of our lenders?

    • http://twitter.com/joefirestonephd Joseph M. Firestone

      In addition, interest rates have gone down since then. That’s because the Fed controls the FFR, not the bond markets!

  • sheryltr

    Let it happen. This tax cut nonsense has gone on long enough. I am sick of hearing that much over-used phrase. The Bush tax cuts were a mistake. Everybody needs to pay more to get rid of this deficit. I don’t have children so I’m not worried about their tax burden, but those who have children and grandchildren should care enough to pony up.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      Read this and get back to me: “http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%E2%80%93-here%E2%80%99s-why.html”

  • neuropiepants

    Paul Krugman for Treasury Secretary!

    • http://twitter.com/joefirestonephd Joseph M. Firestone

      Nope! He doesn’t know enough about the money. Warren Mosler for Treasury Secretary!

    • Gregg Smith

      Ugh!

  • MrNutso

    Whack jobs.  I love it.  Don’t hold back. :D

    And bloody parasites.

  • StilllHere

    Deficits are a privilege, made possible by a confident lender.  What happens if they lose confidence?

    • http://twitter.com/joefirestonephd Joseph M. Firestone

      Nothing! We don’t have to issue debt instruments to do deficit spending. We do that because it’s a hangover from the gold standard.

      • StilllHere

        So we just print more money, without lessening the implied value of the money that already exists.

  • Ellen Dibble

    The time to worry about this debt was when we launched in that fiery night into Baghdad.  Who pays for that war?  Can we declare national bankruptcy?  We made a colossal and costly mistake?  The time to think about that was THAT decade, when people had NOT been the victims of that October 2008 fiscal fiasco.  Now, the issue is the economy is sick, not that we are spending like drunken sailors.  Let’s declare bankruptcy.  That’s what Americans do.  We need a second chance, a fresh start.  (I jest, but…)

    • dawoada

      In 2003 the Atomic Energy Commission stated that Atomic weapons were not imminent in Iraq; they were 5-7 years away.  Hey wait a minute, 5-7 years from 2003 would be 2008-2010!  That’s now!  Is that what we prevented?  Maybe not so bad.

    • Gregg Smith

      You sure are interesting, always have been. For some reason I never am compelled to argue with you. I just read and absorb. So in that light it would be silly to rehash the Iraq war. But I do have a question hopefully we can keep in the realm of philosophical discussion, if you choose to respond. Do you believe there is ever a cost (lives and treasure) for not going to war?

  • http://profile.yahoo.com/QMDZ3LH5U2B4GAT7J2HS4TCP6E Jim

    I want to go over the cliff.. that lady is right. the defense spending MUST be cut. i want tax hike across the board and i want more tax increase on the rich. 

    we will be ok going over the cliff. if you do not want to go over the cliff convince the republican house to increase taxes on everyone, ok? and not loopholes.

    • http://profile.yahoo.com/P7EMWC3TJPCM7OJWLI266HDWWY Ed

       The lady was Stephanie Kelton, and she was saying that there is no reason to raise taxes and balance the budget. The deficit is a false crisis made up by those who want to raise your taxes or decrease your social benefits.

  • Thinkin5

    At $1.75 trillion, U.S. corporate profits hit an all-time high in the third quarter, accounting for 11.1 percent of the country’s GDP.
    The profit jump, revealed by revised GDP numbers from the U.S. Department of Commerce for the period from July-September 2012, marks an 18.6 percent increase from the same time last year.
    Meanwhile, wages for workers hit an all-time low in the third quarter, falling to 43.5 percent of GDP.
    Austin Business Journal by Lauren Hepler, Economic Development Reporter
    Date: Monday, December 3, 2012

    • hennorama

      Ms. Hepler is a bit late to the party.  I posted this 5 days ago, which has been edited for brevity and focus.  I even created and posted a chart of both items. (and I’m just a casual observer):

      “While this is not exactly on topic, one needs to consider only a couple of items to understand why this income tax discussion is important, and why there is a sort of general feeling of malaise among wage earners:

      1. Corporate Profits as a percentage of GDP are at or near an all-time high of just under 11%. …. Since 1970, corporate profit’s share of GDP has more than doubled (from 5% to almost 11%).

      2. Wages as a percentage of GDP are at or near an all-time low of just over 44% …. Since 1970, Wages’ share of GDP has declined by nearly one-fifth (from 54% to 44%).

      This is coincident to the decline in union membership as a share of the U.S. workforce, from about 25% in 1970 to about 12% today.

      Sources:http://www.businessinsider.com/corporate-profits-just-hit-an-all-time-high-wages-just-hit-an-all-time-low-2012-6

      http://en.wikipedia.org/wiki/Labor_unions_in_the_United_States

      This chart shows Wages as a percentage of GDP (in red) and Corporate Profits as a percentage of GDP (in blue) using Federal Reserve Economic Data (FRED).”

  • Robert Gray

    Let’s see…on Jan 1 we go back to the pre-Bush policies of a period of several decades of amazing sustained growth in the US.  The period of the cuts has proven to be the bubble-creation years. No dots being connected in the contexting of “fiscal cliff.”  This is not even a speed-bump or step off-the-curb!  But do love the drama of it all..fills the 24 hour new channels, and our love of story and intensity.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      Actually, the sustained growth, predicated on cheap energy, was in the 1937 – 1971 period. That’s when the highest marginal taxes were 70% – 91%. Krugman’s book “Peddling Prosperity” takes on Reagan to Clinton (not too nice to either one). 

  • Coastghost

    If Democrats and their ideological mouthpieces are so enamored of driving through the fiscal guardrails at whatever velocity they choose, they can take PLENTY of credit–and more–for whatever mangled landing occurs on the other side of the busted guardrails. All of your callers sanguine about going over (regardless of elevation, topography, or velocity) can recollect their sage advice each and every month in 2013 and beyond.

  • geraldfnord

    One concern about stimulus:  when people get some money in their pockets, they spend it on things…most of which are now made in China.  Is this a problem, or is so much of the price added-in after the goods arrive in America that this doesn’t signify?

    As far as household debt goes:  millions of us are heavily in debt paying for houses and automobiles, and happily so (pacem climate change)…if we can afford the payments.  At current interest rates, I think the government can, and when they rise, it will be in synch with tax revenue’s rising to meet it.

  • JGC

    So if World War II was a giant spending program that kicked off the growth for the next two decades, was the problem that the wars in Iraq and Afghanistan were not big enough?!

    • http://pulse.yahoo.com/_HDGK6NJNN53FQKI22YLIMLQXYE Arturo

      The war mobilization has not been large enough as to engage the entire economic machine. Besides, the war effort has benefited private contractors, who in many instances have been corrupt and inefficient.  

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        And in bang-for-the-buck terms, military-only spending doesn’t have much of a multiplier effect.

        When the entire automobile industry shut down and started making war materiel, that was way different than the post-9/11 wars.

    • jefe68

      Yeah, and we also did not have war bonds, rationing or anything else that was in place then to help with the war effort in Iraq and Afghanistan. Plus 16,112,566 troops were engaged on both fronts in WW2.

      Are you aware of the amount of ship building that was going on here in leading up to WW2?

      The US does not build ships anymore on that scale, if at all. We don’t use ships to move troops and supplies at the same volume as WW2.

      You have to remember that the largest cargo plane in WW2 was the Douglas C-54 Skymaster it carried a crew of 6 which included 2 relief members, with a maximum load of 28,000 pounds of cargo or 49 passengers.

      Compare that to today’s C- 17 which can hold 102 paratroopers and their equipment.

      There was a lot of stimulus in manufacturing all over this nation from Mobile to Maine.

    • http://twitter.com/MassivRuss Russ L

       No, mostly. We already have the tanks, trucks, guns, missiles, ships, planes, and everything else we had to build from scratch during WWII.

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        Yes, but in addition, that depends on how quickly the materiel is being destroyed (in combat).

    • MCT2

       Very good question. I think that WW2 was not put on the credit card and sold to China (as George Bush gov’t did) – bonds that have to be paid back with interest. When you “sell” a debt, you put it on the credit card with interest. It is the interest that sinks you in particular. Anybody that’s rung up personal credit card debt knows that. Also, we came out of WW2 with close to 90% as the upper tax category. Citizens were paying for WW2 with their labor and their taxes. Honestly, I don’t know enough macro-economics to know every difference, but these are a couple. Check in particular what Stan Collender said in today’s program.

      • jefe68

        Sorry but the US government also borrowed heavily during WW2. The US debt was 113% of GDP in 1945.

        • MCT2

           In what form was the debt – to ourselves (printed money etc.) or to other countries?

    • Gregg Smith

      I sometimes find your politics questionable but I always enjoy your comments. Great question.

  • http://pulse.yahoo.com/_HDGK6NJNN53FQKI22YLIMLQXYE Arturo

    No one can accuse the GOP of having a short term vision. The rationale behind their position regarding the fiscal cliff boils down to Reaganomics 101. They want now to have a government acting ‘responsibly’ and paying the public debt, so in the future when they win the elections after a prolonged recession, they will borrow like crazy to give more tax cuts for the wealthy (and themselves) without having to reduce the government so much as people hate them for their entitlements.

  • StilllHere

    What is the lesson from the recession of 1920-1921?

    • jefe68

      Oh boy. Not that again. 

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        That right-wingers are like alcoholics: When out of power, they Get Religion, and go on the wagon, with the insistence that nobody within 10 miles gets to drink because they can’t handle their liquor.

        When in power, they insist they can handle it, and the rest of us have to clean up the vomit.

        • JGC

          LOL!

    • Gregg Smith

      Real spending cuts work. Lesson learned.

      • Steve__T

         Evidently not, that preceded the great depression.
        Try again thanks for playing.

        • Gregg Smith

          Look up Charles Dawes. 

          • Steve__T

            What Does he have to do with anything? I know he was a Vice President that won an Nobel for helping Germany after ww1.

            This is 2012 and this aint Germany try again thanks for playing.

          • Gregg Smith

            He was the first Director of the Budget. He cut spending in half in two years. Not just reductions in the rate of growth, actual spending. He slashed tax rates. The economy boomed as a result. Glenn Beck turned me on to him a couple of years ago.

          • Steve__T

             He was appointed ambassador
            to Great Britain (1929–32) by Herbert Hoover. During the Great Depression he returned to the United States (1932) to direct the Reconstruction Finance Corporation but resigned the same year to reenter the banking business.

