Friday, November 9, 2012

What's Missing from the "Fiscal Cliff" Discussion

Here's FT on the "fiscal cliff". It is similar to most MSM discussion on the cliff:
Efforts to avert the fiscal cliff gathered momentum as a senior ally of President Barack Obama called on business leaders to urge Republicans to make concessions to stave off the looming budget crisis threatening the global economy. 
Two days after Mr Obama’s re-election, Senator Chuck Schumer of New York, a leading Democratic spokesman on fiscal issues, said he welcomed a signal from John Boehner, the Republican speaker of the House of Representatives, that his party was willing to compromise to avert the fiscal cliff....
The appeal came as Washington pivoted from the bruising election campaign to focus on averting the tax rises and spending cuts due to take effect in January, which could tip the US economy into recession.
What's generally missing is the breakdown of the fiscal cliff, which is a 4 to 1 increases in taxes (via increases and an end to expiring tax cuts) versus spending cuts and that "compromise" proposals are all about 3 to 1 increases in taxes versus spending cuts. WSJ covered the fiscal cliff details, once. Council on Foreign Relations economist Robert Kahn covered the "kick the can down the road" possibility. But that's been it. It is otherwise just lumped together in reports as "tax increases and spending cuts," with no indication as to how much is tax increases.

Bottom line: It's all about a huge tax increase. It's just that who will be tagged with the increase, and by how much, hasn't been determined. I estimate that the average taxpayer will see a combination increase in income taxes and payroll taxes of between 10% and 15%. Forget the further smokescreen about taxing the rich, the average person will pay more, especially through higher payroll taxes and elimination of some deductions.


  1. It may not be announced, but the target of the tax hike is obvious.
    It will be called "the rich", but there are not really that many rich and many have means of escape. So the actual target will ... unexpectedly ... turn out to be "people with jobs".

  2. "Council of Foreign Relations 'economist'"

    Good for a laugh!

  3. As noted, the "fiscal cliff" is a big scam and why it is being pushed by the MSM is to protect the interests of the political elite and crony capitalists, not the middle class, not ordinary Americans. With real cuts for once in military spending and a decent chunk of revenue from the tax increases hopefully to pay down our massive budget deficit, we are much better off going over the "fiscal cliff" than the alternatives being offered.

  4. Most wealthy people didn't get that way by being stupid. You can only milk them for so much and then they stop working and producing. Or maybe they vote with their feet.

    One thing is practically guaranteed: the revenue projections will be wrong. Either the deficits will be bigger than estimated, or they'll have to tap a dwindling middle class to make up the difference. Either way, it represents more wealth destruction and a lower standard of living for everyone.