25 years ago we had Ronald Reagan, Johnny Cash and Bob Hope.The Magazine
Fiscal Cliff Diving
The deficit showdown ahead.
Nov 26, 2012, Vol. 18, No. 11 By JOHN MCCORMACK
Under current law, the U.S. economy will tumble over the so-called fiscal cliff at the start of the new year...Pentagon officials say the spending cuts, part of the 2011 debt ceiling deal, will hollow out the military.
President Obama and congressional leaders declare theyre committed to striking a deal to avert a fiscal fall. But Obama also says he wants to raise income tax rates on individuals and small businesses making more than $250,000, and Republicans say thats a deal-breaker.
A tax rate increase should be completely off the table, insists Pennsylvania Republican senator Pat Toomey.There is no need for that. It is economically destructive to do that. According to the Congressional Budget Office, letting the top tax rate rise from 35 percent to 39.6 percent would mean 200,000 fewer jobs. Another study, conducted by Ernst & Young for pro-business groups, says it would cost 700,000 jobs.
Republican leaders are willing to compromise on tax revenue by limiting tax deductions. For example, capping deductions at $50,000 would yield $749 billion in tax revenue over 10 years, about the same amount as letting the Bush tax rates expire for high earners, according to the Tax Policy Center. Republicans also believe that any deficit deal must include structural entitlement reform.In six weeks, you cant do a complete transformation of entitlement programs, which is what we really need, but you could make changes that are conceptually simple and legislatively very doable that would result in substantial savings over time, says Toomey.
Although Republicans and Obama publicly disagree about tax reform, sources say that at a November 16 White House meeting with congressional Republicans, the president privately accepted a broad entitlement and tax reform framework that would lower tax rates while eliminating and reducing some tax deductions.
They discussed a down payment of sorts and then setting up tax and entitlement reform next year, reports a source familiar with the talks. Obama agreed to a tax reform structure that would lower rates and broaden the base. He also agreed that structural entitlement reform would have to be part of any agreement.
I dont think anyone left the White House thinking were heading over the cliff, another source familiar with the meeting says.Thats not to say we wont. We might trip off the cliff unintentionally.
What reason is there to think that President Obama will actually compromise with Republicans on taxes and entitlements? Obama just won reelection, and congressional Democrats, who picked up seats in the House and Senate, are opposed to entitlement reform. Senate majority leader Harry Reid and others have spoken out that they are not going to touch any of the entitlements, so I think that that gives you some indi- cation of the likelihood of something like that happening, House minority leader Nancy Pelosi said at a November 15 press conference.
Some Democrats, like Washington senator Patty Murray, are openly calling for heading over the January cliff, at which point theyll be able to beat down the opposition.We will reach a point at the end of this year where all the tax cuts expire, and we will start over next year and whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this, Murray said on ABCs This Week. Other Democrats, such as Howard Dean, say theyre more than happy with going over the cliff, not as a negotiating strategy, but because they prefer a policy ...
Now we have Obama, no cash, no hope.