            And so the US went down the tubes he was no help.
            Try again. thanks for playing

          • Gregg Smith

            Dude, we were talking about the depression of 1920, no?

          • Steve__T

            No you are.

          • jefe68

            Then it crashed in a big way, and the Great Depression happened. The growth was all based on speculation and out of control banking practices. Sound familiar? 

            Except there was no FDIC or any other insurance for economic downturns on the scale that happened in 1929, 30 and 31. You had runs on the banks.

          • Gregg Smith

            That was not a result of the cure for the 1920 depression.

    • Steve__T

       This aint 1921 catch up.

      • StilllHere

        You are certainly the dimmest of bulbs.

        • Steve__T

           Coming from you that makes me feel like a Christmas tree.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      Read this and get back to me: “http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%E2%80%93-here%E2%80%99s-why.html”

      • StilllHere

        You first.

        • jefe68

          You sound like a 10 year old child.

          Funny how you leave out the all the economic free for all of the Roaring 20′s and how it lead to the Great Depression.

  • Scott B

    Mr Krugman makes a good point about the unemployed and those that think they don’t want to work.  I’m long over my 99 weeks, and lucky my wife has a fulltime job. But I do look for work. But I’ve encountered possible employers that  look at me and say, “And you just looking for work now?”  I’ve politely gone off on a few, telling them that I have always been looking for work, but it’s easier to get a job when you have a job and your skills are current and potential employers don’t think you’ve been milking the system and watching TV all day.
     So many people that think that way just can’t imagine that a long-time unemployed might be circumstances that made it hard, if not impossible, for someone to find a job. Here in NYS, the unemployment rules say that if you work more than 2 days you loose a huge amount of your unemployment check.  That means you can work 12 hours a day for 2 days and you’re ok, but work 4 hours a day for 3 days and POOF!, it’s gone.  I’ve been turned down my part time employers that told me they didn’t want to screw up my unemployment money. Some even did back flips trying to work something out, though unsuccessfully.
      Heaven forbid that you make $20 a month more than allowed if you’re on Food Stamps. I know a family of 5 that lost $500 a month in food stamps because the wife’s job but them $2 over the limit. So then the family, already on a limited budget, has to find a way to buy food when the wife’s job was barely paying for a roof over their heads, utilities, and the commute to work.
      Let those pointing their biased fingers at those struggling to get by walk in their shoes and they might change their tune.  Nah, they’re Republican and they’d just deny the experience.

  • StilllHere

    Here’s what we’ve learned today:
    Taxes create jobs.
    Government spending good, more better.
    Interest rates will stay low forever.
    Deficits don’t matter.
    Debt is our grandkids’ problem.
    We can have it all for free!

    • NewtonWhale

      We also learned that ignorance is still here.

    • jefe68

      Here’s what learned today:
      The right thinks magical thinking will solve all our problems.

      That they really want the US to be Greece.

      They think tax cuts create jobs.

      Austerity works, when it’s clear it does not.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      Corporate tax collections are at record lows and profits are at record highs. Where are the jobs?

      Government is the only non-revenue-constrained player in the economy. Neither taxes nor “borrowing” provisions the issuer of sovereign, fiat currency. Don’t believe me? Where do people get the dollars with which they pay taxes if the government doesn’t spend them first?

      Interest rates are managed by the Fed. They too have no revenue constraint since they can make dollars literally without limit.

      Deficits *do* matter. Government “debt” is an accounting identity with non-government financial assets + net exports. (see http://www.economonitor.com/lrwray/2012/11/08/ratings-agencies-still-clueless-threaten-to-downgrade-uncle-sam/)

      Government “debt” is completely unlike household debt. See “http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%E2%80%93-here%E2%80%99s-why.html”

      We can’t have it “all” for “free,” but we can stop shooting ourselves in the foot.

      • Mike_Card

        Thanks for your citations.  Stillllll is just a troll who does his very best to disrupt the conversation.  The rest of us (mostly) are trying to learn from others’ opinions or research efforts.

      • StilllHere

        The jobs and the profits are overseas.  Foreign taxes paid are at record highs. The issue is global. You can’t use domestic statistics only anymore.

  • ttajtt

    legalize prostitution new jobs.  does then mean now doctors are below lawyers and wall street pay grades.  unless your on netwk tv  

     retirement is becoming on ones own, yet they computers marked everything.   no by or sell without the cliff.   

  • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

    Contra Gurgle, Pew/WaPo poll finds that shoud we go over the fiscal cliff, 53% say congressional Republicans will be to blame while just 27% would say Obama is at fault

    If 27% sounds familiar, it’s the bottom-of-the-barrel popularity rating for the last GOP president. I don’t remember his name–I’ll have to look it up; it’s like the whole of the mainstream press has disappeared him and his failure.

    http://www.people-press.org/2012/12/04/pessimism-about-fiscal-cliff-deal-republicans-still-get-more-blame/

  • dawoada

    Yes, the Republicans keeps pushing for not increasing the taxes on the rich but why does Obama keep pushing for increasing those taxes?  The proposed tax increase would only amount to less than 10% of the deficit, not enough to solve anything.  Not enough to risk going over the cliff.  Why is he doing this?  Sure, the majority of the people are in favor of this.  Of course they are; the tax is NOT ON THEM!  Is this the reason Obama is pushing this so much: to keep favor with his voters.

    • TomK_in_Boston

      You’re wrong. Like Warren Buffett, I want my taxes raised.

      Do you complain when the right proposes cuts that won’t fix the whole deficit all by themselves?

      I agree that taxes at the top should be increased more. Going to clinton rates is just a baby step. Why is the top rate hit at a few $hundred K? That’s ridiculous. Rates should start low and keep increasing into the stratosphere. The romney types have taken all the wealth and income, tax rates should follow the money. A financial transactions tax could both raise $ and damp down the wall st casino.

      Total personal income is about $14 trillion and the 1% have about 20% of that, $2.8 trillion. A modest extra 10% of that is $280 billion/yr. See what taxing the rich more in line with out traditional norms could do?

      • Gregg Smith

        Warren Buffet wants to raise taxes on those making over $400 million. Are you in that bracket?

        • TomK_in_Boston

          Don’t be silly. I favor policies that will raise my own taxes, as does Mr Buffett. The righty talking point that the only people who want higher taxes are those who don’t have to pay them is nonsense.

        • http://twitter.com/joefirestonephd Joseph M. Firestone

          No! Are you?

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      I won’t defend the crookedest administration in history (40% of America’s net worth disappeared because of financial frauds, yet prosecutions for financial fraud are at 20 – 30 year lows), but you’re mistaken. The tax on the wealthy, although unnecessary (taxes and borrowing don’t fund government, see my post above), prevents the kind of casino capitalism that got us into this mess, and redresses the growing income inequality that threatens the fabric of society. The intimation that this is somehow a “bribe” to Obama’s constituents is beneath contempt.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      I won’t defend the crookedest administration in history (40% of America’s net worth disappeared because of financial frauds, yet prosecutions for financial fraud are at 20 – 30 year lows), but you’re mistaken. The tax on the wealthy, although unnecessary (taxes and borrowing don’t fund government, see my post above), prevents the kind of casino capitalism that got us into this mess, and redresses the growing income inequality that threatens the fabric of society. The intimation that this is somehow a “bribe” to Obama’s constituents is beneath contempt.

  • Alan Kreglow

    The woman on air who stated that U.S. Dollar currency is created by the U.S. government got the issue correct, but got her facts wrong. 
     
    The entire problem is that every Federal Reserve Note in your wallet, bank account, or in existence anywhere was BORROWED into existence, created out of thin air, either directly by International Bankers who own the FED and then loaned by the FED as newly created currency to the U.S. government, or loaned by a bank participating in the Federal Reserve System as newly created currency to a customer of the bank.  Banks do not lend existing currency.  They “lend” only newly created currency, created ironically by the borrower’s signature from the borrower’s credit.
     
    The ultimate irony of the way this system works is that if every borrowed dollar were paid back, this would shrink the currency supply to zero, and if the currency supply shrinks even a little bit, this creates a crisis because borrowers cannot find currency with which to pay back borrowed currency.  In any event, currency newly created and loaned either to the U.S. government or to a bank customer is only enough currency to pay back the principle, not the interest.  ALL currency to pay interest must be borrowed into existence.  This means that the currency supply must constantly expand or the bank lending system goes into crisis.
     
    The key resolution to this absurd way of handling our currency is for the U.S. government to issue currency as the Constitution mandates and to take the creation of currency out of the hands of bankers (or should I say “banksters”).  The best part of this (according to information I deem reliable) is that the U.S. Treasury has ALREADY taken over control of the FED, so the resolution of this situation is already underway.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      Well said! (And Ms. Kelton would agree)

  • Adrian_from_RI

    The first steps on the path to the Fiscal Cliff were taken by our government under the presidency of Lyndon B. Johnson and his War on Poverty. To now expect solutions to our financial crises from the same institutions and politicians that got us into this economic mess is not just silly. It is outright stupid.

    If you are interested in understanding Washington’s destructive role in our economy, I recommend you read the just published book “The Financial Crises and the Free Market Cure” by longtime CEO of BB&T, John Allison. I also recommend “Economics in One Lesson” by Henry Hazlitt as a very readable primer in economics and its fallacies.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      More horse puckey. See my comment above.

  • http://twitter.com/cwooley89 Charles Wooley

    Krugman again!
    huge fan of his Mon/Friday column looking forward to this one
    Hope the get the audio up soon!

  • Pingback: What I Did Not Get to Say on NPR's On Point This Morning - New Economic Perspectives

  • Steve__T

    Re posted from earlier with added anger.

    SS was in good shape 2.6 T until congress started borrowing from it and putting in IOU’s that never got paid back with anything of value. The federal government has borrowed all of that trust fund money and spent it.

    Now I have to work till I die. The nerve of thees politicians is unbelievable, while they get paid for work they don’t do. I have to suffer a reduction to an unlivable wage, money taken from every paycheck I ever received, for my whole life has been stolen by them, while they live in lavish style and comfort. Ive already lost my IRA to Wall St. I guess if I have to go to the Hospital they’ll leave me bleeding on the table, no money no savings just one less to worry about. Unfortunately, I am not alone.

