Days after being re-elected into office, President Barack Obama emphasized his approach for evading an ominous “fiscal cliff” that pressures a new recession–meaning the country’s wealthiest people will have to pay more in taxes.
Obama’s comments on Friday Nov. 9 were his first since his re-election, and they set the attitude for forthcoming talks with congressional Republicans on circumvent the combination of spending cuts and the expirations of Bush-ear tax cuts that take effect Jan. 1 and also total $800 billion next year alone.
“If Congress fails to come to an agreement on an overall deficit reduction package by the end of the year, everybody’s taxes will automatically go up on January 1st,” Obama said. This includes the “98 percent of Americans who make less than $250,000 a year…It would be bad for the economy and would hit families that are already struggling to make ends meet.”
One of the most problematic aspects of the chained CPI is that the cuts are larger the longer you receive benefits – meaning that the chained CPI would disproportionately hurt many women, veterans, people with disabilities, and others. For example, veterans wounded in combat and others disabled at young ages would be disproportionately hurt. Seniors, especially women, who live long lives would also be hurt disproportionately.
Several analysts consider that the fiscal cliff is more like a “fiscal slope” and the economy could endure a short-term conclusion of the Bush-era tax cuts and the government might manage a brandish of regular spending cuts for a few weeks.
However, at a minimum, going over the fiscal cliff would unnerve financial markets as the economy resists recovering. Markets have currently slumped worldwide as investors have refocused on disputes to the world economy following Obama’s re-election.
The CBO analysis says the looming combination of automatic tax increases and spending cuts would cut the massive U.S. deficit by $503 billion through next September, but that the fiscal austerity would cause the economy to shrink by 0.5 percent next year and cost millions of jobs.
The new study approximates that the nation’s gross domestic product (GDP) would grow by 2.2 percent next year if all Bush-era tax rates were extended and would expand by almost 3 percent if Obama’s 2-percentage-point payroll tax cut and present jobless benefits for the long-term unemployed were extended too.
Greenstein finished his interview with NPR by stating, “This is a very controversial change. You can view it as this is not a benefit cut; this is not a tax increase. We say we want to adjust for inflation. Let’s use the most accurate measure of inflation”
“Or you can say, well, relative to current law, this would be lower benefits in Social Security and higher taxes. So it either looks non-controversial or it touches all the third rails at the same time.”
Democrats are presumably to press for a pledge that tax reform doesn’t wind up hurting middle-income taxpayers at the outlay of upper-bracket earners. Republicans want to press for corporate tax reform and a assurance that the top rate paid by individuals and small businesses goes down as well.
- Commercial Real Estate and the “Fiscal Cliff”: Several Reports Indicate the Industry is Bracing for January 2013 (prweb.com)
- Arcane Inflation Measure May Be Key To Fiscal Cliff Deal (huffingtonpost.com)
- Obama-Boehner 2011 Near-Deal Give Blueprint for Debt Deal – Bloomberg (bloomberg.com)
- Obama holds onto caveat in averting “fiscal cliff” (cbsnews.com)
- Changes to SS COLA Could Hurt Retirees (aarp.org)
- Obama invites lawmakers to WH to talk fiscal cliff (kansascity.com)
- Obama talks fiscal cliff (weau.com)
- Cliff Notes (democracyforum.blogspot.com)