On December 31, an unprecedented change in U.S. policy is set to take effect. Without action, temporary spending and tax measures totaling $550 billion will expire...But he notes:
Most analysts expect a "kick the can" deal, in which spending and tax measures are temporarily extended (or reinstated after a short expiration) and commitments are made to work toward a broader agreement or "grand bargain" in 2013...
Kahn projects that such a kick the can deal will increase taxes by $530 billion.
Specifically, he sees strong support for an end to the payroll tax cut, an end to Bush tax cuts, and broad support for short-term "tax extenders."
On the spending side, no further extensions of unemployment and a cut in Medicare payments (the doc fix). Total spending cuts $170 billion.
Got that? Tax increases of $530 billion and cuts of only $170 billion. In other words, the "kick the can deal" is a huge tax increase. They are set to scare the public and then take more money out of their pockets.
Here's Kahn's table of what he expects (my highlights):
Cliff item
|
2013 impact (CY, $billion)
|
% of GDP
|
Prospects
|
Total revenue increases
|
530
|
3.3
| |
Bush tax cuts (with AMT)
|
300
|
1.9
|
A deal on the tax cuts is central to a resolution; AMT will be difficult to change retroactively
|
Payroll tax cuts
|
120
|
0.8
|
Little support for renewing; the administration is reportedly considering alternatives
|
Short-term tax measures ("extenders")
|
110
|
0.7
|
Broad support for renewing, but these are tied up with broader tax reform
|
Total spending cuts
|
175
|
1.1
| |
Sequester
|
110
|
0.7
|
Broad support for replacing, but no agreements on specific cuts to replace it
|
Unemployment benefits
|
50
|
0.3
|
Little support for extending
|
Medicare cuts ("doc fix")
|
15
|
0.1
|
Strong support for extending
|
Fiscal cliff: total revenue increases and spending cuts
|
705
|
4.4
|
Estimates range from 4 to 5 percent of GDP
|
Total fiscal drag
|
825
|
5.1
|
Includes other measures scheduled to take effect
|
Prediction: Repubs will cave. Also, they and their families will be physically threatened if they create "roadblocks" to Obama's "mandate".
ReplyDeleteOnce we are all dependent on gov't food stamps and health services, the transformation will be complete.
But we all knew that :)
This makes sense given how all the previous massive tax increases have reduced the deficit.
ReplyDeleteHmmm.... I keep looking at the previous sentence, and something seems wrong, but I can't put my finger on it.