    I found this:

    In order for Social Security to pay full benefits after 2016, it will be necessary for the government to begin repaying the money it has spent on other things.  This will mean increased taxes and/or additional borrowing.  Neither of these is politically popular, and there is no assurance that future politicians will be willing to raise taxes to pay for
    the irresponsible behavior of past politicians.  If the money is not repaid in full, with interest, it will have been stolen by the government from working Americans who paid into the fund.

    Since Social Security would be fully funded until at least 2037 if the government had not used the money for other things, the only reason that politicians are advocating cuts in Social Security benefits is the fact that the government does not have the money with which to pay its debt to Social Security.  Given the fact that Section 13301 of the
    Budget Enforcement Act of 1990 made it a violation of federal law to use Social Security revenue for non-Social Security purposes, it is hard to justify using the word “borrow” to refer to any of the Social Security money spent after 1990, even if it is eventually paid back.

    Dr. Allen W. Smith Professor of Economics

    So what it boils down to is we have been robed, lied to and cheated. Whoever, any and all, that are responsible needs to go to jail and their assets confiscated to help repay what they have stolen.Yeah, that’ll happen, when pigs fly.

    • TomK_in_Boston

      I disagree. The trust fund holds T-bonds guaranteed by the “full faith and credit” of the USA, same bonds held by conservative investors all over the world. What do you want SSA to do, keep the $ in the proverbial mattress? Sure gvt has to repay them, but thats no different from honoring anyone else’s T-bond.

      What we have to watch is the right arguing that it’s OK to default on SS T-bonds. They might try that, as their agenda is to keep taxes low on the rich, and those taxes are way too low now to honor our future debts. However default wd be so toxic that I’m not concerned about SS.

      • Steve__T

         Tom, you are someone whose opinions I respect, but I also understand your well off, you have no worries about your retirement, so you may not be concerned about SS, but I am. When I hear reduction on what little I’ll get to live on by SSA I WORRY.

        I don’t trust the government to do the right thing. They are trying to hard not to now. I was looking to retire at 65, they added two years, now they want me to work till I’m 70 when I hit 70 if I live that long will it move again? I’m fed up and tired of the BS. I hope you understand my position.

        • TomK_in_Boston

          Steve, I understand. I don’t want any screwing around with SS and I don’t trust the right or the conservadems. Since they work for wall st their goal is privatization so their bosses can get their hands on all that $. As I said I think they would also like to default on the SS T-bonds to keep taxes on the rich low, claiming that’s different from defaulting on debt to the chinese, but I think that’s too much of a reach – it would lead to revolution unless we’ve become total sheep.

          I was mainly saying that I don’t see a problem with the trust fund holding T-bonds. If I have a box full of $ and I use them to buy T-bonds to get a little (very little today!) interest, then the gvt has borrowed my money but I’m not worried about getting it back. The USA is not going to default!

          Inflation could make the bond less valuable when I get paid off, but that applies to cash too.

          • Steve__T

             Thank you for your response, If they privatize SS they won’t have to worry about how much I receive, but how many bullets I have in my gun belts. In the words of one of my favorite comedians “Homie don’t play dat!”  Not a sheep and not asleep.

    • http://www.facebook.com/people/Adam-Eran/100002135383412 Adam Eran

      Sorry, this makes the *fundamental* error of assuming government is revenue-constrained. Just to remind you, its recent audit disclosed the Fed issued $16 – $29 trillion to cure the same financial markets whose frauds crashed the economy. This was in 2007 (BTW, where’s the inflation?)…

      Anyway, the government will run out of dollars when the Bureau of Weights and Measures runs out of inches.

      Taxes and/or borrowing do *not* fund government. Why would government need your dollars when it can make as much as you can imagine? If you brought cash down to the Treasury building to pay your tax bill, they would accept it, mark your account paid, then shred it.

      So all that “adult conversation” about “debt” and “unfunded liabilities” works out to be so much horse puckey. The cost of keeping workers and factories and workers unemployed is very much higher than the supposed cost of “debt.”

      Besides, when the Fed issues $1,000 in currency, it simultaneously creates “debt” in exactly the same amount. That means retrieving dollars spent into the economy is what’s needed to extinguish “debt.” That’s particularly cruel when such austerity produces nothing but unnecessary pain, not economic growth. It’s great for the predatory vulture capitalists.

      So apparently “debt” matters when it applies to state revenue sharing and social safety nets, but not when it applies to tax cuts for the rich, or unnecessary wars.

      See?!

    • 2Gary2

       friend–all we need to do is eliminate the cap on taxable income and the average ssi recipient could get an immediate raise of 65 per month and the program is solvent forever.  its just a matter of ending welfare for the rich which is what the cap on ssi tax is.

  • kayfinley

    Tom, I do not understand how you can pretend that what the Republicans and the Democrats are doing is in any way comparable.  The Republicans are only protecting the 2%, while the Democrats are trying to keep some protection for the other 98%.  I don’t think the Democrats are doing what Krugman has been saying over and over needs to be done, spending to hire more Americans and rebuild the infra-structure, but at least they are not sacrificing the whole country to protect their own financial interests.  I also do not understand how you can continue to site Fox News as any kind of credible news source.  It is propaganda through and through.  Just because it is sponsored by the corporations and not the government does not excuse it from purposely deceiving the American people.  You and all other news media feed into this propaganda by using the sounds bites that the right wing feeds you and continuing to act as if the two sides of the fiscal cliff have equal credibility.  As a news source, you can publish information about what is good for the country not just what is good for democrats or republicans.  

    • StilllHere

      Wow, such hate!  Truly pathetic.  It’s about fairness.  Republicans don’t want anyone’s tax rates to go up.  Maybe you’ve been listening to too many discredited leftwing news sources because it seems you’re just spouting mindless propaganda.  It would be good for you if you broadened your news sources considerably, that might open your closed mind.

  • 2Gary2

    When the conservatives “reform” the tax code, they mean “make taxes even lower for
    the rich.” The wealthy do not pay their fair share of taxes in the
    United States, which is a major reason there is a large deficit in the
    first place. When the very wealthy pay lower tax rates than ordinary
    working people, the result is an increasing redistribution of income
    upward that puts the U.S. in the top 30 percent in income inequality out
    of 140 nations, according to the Central Intelligence Agency. We’re a shameful #42. Income inequality is not only unfair, it’s dangerous and makes society unstable.

    • TomK_in_Boston

      It’s important to translate righty newspeak into English. You are absolutely right, “reform” = “screw the middle class”. Stopping the class warfare and upward redistribution of wealth is the #1 issue of our time.

    • OnPointComments

      You can always pick out an anecdotal instance where one rich person pays less tax than one ordinary person. The use of that tactic when discussing taxes is just as fair as it is when a person speaks of the Cadillac Welfare Queen and leaves the audience to infer that everyone receiving government benefits is gaming the system.  However, if you want to deal in facts, here are the facts:

      2009 Average Tax Rates
      Top 1%:  24.01%
      Top 5%:  20.46%
      Top 10%:  18.05%
      Top 25%:  14.68%
      Top 50%:  12.50%
      Bottom 50%:  1.85%

      The higher income groups pay much higher federal income tax rates than those in the bottom 50%.  As you progress up the income levels, each higher income level pays a higher tax rate than the preceding level.  This has been consistent for decades and decades.  On average, and as a group, the very wealthy do not pay lower tax rates than ordinary working people.

      • http://netbacker.tumblr.com Netbacker

         Most of the “income” for the higher groups come from investments, so they rarely pay 24% on all of their annual income. Some of the investment income is tax free and the rest is taxed at 15%. So they end up keeping almost all of their earnings, which they then invest in govt bonds.
        The bottom 20%, pay a direct tax of 15% in the form of FICA (SS & medicare) on each pay check even before they get the money. Higher income groups have a whole year to work through their tax strategy to pay the least amount without breaking the law :)
        The rich make the money work for them, while the bottom 20% work for the money all their lives.

        • OnPointComments

          As another commenter said, you can slice and dice these numbers a million different ways.  You can say that the bottom 20% pay a direct tax of 15% in form of FICA (by the way, the 15% is both the employee and the employer share), and I can counter that if you’re going to include the employer share of FICA, then we need to include the corporate income tax as part of the upper income tax burden since dividends have already been taxed at the corporate level.  In the final analysis, in a discussion of federal income taxes that fund the day-to-day operations of the government, the income tax rates of the top 50% are many multiples of the rate that the bottom 50% pays.

          • StilllHere

            And there is no way anyone can call that fair!  But it’s the only way that Democrats can continue to grow the welfare state.  

          • jefe68

            Hyperbolic.

          • http://netbacker.tumblr.com Netbacker

             FICA has a direct impact on wages, especially for the low income earners. The employer’s contribution is taken out of your pay check without they telling you.  Corporate income taxes are passed on to the consumers not to the employees.
            You are wrong about “taxes that fund the day-to-day operations of the government” this does not apply to federal government, which is the sole currency issuer.
            For the federal govt, taxes don’t fund anything, not since we went of the gold standard in 1971. Once you understand that, you will begin to understand how the current monetary system works.

          • OnPointComments

            How did you come to the conclusion that the company’s share of payroll taxes comes out of the employee’s pay check and therefore isn’t passed on to the consumers, yet the tax that the company paid on dividends didn’t come out of the dividends and therefore were passed on to the consumers?  If you’re not going to be logical, at least be consistent.

      • 2Gary2

        The top 1% have at least 40% of the nations wealth so by that measure they are under taxed big time.  This is in keeping with your % analogy.

      • http://twitter.com/joefirestonephd Joseph M. Firestone

        You’re a bit vague in your statement. Are you saying the top 1% on average pay Federal income tax 24.01% of their total income from all sources; or 24.01% of their salaries. I ask that because many wealthy people, including Mitt Romney, receive most of their compensation in other forms than salary and pay far lower tax rates on those than 24.01%. Also, do we have any way of knowing what their foreign-based income is from sheltered sources of various kinds? In short, how valid are the statistics you just cited as in indicator of the percentages people really pay? I expect quite valid for the bottom 50%. But how about the top 1%?

        • StilllHere

          Foreign-based income?  Sheltered?  Any evidence for this?  This would be a criminal offense.  What about unreported income across the underground economy?  My guess is this is concentrated in the bottom 50%.  Are you accounting for this freebie?

          • jefe68

            So the bank accounts that Mitt Romney has in Switzerland and the Cayman Islands are illegal in your view?

            Amazing, that you would bring up people selling stuff at garage sales and swap meets and then have the gumption to even think this adds up to anything near the amount of money being taken by the top 1 to 2 percent.

            Funny how you go on about math and yet have really no idea how this works in context to the economy.

          • OnPointComments

            Funny how you go on about “the amount of money being taken by the top 1 to 2 percent.”  Your choice of verb is illuminating.  I would have used the word “earned” in place of “taken.”  And yes, whether the money is earned through wages, investments, capital gains, or any other legal manner, it is earned.
             
            An interesting article that is apropos:
             
            “Planting the Seeds of His Own Demise”

            http://spectator.org/archives/2012/12/05/planting-the-seeds-of-his-own/ 
             
            Excerpt:”To a normal person, the fair share of federal income taxes for a top 1 percent earning 13 percent of income is 13 percent of the taxes. For a Marxist, the top 1 percent earning 13 percent of the income while paying only 39 percent of the income taxes is unfair because it is only fair for the top 1 percent to pay most of the income taxes by themselves.
              A normal person would see that policy as social theft. But a born and bred Marxist would see that as social justice, because it is unfair for the top 1 percent of income earners to even exist. Their income and wealth is not earned in the Marxist view, but stolen from The People. So it is only fair that the people steal it back.
             
            According to the CBO, based on official IRS data, the top 1 percent pay an average federal tax rate of 29 percent, taking into account all federal taxes. The middle 20 percent of income earners, the middle class, pays an average federal tax rate of 11.1 percent. The bottom 20 percent of income earners pays an average federal tax rate of 1 percent.”

        • OnPointComments

          The statistics come from IRS data for 2009 individual income tax returns, the latest data that is available.  Collectively, the average federal income tax rate paid by the Top 1% is 24.01%.  Sure, there are some people in this group who pay less, and there are others in the group who pay more, but the average federal income tax rate paid by the Top 1% group is 24.01%.  For example, for an average Top 1% taxpayer who reported income from all sources of $1,000,000 (salaries, dividends, capital gains, etc.), the average federal income tax bill was $240,100.  Thanks for helping me make my point that many people assume this group’s average federal income tax rate is less than other income groups, when in fact it is higher.

  • 2Gary2

    When conservatives say “fix” Social Security, they mean cut Social Security.
    Fixers want to convince the public that a well-managed, hugely popular
    program that does not add to the deficit (it’s self-funded) is somehow
    in crisis and requires intervention in the form of various cutting
    schemes. They seek this because many of the rich do not want to pay
    taxes for Social Security, and financiers want very much to move toward privatization of retirement accounts so they can collect fees on such
    accounts.

    • Mike_Card

      Billionaire Peter G. Peterson has always had a wild hair up his ass about Social Security, which he seems to think was devised as a personal affront to him.  He spends millions upon millions to undercut its good in the public eye, and provides excessive amounts of money in an effort to destroy it.

      Wall St. has managed (through fraud & deception) to get its hooks into the pension money–read 401(K), IRA, Keough, etc.–and covets the Social Security tax.

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        Why do I get the feeling I’m just a burlap sack with arms and legs and a big “Social Security $” label on it to Peter P. Peterson?

        (PS I gave him the middle initial he’d have if Stan Lee invented him. Seems more fitting, no?)

    • Steve__T

      There is no money in the Social Security Trust Fund, it has all been spent. A record has been kept, so we know what’s supposed to be there and who borrowed and spent the money (hint: other government agencies, and it’s part of the National Debt).

    • JONBOSTON

      Hard to fathom such an utterly idiotic post

    • StilllHere

      It’s math, it’s not complicated.  SS is unsustainable as the welfare program it has become.  It is a sham.  If we’re going to keep up the mirage that I’m just getting back what I paid in, then privatization should be a voluntary option. 

      • http://twitter.com/joefirestonephd Joseph M. Firestone

        It’s not math! It’s economic projection, and it depends on various questionable assumptions for its accuracy. If we ignored debt and deficit issues and just did what we need to do to get to full employment again, those projections would be knocked into a cocked hat. Have you ever noticed that BO and OMB projections are rarely goo even two years out? Much less 20 years out of 25 years out? We’re considering significant cuts to entitlements based on fantasy projections that are grounded on nothing!

        • StilllHere

          Yes, usually OMB usually underestimates, that’s why it’s so dire.  We need to cut benefits now or reform the whole concept.

  • 2Gary2

    It’s ridiculous that we have ‘single payer’ for ailing banks, but not
    citizens. If you are worried about the deficit, just let tax rates rise
    back to the levels of the Clinton era, when growth ran far ahead of
    today’s economy, and tax dividends, carried interest, and capital gains
    at the rates working Americans pay. And don’t, absolutely don’t, let
    American companies escape taxation by stashing their money abroad.”

    • http://netbacker.tumblr.com Netbacker

       Couldn’t have said that better, can I steal this line of yours? “It’s ridiculous that we have ‘single payer’ for ailing banks, but not citizens.”

      • 2Gary2

         help yourself!

  • Shag_Wevera

    Forget the Clinton era marginal rates.  Let’s go with the Eisenhower rates.  He was a Republican, wasn’t he?

    • Gregg Smith

      On average revenue as a percentage of GDP was lower under Eisenhower than during Bush. Also, the top earners paid a lower portion of the overall bill. Why do you advocate less revenue and a break for the rich? Have you thought this through? Shall we return to Eisenhower era spending levels?

      • nj_v2

        Checking all of Greggg’s bogus claims would be a full-time job, but even picking out one of his pretend-factual posts every so often, it’s almost always wrong.

        Here, avoiding likely outright embarrassment by posting his source upfront, but probably parroting what Flush or Fox So-Called News told him, Greggg proffers, “On average revenue as a percentage of GDP was lower under Eisenhower than during Bush.”

        This is clearly and demonstrably wrong.

        http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205

        Averaging the years 1953–1961 and 2001–2009, total receipts as a percent of GDP were 17.53% in the Ike years and 17.3% during the Shrub reign of incompetence. 

        • Gregg Smith

          I will belatedly add way down here (you’ve been humiliated enough up top) these numbers are of my own devise. No one I have heard on radio or TV has cited these facts.

    • TomK_in_Boston
    • OnPointComments

      From 1980 through 2009, the taxpayers in the Top 10% of taxpayers have seen their share of the government’s income taxes increase by 43%, while the Bottom 50%’s share of taxes has dropped by 68%.  The average tax rate of the Top 10% declined by 23% from 1980-2009, while the Bottom 50%’s tax rate declined by 70% during the same period.

      • StilllHere

        Watch out, libbies don’t like percentages or real numbers; and they can’t figure pictures out either.

      • http://netbacker.tumblr.com Netbacker

         Why don’t you compare that to the incomes of these two classes and see how that looks. The top 10% paid higher taxes even after their tax rates went down because their income went SIGNIFICANTLY higher than the bottom 50%’s income.
        More you make, more you pay in taxes. So just by showing 1 graph, doesn’t mean anything.

        • OnPointComments

          From 1980-2009, income of the Top 10% increased by 34%, and their share of federal income taxes increased by 43%; for the same period, income of the Bottom 50% fell by 24%, and their share of federal income taxes decreased by 68%.

          • 2Gary2

             the wealth and income inequality is so bad that the 6 walmart heirs have more wealth and income than the bottom 40% of the entire population.  By your numbers the rich are WAY under-taxed.

          • OnPointComments

            I say congratulations to Sam Walton and the Walton family for creating the successful colossus that is Walmart.  It was their idea, and their business, and they deserve the wealth that it has created.

          • OnPointComments

            I say congratulations to Sam Walton and the Walton family for creating the successful colossus that is Walmart.  It was their idea, and their business, and they deserve the wealth that it has created.

          • OnPointComments

            I say congratulations to Sam Walton and the Walton family for creating the successful colossus that is Walmart.  It was their idea, and their business, and they deserve the wealth that it has created.

          • Steve__T

             Yes we must praise Faro. We slaves are not worthy.

          • http://netbacker.tumblr.com Netbacker

             Fair enough. I don’t think anyone is questioning their success. What’s in question is they (Walton’s) relying on the Govt to backstop them with medicare and SNAP so that Walmart can pay bare minimum wages and extract maximum profits. In a true free market, the cost of labor will match the basic sustainable levels without govt backstops.

          • OnPointComments

            One of the many, many great things about this country is that no one makes us unworthy slaves (with apologies to Steve_T below) and forces us to either shop or work at Walmart.

          • http://netbacker.tumblr.com Netbacker

             When there are no jobs available or just low paying jobs being available, the only place you can shop is the one that says “Everyday Low Prices”
            These “job creators” have successfully convinced all of us that the only way to stay competitive is to ship all the jobs to unregulated third-world countries.
            For every job opening advertized, the last I heard there are 10 people available. With such large supply of labor, there is no incentive for companies to offer higher wages.

  • Bruce94

    Thanks, OnPoint, for assembling such an outstanding panel.  After listening esp. to Krugman, with whom I agree most of the time, I was originally depressed at the prospect of going over the “fiscal cliff” and believed that the pain that “cliff diving” would impose on ordinary people struggling in a tough economy would not be worth the political leverage gained by Obama et al.  Now I’m convinced that going over the “cliff,” which may in fact resemble more of a slope, could be a necessary step in putting our fiscal house in order and once again exposing the extremism and cronyism of a GOP that has become morally bankrupt and ideologically adrift. 

    If at the bottom of the abyss, we wind up in a double-dip recession, it will be GOP intransigence that will be blamed, and the 2014 elections could be a landslide for the Dems.  In any case, in spite of the Right-wing denials below, today’s guests were helpful in reminding us how the economy crashed in the first place and how, historically, public spending has been necessary to effect recovery. 

    Under Clinton, for instance, when deficits initially rose, they were employed, first, to invest in education and training in order to help people become more productive and better able to bear the cost of the additional borrowing and, second, to lay the foundation for a modern infrastructure in order to support the development of human capital that is a prerequisite to raising living standards.

    As the guests pointed out, history shows that both types of public investment are necessary to maintain and expand the middle-class.  No one can dispute that during the Clinton years both were effective in increasing the capacity of people to lead more productive lives while, at the same time, paying down the national debt.

  • http://www.facebook.com/pjpw2320 Peter Wills

    Call it what you will, Fiscal Cliff or whatever, but I don’t know how anyone can claim it is not real.

    If action is not taken by Congress before January 1st then all Bush tax cuts will expire and the middle class, which is already suffering and quickly starting to disappear into the black hole of poverty, WILL be hit harder and there WILL be more who will be absorbed into the poverty vacuum.

    Is this what we want for America …… two classes, the rich and the poor? Because that is the way it is unquestionably headed.

    Are all you Republican supporters out there all so wealthy that it doesn’t make any difference to you? I doubt it.

    Are you all so brainwashed that you cannot see what your Republican representatives, and I use the term “representatives” loosely, do not want you to see.

    I guess when it hits the nerve in your hip pocket you may take notice, but I am starting to doubt it. Your elected Republican “representatives” seem to have rather exceptional brainwashing skills, or is it a reflection of something else?

    Your Republican “representatives” are not serving anyone’s interests other than themselves and the big money backers, lobbyists and Wall Street money manipulators who they really serve.

  • ttajtt

    republication or democrat another bad water year in water & food.  or a war gets big and worse, a pandemic, nature diverts our attention.     we won’t carry about have this stuff, but miss it back. 

    what are some of the tax care would we want, need, help each other with. no to deeping our great grand childs’ burden.   

  • Pingback: Paul Krugman On Fiscal Cliff: ‘We Created This Crisis Out Of Thin Air’ « Go to News!

  • Gregg Smith

    Republicans are acting like idiots. This same thing happened the last time. They have now made two offers, they are negotiating against themselves. Obama’s compromise is either raise the top rate or raise the top rate. The last time the House passed “Cut, cap and Balance” which would have shown enough effort for fiscal sanity to have prevented the downgrade according to the head honcho at S&P. But they kept on negotiating themselves to disaster. They should pass an immediate and permanent extension of the tax cuts and walk away. 

    • Mike_Card

      I usually find fault with at least an element of your posts, but I must agree completely with this one.  I would only amplify on what you’ve written by adding my own opinion:  the Tea Party nut jobs are not Republicans, yet they have taken over the Grand Old Party.

      They truly ARE morons who hate knowledge and prefer their own delusional belief systems.

      • Gregg Smith

        It’s good to agree in part as I do with you sometimes but lets just say I find fault with at least an element of your post.

      • 2Gary2

         GOP=Grand Old Plutocrats.

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      When you say “raise the top rate” do you mean “beyond 39.6%”?

      Because I can’t say I’ve seen any two people on a TV or radio show take opposite sides of this proposal.

  • JGC

    Is On Point also doing a Conservative View on the Fiscal Cliff?

    • http://profile.yahoo.com/R2E4RHV5QDAVBXUUS7BMTBQ7DU Payam

       There is no conservative view on the Fiscal Cliff outside of political posturing.  IE they have nothing to say about what the cliff is, what they plan to do, etc etc etc

    • http://profile.yahoo.com/P7EMWC3TJPCM7OJWLI266HDWWY Ed

      The conservatives want to take your social benefits and turn us into Greece just so they can blame Obama. But besides that they are awesome.

    • Gregg Smith

      Great question, I hope so. Maybe they will.

    • 2Gary2

       we all know the conservative view on everything.  Cut taxes for the rich.  It would be a very short show.

    • StilllHere

      Probably not, math is boring radio compared to Liberal whining.

      I believe the Liberals provided it today.  Moreover, how was today any different from any day on OP?  There’s always Tom and some rinky-dinky “journalist” doing their best to defend the liberal view.

      • jefe68

        Why do you bother listening and making inane comments then?

      • TomK_in_Boston

        Still, sorry, but as one who swallows the con that the ryan budget of tax cuts, unspecified loophole closings, and magical economic stimulus is “serious”, you are disqualified from using the word “math”.

      • TomK_in_Boston

        Still, sorry, but as one who swallows the con that the ryan budget of tax cuts, unspecified loophole closings, and magical economic stimulus is “serious”, you are disqualified from using the word “math”.

  • http://profile.yahoo.com/P7EMWC3TJPCM7OJWLI266HDWWY Ed

    When the government spends 15 trillion and taxes 10 trillion the private sector gets the 5 trillion. Both spending cuts and tax increases take money out of economy. We need more money in the economy not less.

  • http://profile.yahoo.com/P7EMWC3TJPCM7OJWLI266HDWWY Ed

    I agree with Dr Kelton: Deficit spending is what grows economies and puts people to work. Both political parties are working against the people. Democrats are stupid for wanting tax increases and Republicans are stupid for wanting spending cuts. Until the American people quit thinking in that false D & R paradigm we will never get our economy growing again.

  • davecm

    Nearly 60% of Americans believe we are headed in the wrong direction, yet we voted Obama back in.  Why????

    The liberals do make history!
    Obama may be the first Pres. in history to run a Trillion dollar deficit.
    Infact, He has ran Trillion dollar deficits for four years.
    Prediction, you will see by the end of this four yr. term, a Nat’l debt over $20 Trillion.
    But!!! as the guest and Krugman suggest to us, Don’t worry!!
    Well, my suggestion is, get out of debt, stay out of debt and save all you can, because next year, Obamacare starts to creep in with a pile of new taxes. 
    Also, our debt is financed at a very low rate. Do the math and see what a small rate increase would do, say, 1% or 2% increase.
    I wished I could be a liberal, just knowing that the govt. will always be there to take care of me would let me sleep better at night. Reality is coming!

     

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      Someone wanna explain “business cycle” and “percentages” to Davecm? Because using raw numbers with no timeframe is a great way to fool adults impressionable schoolkids.

      • Mike_Card

        But he DOES do punctuation signs…

    • StilllHere

      Excellent points, prepare for the relativist lightweights to attack.

    • TomK_in_Boston

      Because the “direction” is 30 years of voodoo economics and the worst economic crash since the great depression, not the 4 years of the fireman who got the job of salvaging what was left of the burning building and  putting it back together. FYI, “systemic banking crises” typically hit bottom 3.5 yrs after the crash, and this one is following the pattern. I know it’s politics to say BHO is responsible for everything that happened “on his watch” (like W was responsible for 9/11, right?) but voters are not stupid and understand momentum.

      • Gregg Smith

        Obama/Biden swore up and down in 2008 that it was the worst economy since the great depression. It was not even close at the time. Now they say they didn’t realize the economy was as bad as the said when they said it was worse than it was. Go figure.

        • TomK_in_Boston

          I don’t care about that “ooh you said…” stuff. That’s for losers. The fact is that it was the worst since 1929, and you can’t make any sense out of our situation unless you know that. But maybe you are more interested in spinning than understanding.

          • Gregg Smith

            Not in 2008 it wasn’t but they said it was.

          • TomK_in_Boston

            I repeat, I don’t care what anyone said, I know a “systemic banking crisis” when I see one and  - it was.

          • Gregg Smith

            Fine, my point is don’t trust the rhetoric.

      • http://netbacker.tumblr.com Netbacker

         voodoo economics is not the problem, it is turning a blind eye to blatant control fraud that caused this crash. Even though we had regulations on the book, we intentionally did not have enough regulators to enforce those regulations. Markets are as self regulating as a grammar school class when the teacher is out of the classroom.

        • TomK_in_Boston

          “turning a blind eye” is voodoo 101, so it is part of the problem. The easiest way to carry out the deregulation half of the voodoo commandments of “tax cuts ‘n deregulation” is to simply appoint people to the regulatory agencies who don’t believe in regulation. Much simpler than actually changing the laws. Geez, Markopolis handed Madoff to the SEC and they weren’t interested.

          Of course tax cutting is a big part of our “wrong direction” too.

          • http://netbacker.tumblr.com Netbacker

             Federal taxes don’t fund anything.
            The Federal govt is the sole issuer of its currency, hence is not revenue constrained. Federal taxes perform 3 functions
            -
            to establish the value of a fiat currency in the first place. Without
            taxes being enforced no one will use the fiat currency. Like death,
            taxes are a certain thing in life :)
            - to control inflation by destroying net financial assets that create excess demand, driving prices up.
            - to regulate the distribution of wealth so that there is greater economic equality.

            Regulating
            the distribution of wealth is very important because extreme inequality
            undermines democracy as we are witnessing today across the globe.

    • StilllHere

      Liberals don’t know what interest rates are and can’t do the math associated with an increase, but good try.  Watch for personal attacks and avoidance of your points.

  • Steve__T

    Fiscal smiscal  I am furious at what I found out today.

    http://www.huffingtonpost.com/sen-don-riegle/post_1901_b_845106.html

  • harverdphd

    “Infrastructure is dangerous as well” Stephanie Kelton -  another stupid broad heard from….

  • Andres Molestina

    Are the two proposals available to the public? I’d really like to read them myself.

  • Debbie Israel

    Great conversation. I agree with the farmer who spoke last. Let’s hold hands and jump. The speakers represent what many of us believe- that the cliff, the debt ceiling, etc. are constructs that relate mainly to politics not to governing. Ayone who has been elected and had to look at budgets knows that across the board cuts are a moron’s answer to a problem.

    Cuts need to be thoughtful, sometimes gradual,and sometimes are not done at all . Some departments pad their  budgets, some administrators hide money ( see California Parks) and some budget preparers act as though they own the budgets as opposed to the people who suffer through the cuts.

    Details, details, details-  even in trillion dollar budgets need to be reviewed and adminstrators that don’t include the clients they serve or the employees that try to deliver service are a part of the problem.

    From a small town perspective- all of the communities I have worked for had/would have had trouble using the infrastructure money (ARRA) in part because they don’t have the staff to prepare engineering plans ( and associated environmental documents) in advance of getting funded.

    Does this mean they don’t know what needs to be fixed or what the fix is- No- they know all too well as the individual projects pass from year to year- not being funded.  But infrastructure will not only help the country move into this century but employ millions of people.

    There needs to be planning money included in the infrastructure $$. Our small town- developed when in the county without urban services now has an unfunded infrastructure bill for streets alone that is more than 25million $- a drop in the bucket but huge here.

    The comment about China and debt may not be accurate but it is accurate to say that the price of building everything went up because China was building not only dams but their own infrastructure. If China is slowing down and debt is cheap there will never be a cheaper time to build our own infrastructure.

    Lastly, as a former School Board member spending on education is at a crucial point. Children need to learn to be life long- learners because rote instruction will not cut it in this century. The days of having a basic education and getting a living wage is gone. To look forward we need our children to be ever ready to learn along with skill building matched to them and future employment. That doesn’t mean  Science and Technology are the only important parts of the curriculum. It does mean our students must learn application along with skill building.

    More shows like this- using real numbers and real facts will be appreciated. Please ask rural America about all of this. We share the pain.

  • tao101

    The Fiscal Cliff isn’t an illusion, if just for the reason that one or more credit rating agencies have declared they will downgrade the country’s credit rating yet again if Republicans and Democrats can’t come together.  But most (all?) Republicans signed Grover Norquist’s “no new taxes” pledge and are running scared of what Norquist and his secret group of millionaire and billionaire backers will do if they relent.  Yes, we could likely avoid ANY cuts to entitlements, but accomplishing this also avoids raising taxes.  With the President adamant about holding the Republicans down and rubbing their noses in their self-inflicted “mess” (which I applaud)…I don’t expect a solution until 2013.

    • Gregg Smith

      I can’t say I disagree with most of your comment. I don’t see the Norquist thing like you do though. At the time the pledge was signed, it was a feather in the cap for candidates. I don’t see it as much more, I certainly don’t think they fear Norquist and his henchmen. I do think they fear the voters who put them in office. I agree completely with your view that we will jump before a deal is reached. I hope we’re both wrong but even then it won’t matter. In the end, any “deal” will most likely be insignificant to solving squat.

  • http://www.facebook.com/people/Ann-Learner/100002132964693 Ann Learner

    When you have a hard problem sometimes the solution is outside the box.  We have  put the argument is a very small box.  The choice is not between between tax increases and entitlement  cuts. Increase the size of the  box by considering taking away corporate welfare like  oil subsidies, cutting defense spending etc.

    • William Meyers

      Exactly! I have always wondered why these entitlements are not on the chopping block

    • JGC

      Agreed.  Another example, although at the local and state level, is the tax holiday given to corporations for their presence in a community.  States and towns have been doing triple backflips to accommodate the endless demands that corporations demand to set up in their area. See “The Empty Promise of Tax Incentives for Corporations” in the New York Times last Sunday, 2 Dec.

      “Texas awards more incentives, over $19-billion a year, than any other state. Alaska, West Virginia and Nebraska give up the most per resident.”  The vice president of the Downtown Council of Kansas City said, “It sounds like I’m talking myself out of a job, but there ought to be a law against what I’m doing.”     

    • StilllHere

      Perhaps, but there is a cost and maybe it’s not significant.  Americans work for defense contractors right.  Oil is a competitive global market and all nations provide subsidies to their domestic oil companies.  So subsidies level the playing field but they also encourage behavior the government wants, like charitable and mortgage interest deductions and tax deferral on retirement account contributions.

  • davecm

    Americans are being herding into the liberal’s plantation and they cannot even see what is being done to them!
    We have had spending stimulus plans, QE1, QE2 and now QE3 and where are we now, $16T in debt. Obama wants big tax increases and very little spending cuts, maybe next year he states.
    Just wait and see America, the bill will come due and we the taxpayers will be left holding the bag!
    A politician will promise(lie) you the world to get your vote.
    Remember this promise:
    Obama, Aug. 15: [i]f you like your health care plan, you keep your health care plan. Nobody is going to force you to leave your health care plan. If you like your doctor, you keep seeing your doctor. I don’t want government bureaucrats meddling in your health care.
    I have had BCBS for 30 yrs. where I work, good insurance.They now tell me, beginning in 2014(the year of Obamacare) I will no longer have BCBS, but another Insurance deemed as “adequate”. Starting Jan. 1, BCBS stating, due to Obamacare requiremnets, my premiums increase $60 more a month. FSA, cut from $5,000 to $2500.CoPay goes from $30 to $50.Oh!! another, my company is experimenting with the idea of temps or part-time jobs, with you paying the entire cost of your healthcare.I love how liberals think, they ALWAYS cost me money!

  • Wm_James_from_Missouri

    I think the problem of the public debt is really a problem in psychology. Most people are not comfortable with large numbers. If your take home pay is in the hundreds of dollars and you hear that the government debt is in the trillions, you naturally gravitate to the opinion that the debt is much to large because you are comparing that large number to numbers that are relevant to you ! People are also comparing current numbers to numbers that they have “known” in their past experience, often from very many years ago. If the US were to issue new money that converted at a rate of 1 new dollar (with a different look) equal to 1000 current dollars and make this the new currency our debt levels would be in the millions of new dollars not trillions of old dollars. This would be less shocking to the human psyche !

    • Wm_James_from_Missouri

      Another point: a debt level in the millions of dollars applied to the roughly 350 million people in the US, doesn’t seem quite so bad as trillions of dollars applied to 350 million people. Too many people are arguing from emotions and not reason.

      • StilllHere

        Maybe, but if you look at other countries in the developed world, you’ll see what some of the concern is.  Debt/GDP, Deficit/GDP and Debt + unfunded liabilities (Medicare,SS..,) / GDP are all in dangerous territory.

        • jimino

          In mentioning SS and Medicare, you have named the only two funded liabilities.  Reality is that military is totally unfunded, unless our troops are plundering and sharing the spoils or selling candy bars to fund their monumental expenses.  And almost all other government operations are also unfunded.

          Social Security has a several trillion dollar surplus.  That is the opposite of unfunded.

          • Steve__T

             Your right but, the SS fund has nothing in it but IOU’s. See my post below.

  • http://profile.yahoo.com/YWR6HVCPNV4PHYFCJITIXDVILQ yahoo-YWR6HVCPNV4PHYFCJITIXDVILQ

     http://front.moveon.org/dear-democrats-please-stick-to-these-8-principles-from-robert-reich/#.UL6-Loh7STo.facebook

    • OnPointComments

      If President Obama forced the country into bankruptcy and Democrats reinstituted slavery, all while the President & leaders of the Democratic Party regularly met in the White House situation room to drown kittens, Moveon.org would support them in their endeavors.

      • StilllHere

        and puppies to, just to be seen as fair.

      • TomK_in_Boston

        A nation with its own currency can’t go “bankrupt”.

  • Pingback: Krugman: 'We Created This Crisis Out Of Thin Air' |

  • captnboston

    Republicans may get what they want if we go over the “cliff” with $1.2 trillion in “sequester” cuts of which about half are military. The other half is “discretionary”.

    So taxes will go up, and the Democrats will ask for middle class taxes to be cut immediately, to protect Obama’s promise.

    The Republicans will gladly comply. Of course the Democrats will want to un do the sequester cuts by tying that to the new tax cuts, but the Republicans will have none of that. Obama will have to compromise to get the cuts.

    Voila, insignificant tax increase on “the rich” who will still have their loopholes and major spending cuts across the board.

    With 1/3 of the military out of work, Obama won’t have nearly enough money make ends meet. Game set match, Republicans.

  • Potomac_Jake

          Today’s discussion provided a clear factual description of the
    economic consequences of tax increases and government spending decreases.
     What bothered me was that the well-established conclusions were ignored by many of the callers and even Tom Ashbrook
    treated their conclusions as if they were mere theories.  
          If the topic was
    creationism or climate change I suspect that there would be a lot more credence
    given to the experts who spent years studying the issues and provided widely
    accepted scientific evidence.  
          I find it disconcerting that many callers
    would accept findings from hard scientists associated with prestigious research
    centers, but feel free to substitute their intuition for the analysis and
    modeling that support the views presented by today’s guests.  
           But far more disconcerting is that journalists
    often give equal credence to claims used by one side of the debate that directly
    contradict well-established conclusions versus claims by the other side that are
    consistent with careful analysis of the economic consequences of raising taxes and
    lowering government spending. 

  • hennorama

    The “debt ceiling” is a ludicrous and outdated device, an anachronism.  Virtually no other democratic country has one.  (Maybe this is a feature, as part of “American Almost Exceptionalism?)

    Anyway … Congress already has complete control over Federal Spending through the budget process.  They can already impose restrictions if they choose to do so, without risking default on US debt,

    The debt ceiling as a limitation on spending is far too weak to be useful if Congress can simply vote to raise it anytime they wish.  And the downside of violating the debt ceiling is far too disproportately severe for it to be a reasonable tool just to limit spending.  The potential consequences of DEFAULT on US debt are too catastrophic to entrust the debt ceiling to the whims of politicians, regardless of party.

    Fights over the debt ceiling turn into ridiculous games of “chicken” and reward only the fanatical, who get plenty of attention, rather than the reasonable, who want to make sensible deals.

    Let’s do away with the damned thing, once and for all.

    • StilllHere

      Not a chance, the debt ceiling is the only form of representation the taxpayer has.  Congress and the President should have to think good and hard and should be put in difficult positions anytime they want to exact more punishment on taxpayers.  No other debate does this.

      • Gregg Smith

        The underlying theme is Government should never be questioned about how much they spend. They require what they say they require, budget be damned. 

        • StilllHere

          And they always require more.

  • http://profile.yahoo.com/GXQGPPRD2I4CVBNPIXSAUZ7QJQ Chris

    The fiscal cliff debate could pass for the election campaign if one had just woken from a coma after 6 weeks. We’re still hearing the same points, even the same catch phrases. The Republicans have given a small bit of ground, accepting increases in revenue in some form, nothing new, part of Romney’s plan. This seems to me to be more about being seen as reasonable than a serious concession. Obama seems to be in the mood to hold ground after backpeddling for the first 4 years, but doesn’t say anything he didn’t say in the 2012 campaign or even the 2008 one.

    Obama should go on prime time national television and make it clear to everyone that taxes on the top 2% are going up Jan. 1st one way or the other. Sorry if that includes you, Tom. It should, you have the best show on radio.

  • http://pulse.yahoo.com/_VAS7HQOSITEB5HANERHRJ26IOY stephenw

    I really wish Tom would have let Stephanie Kelton expound on the remarks she was making about the different constraints bore by a currency issuer versus a currency user.  This distinction is critical and not at all well understood.  Tom off-handedly said, “Yes, but we still owe a lot to China,” and which is true, but only in a sense.  Actually, we owe the same amount (1.9 t) to China as we do to Japan, but that money is lent for a reason having to do with commerce.  To be sure, there is a sense in which the monies owed to Japan and China have “already” been paid.  But the truth is most of the “deficit” is not debt at all but money we owe ourselves.  In other words, if money changes hands in a house, little brother pays back what he owes to big brother, how does that effect the household deficit?  These points and more are critical if Americans are to understand why the fiscal cliff is largely a mirage.  To understand more, go to new economic perspectives (where S. Kelton blogs) and learn about Modern Monetary Theory__________

  • Gregg Smith

    Man, I wish Newt had won the nomination. I mean no disrespect to Mitt. I came to respect him immensely but Newt was my first choice. He summed up the whole fiscal cliff thing in a debate on Fox almost a year ago. I wonder how many of my “mostly always disagree” friends can agree Newt was right. It took me a while to find it but it was fun. I had to watch 30 minutes of Newt highlights. I found part 2 first but the money clip I was looking for was in part 1. It’s 6:50 in, I don’t expect ya’ll to suffer Newt more than a minute. 

    http://www.youtube.com/watch?v=0Cmq6vzE0kI 

  • jimino

    When Congress refuses to raise the debt ceiling and we can’t make good on our federal government’s bills, can we start with Boehner’s district and the State of Kentucky?  Seriously, who gets to decide what gets paid and what doesn’t?

    • TomK_in_Boston

      BHO should just declare it unconstitutional and ignore the teaOP.

      Geez, these people are disgusting. Bohner’s “counteroffer” is 100% recycle class warfare. Cuts in SS and medicare, lower tax rates and unspecified “loophole and deduction closings”. You know that if they actually close anything it will be employer health insurance, home mtg, charitable etc – more massive screwing of the middle class.

      There is NO REASON to support the crazy TeaOP unless you are a greedy 1%er. They should get about 1% of the vote. Why would Americans vote for a party that wants to do all those horrible things? Is it really that easy to scare people with the big bad debt bogeyman?

  • Gregg Smith

    NJ, try again your math is wrong. I used OMB numbers but they are the same as yours. The average under Eisenhower was 17.525%, under Bush it was 17.625%. I assume you rounded up (cheesy) to 17.53% for Ike. The 8 years of Bush were:

    19.5% – 2001
    17.6% – 2002
    16.2% – 2003
    16.1% – 2004
    17.3% – 2005
    18.2% – 2006
    18.5% – 2007
    17.6% – 2008

    Someone check the math, I get an average of 17.625%.

    A couple things. First it means nothing. I am not one who believes revenue and the economy revolve around the top rate. I am simply slaying dragons. A 91% rate did not bring in more revenue. It is not a solution. At the very least if the suggestion is serious then lets go back to Eisenhower era spending levels too.

    Also, assume you could do math at a 3rd grade level and your numbers were correct. Boy, you really got me. The difference between 17.53% (rounded up) and 17.3% (bogus math) is .23%. Wow! Look at all that revenue. Yea, that will fix everything… NOT! But again, you were not right, you did not preform math at a 3rd grade level and I was correct.

    Finally, I must admit I get a thrill imagining you seeing my comment and getting all twitchy to prove me wrong. Good luck but we’ve been here before. Take a chill pill, realize the liberal dogma is flawed and don’t let your nasty zeal cloud your judgement. Try to get me out of your head.

    And to other commenters, as NJ will likely not respond, feel free to tell me where I’m wrong. On average revenue as a percentage of GDP was higher during the Bush years than under Eisenhower. I understand this goes against all you believe but facts are stubborn things. Can we end this silly talk of 90% rates?

    • jefe68

      And the average in the 90′s was 18.5% with the higher rates during the Clinton presidency.

      Then there is this: The evidence on the 2001-2007 expansion provides no support for the claim that the tax cuts generated especially robust economic growth. Rather, examination of a broad range of key economic indicators indicates that the economic expansion that began in 2001 was, on balance, weaker than average. In fact, with respect to GDP, consumption, investment, wage and salary, and employment growth, the 2001-2007 expansion was either the weakest or among the weakest since World War II.

      Moreover, the economy’s performance between 2001 and 2007 was weaker, overall, than its performance in the equivalent years of the 1990s, years following significant tax increases. GDP growth was somewhat weaker than in the 1990s, and job creation, investment, and wage and salary growth all were substantially weaker.

      http://www.cbpp.org/cms/index.cfm?fa=view&id=575

      • Gregg Smith

        All of that is a different discussion. As I said I don’t think everything revolves around rates. It was suggested by Shag_wevera (I think) that everything was peachy with a 91% top rate. I hear it often. So I asked him/her why should we support less revenue and the top earners paying a smaller portion of the bill. NJ weighed in with his usual pompous nastiness based on bad math issued with a condescending arrogance. So I shot back.

        So, I am happy to dissect and discuss your observations with 2 caveats: 1) If you want to look at 2001 to 2007 don’t stop there, it’s virtually 2013, and 2) agree with my claim or prove it wrong first. 

        “On average revenue as a percentage of GDP was higher during the Bush years than under Eisenhower.”

        Here’s your chance to either show your honesty or make me look like an idiot.

    • TomK_in_Boston

      .23% is $35 billion, more than a lot of the cuts you guys get all twitchy about. Math!

      That’s one of the reasons revenue/GDP is one of the most stupid statistics thrown around. Since GDP is so large, significant revenue changes don’t mak ebig changes in the %.

      Another reason it’s a poor indicator is that GDP includes all spending and in different eras it will be weighted toward different parts of the economy which are taxed differently.

      Finally, the voodoo catechism says that tax cuts will grow the GDP and increase revenue, so why would you divide out your booming (not) GDP and lose an indication of economic stimulus? Similarly, if you really crash the economy, you are protected by dividing by the smaller GDP.

      I think the best indicator would be to measure the revenue change within a few years of a tax change, something like that.

      • Gregg Smith

        The .23% was not a correct number. It was NJ’s incorrect number.

        TomK, we agree! Hallelujah! It is beyond bogus to think a 91% rate is the answer. It is stupid to ignore other rates (the bottom was 20% at the time), spending and many other factors. It’s a silly proposition to think raising only the top rate by less than 5 percentage points will fix squat yet Obama is willing to throw us over the cliff for it as he refuses to address revenue.

        • TomK_in_Boston

          Gregg, since I hate to ruin a rare bipartisan moment, I’ll say that I do agree that 91% is too high, just like I think 35% is too low, and 15% is WAY too low. I agree that the top rate should increase by more than 5%, and divs and cap gains should be ordinary income. However since the right does not agree that taxes should go up sometimes, just like they should go down sometimes, I think it’s essential to grab the unique opportunity of the expiring tax cuts. 5% is better than nothing.

          Above I was mainly saying that I don’t think revenue/GDP is a good indicator. I wasn’t arguing for a specific rate.

          Re .23%, you wrote “.23%. Wow! Look at all that revenue.”. I think it’s important to realize that a small fractional % of GDP can still be a lot of $.

          • Gregg Smith

            I’ll not quibble, even with the notion the GDP to revenue ratio is not a great indicator. I do wonder if there is any indicator that can show a higher top rate alone means bupkis to revenue.  And yea, I understand $35 billion is big bucks… until you try paying off a $16 trillion debt… and that’s the only plan.

  • StilllHere

    Student loan bubble. A new Kansas City Fed study suggests that well over half of all borrowers could have their payments capped under the income-based repayment program (IBR). In contrast, the Department of Education expects that only 6% of repayment volume will be made under IBR in 2013.

  • hennorama

    The United States has had budget deficits for about 80% of its history.  Since 1940, there have been budget surpluses for only 14 of 72 years, making those 58 deficit years merely a continuation of the norm (58/72 = 80.6%).

    The US has also been in debt for nearly its entire existence, as pointed out by another poster through this article by L. Randall Wray, written in 2010:

    http://www.nakedcapitalism.com/2010/02/wray-the-federal-budget-is-not-like-a-household-budget-%E2%80%93-here%E2%80%99s-why.html

    What happens when these deficit and debt trends are significantly changed?  There is a discussion of this in the same article.  Quoting in part and edited for brevity:

    “The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929 …  With the exception of the Clinton surpluses, every significant reduction of the outstanding debt has been followed by a depression, and every depression has been preceded by significant debt reduction. The Clinton surplus was followed by the Bush recession, a speculative euphoria, and then the collapse in which we now find ourselves … While we cannot rule out coincidences, seven surpluses followed by six and a half depressions (with some possibility for making it the perfect seven) should raise some eyebrows. And, by the way, our less serious downturns have almost always been preceded by reductions of federal budget deficits.”

    While I make no claims as to causality vs. coincidence, this should at least raise some eyebrows, as the author said.

    Be careful what you wish for.

    • hennorama

      (I beg the indulgence of the board for this “self-response”).

      One corollary point that was excluded is that, ON AVERAGE SINCE 1940, there have been Federal deficits of 3.28% of GDP. So this new “religion” that many have recently found – claiming that deficits and debt are horrible for the U.S. – is not borne out by the actual data. Overall, the US has fared quite well since 1940.

      Now let’s examine Federal Revenues (FR) during Pres. Obama’s administration, which have also been excluded from the discussion. They averaged (including 2012′s estimate) only 15.35% of GDP. Only two other 4 year periods since 1940 have seen FR this low – 1940-1943 (9.45%) and 1948-1951 (15.3%).

      What is similar about these periods? They came during and after periods of high and/or quickly rising unemployment. We’re all familiar with unemployment during the Great Depression, and the more recent Great Recession, but I suspect few realize that the number of unemployed in the US nearly doubled from Jan. 1948 to Dec. 1949 (from 2.034 to 4.063 million people). This figure fell quite fast, to 1.96 million at the end of 1951, as employers responded to the pent-up demand from rationing and other economic stresses of WWII.

      The moral of the story? There are 3 real keys to greater Federal Revenues and lower Federal Spending – jobs, jobs, and jobs. More jobs = more Federal income taxes, more payroll taxes, more corporate and individual business profits, resulting in higher tax revenues, AND lower spending for UI, SNAP, Section 8, Medicare and all the other Federal income support mechanisms. This may also lead to some lowering of the refundable credits that so many seem to hate (and which lift the greatest number of people out of poverty) – the Earned Income Tax Credit and the Additional Child Tax Credit.

      We simply need more jobs, and the ENTIRE Federal government should be focused on ways to increase employment, not on this artificially created and only modestly worrisome “fiscal cliff.”

      The current circumstances, while modestly worrisome, are far from catastrophic. Reasonable and modest solutions are available, and cooler heads will eventually prevail.

  • http://twitter.com/jmdenn the GREATER Platform

    Let’s say on the block you live, 20% of the non-children are unemployed, 30% are living at or under the poverty line, and almost no one can afford healthcare. You however have three wishes. The first wish is to have a printing press in your basement for US currency. Would you issue enough currency to put everyone back to work at your house, albeit, at
    minimum wage, provide healthcare, and make sure everyone got a healthy balanced diet? At least until such time as they can get a better job and quit you? Or would you just sit there and watch?

    The US budget is not a family budget, a business’s budget or a State budget. We have a sovereign floating rate currency, they don’t.

    We can never default on our debt. Unless Congress shoots themselves in both feet, which would be a seminal moment for a third party.

    With a huge trade deficit if we don’t grow the money supply we’ll simply run out. Of course we won’t because money now is just keystrokes. The rest of the world sends us all their real stuff, cars, electronics, raw materials, and we send them 0s and 1s on a scoreboard at the Fed. Nice work if you can get it.

    When S&P lowered the US debt rating, bonds actually went up in value! Perhaps the best way to break up the Democrats and Republicans duopoly is for them to show how totally ignorant they both are about the economy and the plight of the bottom 98% by going over their Fiscal Bluff.

    The only reason to increase taxes is to tame runaway inflation. We are still dancing too close to deflation. Our government, unlike households and businesses, can afford to be counter cyclical. To spend our way back to growth.

    Growth should be the second wish.

  • StilllHere

    Stop Instagramming your breakfast!

    http://www.thecankicksback.org/3

  • Gregg Smith

    Mitch McConnell wants to bring Obama’s “solution” to a vote and Harry Reid is refusing. What’s that tell us?

    • StilllHere

      Classic!

      • Gregg Smith

        I know, Obama is not serious.

  • hennorama

    “Fiscal Cliff” Ideas

    There’s room for compromise.  Let the top rates go up a bit less than Pres. Obama’s proposal – say to 35.5% and 39% rather than 36% and 39.6%, on AGIs over $200K (Single) or $250K (MFJ).  One could even move this up a bit, say to AGIs of $250K and $300K respectively.

    Phase in (over 5 years) higher dividend and LT cap gains rates to limit the impact to the markets, and classify carried interest in the same way as qualified dividends.  I’d move these rates up for EVERYONE, moving the current ZERO rate up to 5% for the lowest 2 tax brackets, and up to 20% for all others.  Just move it by 1% per year, again to limit the market impacts.

    I’d also begin to phase out the 2% payroll tax reduction, moving it up in 0.5% increments every 6 to 12 months, contingent on employment levels.  The Social Security tax earnings limits should also be adjusted upward, significantly, over 5 to 10 years.  I’d move them up to at least double the current limit of about $110K.  Together, these will greatly extend Social Security viability.  Medicare taxes could also be adjusted upward slightly, perhaps to a combined 3.0% (a tiny increase of 0.1%).

    The EITC, CTC and ACTC could be trimmed slightly, either by lowering the credits or reducing eligibility.  I’d say these could easily be reduced by 5% overall, with greater reductions at higher AGI levels.

    Other tax reforms will have to wait until 2013 due to time constraints:  an overall limit on deductions, the “Buffett rule,” AMT indexing, FUTA reforms, etc.

    As to spending – defense can certainly be reduced.  I’d also want to look at Social Security and Medicare and definitely make them more means-tested.  Mitt Romney, Warren Buffett, Donald Trump et al do not need Federal support from either of these programs.  The Heritage Foundation has some interesting ideas on these programs, which I’d explore. Practically speaking, this will need to be put off until the next Congressional session, but there should be a commitment from both sides to work on these, especially Medicare, as it’s the more critical item.

    As to encouraging growth – the various tax incentives Pres. Obama has included in his budget, such as extending 100% depreciation, and other special incentives for manufacturers and small businesses have merit.  Anything that is specifically targeted to get the long-term unemployed back into the job market would get my vote.  Same thing with incentives for military service veterans.

    These ideas spread out the impacts of revenue increases, both over time and over all income groups, get more people to have “skin in the game,” and begin to address Social Security and Medicare.

    Both Republicans and Democrats would likely hate something in this package, which means it might actually be a reasonable combination and could get bipartisan support.

    As I’ve said before, it took a long time to get into this position, and will take time to get out.  There are no magic solutions, but there are modest and reasonable solutions available that can work over the long term.

    Comments?

  • OnPointComments

    from Jim Cramer, Host, CNBC’s “Mad Money”
     
    “Not only is that Mad Money host aggravated that hardliners are willing to risk a recession rather than compromise – he’s downright outraged these same people aren’t even willing to cancel or even delay vacation plans to try and find some common ground.  The fiscal cliff is likely the most important project that most lawmakers will have to tackle in their entire political careers. Have you ever been able to say to your boss, ‘hey, I know I have a huge project due, one that could bring down the whole company if I don’t finish it, but darn it all, I’m taking a vacation. I will see you later. I am out of here,’” asked Cramer.  No. Absolutely not. But these politicians appear to have a different set of priorities.
     
    Cramer won’t stand for it.  Not only does Cramer advocate something he calls ‘No Vacation without Legislation’ he hopes others who share his disbelief will demand some accountability.  “I want to know which of these bitter and indolent politicians have tickets in their pockets to fly out of Washington next week. I think we should ask each politician ‘have you purchased tickets to leave already without regard to getting your job done?’”
     
    As far as Cramer is concerned, those lawmakers should be ashamed.”
    ______________

    I agree with Cramer.  This Congress is a disgrace.

  • TomK_in_Boston

    This post on firedoglake sums up a lot of what I believe on this matter. Second para is worst case cynical take. Third para, we talk about “taxes” and “cuts” as if they were generic. Taxing those who are already so well off that it won’t affect their economic activity and taxing those barely getting by are rather different. Infrastructure spending in the USA has a rather bigger payoff than doing the same in afghanista:

    “The “fiscal cliff” is a set of tax increases and spending cuts that decrease the deficit by $500 billion per year. The “Grand Bargain” is supposed to cut the deficit by $4000B over the next decade, $400 billion per year on average. Whatever negative effects the fiscal cliff will have on the GDP, the effects of such a Grand Bargain will be only slightly less. So, why bother?

    The key problem so far as both Obama and Boehner are concerned is the fact that the fiscal cliff does not involve entitlement cuts=”reforms”. The current negotiations are to balance the blame so that neither party gets a relative advantage/disadvantage from this betrayal of the voters, who overwhelmingly do not want such benefit cuts and from this dutiful implementation of the will of the elite, e.g., Pete Peterson and Robert Rubin.

    Lets be clear that the deficit this year was $1100 billion of money borrowed at negative effective-interest rates and pumped into the U.S. economy. Cutting that that stimulus by forty or fifty percent will certainly prolong the recovery and possibly induce a secondary recession. But, the effect of each deficit cutting measure, i.e., each tax increase and spending cut, depends on its individual multiplier. For example, the multiplier on the Bush tax cuts is only .29, which indicates that every dollar of revenue acquired through expiration of the Bush tax cuts would take 29 cents out of the GDP. By contrast, the multiplier for the payroll tax holiday is 1.29, which means that every dollar of revenue gains through the expiration of that holiday will decrease the GDP by $1.29. Thus far, there have been no discussions about the relative multipliers on the items in competing proposals…..”

  • MCT2

     Well, didn’t Stan Colleder say that Gov’t activities are 1 of 5 factors in GDP. Therefore, taxes (spent wisely) can/do create jobs; conversely, any of the other 5 facors can also mbe areas of job growth. Corporate growth is just one of 5.

  • MCT2

    From what Stan Collender was saying, any one 1 of 5 factors in GDP can create jobs. Gov’t activity is one factor (spent well!)

    • StilllHere

      That’s too high a hurdle for it to ever clear.

  • emysl

    The goal of the Right Wing is to dismantle the New Deal, and replace the FDR image from the ten-cent coin, with one of their heroes, most likely RR! 

    • StilllHere

      RR wouldn’t want to be on the dime, he’d want to eliminate it, it costs 12 cents to make!

  • Pingback: Kelton, Krugman, and Collender On Point « Multiplier Effect

  • ExcellentNews

    Any tax hikes for billionaire CEOs, bankers, or hedge fund managers will be devastating for the economy of the Cayman Islands and Switzerland. We cannot have that! So, Grover, please, sock it to the American middle class!

    • ExcellentNews

      Some of you might be wondering why? Because that’s where they stash the money they do not know what to do with. After all, when you have three yachts and seven valets, there is little point in spending for more yachts and valets… But that’s complicated economic theory – so tune in back to NASCAR and don’t you worry your little heads about anything. The job creators will take care of business…

  • Ambulanz

    My Congressman, Rep. Sam Farr (D – CA) put into words the frustration that I feel in
    respect to the recent, and long-term inaction by Congress (link to press
    release below).  In addition to the G.W Bush-style work approach by the current G.O.P. (less is less)…

    Merely a month ago the GOP attacked Obama and Dems on his ‘cuts to medicare’, trying and unfortunately often succeeding in disguising what were explained as policies that would reduce the provider and insurance agencies from inflated and predatory billing.  They used this in the presidential debates, as well as state and local elections.  For some, especially what I witnessed in Indiana, their sole message was the Obama initiated attack on medicare, and how they would stop it.

    Now, amazing, only a season later, the GOP lead House is holding firm that we cannot return to pre-Bush taxes on the fortunate without significant cuts, including medicare spending.   Not the kind of cuts that audit predatory agencies, but the cuts that hurt our citizens. 

    Newt and cohorts called out the union for killing the Twinkie, when it was in fact mismanagement, corporate embezzlement, and years of union pay-cuts that put the nail in the spongy coffin. 

    How can we accept this false-reality from perpetuating further?  In the next elections the party will indeed strut their sale approach to the gullible, but I cannot imagine any boss in America allowing employees to take so much paid time-off.  We really need a way to find Congress personally accountable for productivity.

    http://www.farr.house.gov/index.php?option=com_content&view=article&id=917:congress-must-stay-and-work-do-nothing-republican-house-quits-early&catid=36:2012-press-releases

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