Bloomberg has the story of an emerging deal to extend virtually all fiscal issues that kick in at the end of the year into March 2013, and throwing in the fiscal 2013 budget along with it.
Republican and Democratic congressional leaders are weighing whether to delay automatic federal spending cuts until March 2013, according to a House aide and industry officials who were briefed on the discussions.
The $1.2 trillion in automatic spending cuts over a decade, half of which would affect the Defense Department, are scheduled to begin in January 2013. At the same time, lawmakers must decide what to do about income tax cuts and other tax breaks scheduled to expire at the end of the year.
Leaders in both chambers are discussing whether to propose a catch-all bill that would delay the automatic cuts, fund the government through March or later and temporarily extend the George W. Bush-era tax cuts and other tax laws, said the House aide and industry officials, who asked to speak on condition of anonymity.
There are reasons to believe this is a good policy idea and also reasons to believe this is bad politics. On the good side of the ledger, obviously the effects of the fiscal slope are such that you would want to avoid them from all hitting during a sensitive time for the economy. That’s especially true for the trigger cuts, which kick off in 2013 in a big way. So avoiding them for a couple months buys some time. Also, this takes the decision-making out of an unaccountable lame duck session, and allows the election to be something of a referendum on the fiscal picture of the country.
I think that’s very preferable to hoping that a bunch of short-time lawmakers can be cajoled into doing the right thing. As this kind of scheme would have to pass before the new fiscal year begins on October 1, neither side would know if they bargained themselves into a better position, if it will happen under a new President or with a new party in control of either chamber of Congress.
And yet there are pitfalls to this approach, the most important being how this intersects with the debt limit. Under the current operating procedure, the fiscal slope would hit earlier than the debt limit. Treasury can probably engage in extraordinary measures to keep borrowing going until… well, until around March. And extending all the fiscal slope measures would guarantee that the government would have to borrow more, not less. So the debt limit would hit even faster. Aligning the debt limit and the fiscal slope gives conservatives much more leverage in the negotiations. They can use the imminent debt limit in a hostage-taking event, as they did in summer 2011, to get a favorable deal on taxes and spending. Right now, the leverage is arguably on the side of Democrats, since by doing nothing, two things the Republicans really don’t want – the expiration of the Bush tax cuts and the trigger on defense spending – would take place.
In this matter, the idea that the election would “decide” the outcome of the fiscal slope would actually be untrue. It would only take 41 Republican votes in the Senate to hold Congress to their demands. Mitch McConnell has vowed to use the debt limit as a forcing event. So this would give leverage back to the Republicans (unless Democrats hold the Senate and abolish the filibuster, of course).
So it’s unclear how to view this “fiscal punt.” You trade the back rooms of a lame duck grand bargain with the political dynamic of the Democrats at the relative mercy of the opposition.
…I don’t see this in the text, but according to Travis Waldron, an extension would include the payroll tax cut, long thought to be completed when it expires at the end of December.




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Here’s an idea: Raise taxes on the rich, close corporate loopholes and lift the SSI cap. Problem solved. Next?
EDIT: Actually that solves two problems.
“The $1.2 trillion in automatic spending cuts over a decade, half of which would affect the Defense Department, are scheduled to begin in January 2013. At the same time, lawmakers must decide what to do about income tax cuts and other tax breaks scheduled to expire at the end of the year.”
So the defense budget won’t be cut and the Bush/Obama tax cuts will be extended? I am shocked — shocked, I say! — to hear it. Nobody could have predicted that the Democrats would agree to this….
Oh, right, everybody predicted it.
No doubt. Raise taxes on the top 50% of American families, those making over $50k a year and allow the other 50% to continue to get a free ride. We need to continue to aim and provide incentives for simply being mediocre……
Please. Rich people are paying the lowest tax rate for them in 70 years. Excuse me if I don’t weep for the poor, put upon rich. And I wasn’t talking about middle class earners, (who would be represented by your 50k per year figure), I’m talking about the 1 percent who have got better than three quarters of all wealth in this country and who got 93 percent of “stimulus” dollars, that instead of investing, they sat on.
And half the population is paying 0 in federal income tax….I’m not sure what it is like where you work but at my firm we expect every employee from the CEO down to the interns to put the work in.
Before you cry about the tax rate on investment income lets compromise and agree on a flat tax system. That way everyone is paying “their fair share”
You want to punish the “rich” for making responsible financial decisions and taking calculated risks? You want to punish the small business owner? How exactly is this going to create jobs?
This won’t solve the problems, but how about we cut Congress’ salaries, end their pensions (put then in a 401K) make then pay a larger portion of their healthcare, eliminate their expense accounts and make them pay for their own travel. Cause as John Boehner has said – We are broke.
(Except when it comes to war, corporate welfare, tax cuts for the rich and other 1% boondoggles
Listen and try to understand, there are people, skilled craftspeople who can do things like fix your car, repair your home, fix a broken pipe or a shorted outlet box that have never broken 50 grand a year and you, my friend, don’t get to define what “work” is or how much “they” should put in. As far as “job creation” goes, tax rates don’t affect it. That’s a specious argument, long debunked. I have done jobs for close to minimum wage, sometimes for 12, 14, even 18 hours a day that I guarantee would make you fall out in an hour, tops. Keep your sanctimony, people here aren’t impressed and my part of this “conversation” is at an end.
That’s fine.
But those people should also pay federal income taxes or forgo the services rendered using those tax dollars.
What makes you think we don’t? I got laid off in 2009 from a 40k job and last year I only made 26k, yet I paid over $1,300 in taxes. Plus there are sales taxes which are a terrible burden on the poor but the rich don’t even consider when making a purchase. I’d like to see some non right wing mouthpiece citation for that 50% figure as well.
$1300 in taxes or federal income tax? And what check did you get back from old Uncle Sam $3200? That comes out of the pocket of someone else and you should be receptive of their concerns considering the way the are subsidizing the living of so many others.
Sales tax? That is a state issue. You don’t like them move to New Hampshire or Montana.
WHAT?!? Have you had servants to do this stuff all your life or do you just think I’m stupid? The REFUND I got, ($900), came from the taxes I OVERPAID in the with holdings from my paycheck. It didn’t come out of your pocket or my boss’ pocket, it came out of MY pocket. Since you are apparently unable or unwilling to carry on a RATIONAL conversation, I’ll leave you to your Galtian fantasies.
Good day
I don’t know what your unique situation is beyond what you have shared here. The fact is that 50% aren’t paying U.S. federal income tax and receiving subsidized benefits from those that are.
Thus when you suggest, as you did in post 1, that the rich aren’t paying their fair share it doesn’t make any sense.
BTW, the only help I’ve ever gotten from Uncle Sam was unemployment compensation, (which I also paid into), and I call that fair, considering I gave him 5 years of my life in the service.
The rich are paying a lower tax rate than they have in 70 years. Refute that.
That “half your population” you speak of includes *infants* and *kids in middle school* and *people in nursing homes* .
What, we should tell these to go out and “get a job”?
Anyone who has worked at a minimum wage job–and I have–will tell you that you DO pay Federal income taxes, even if you don’t average 40 hours a week. Moreover, you also pay payroll taxes, and all sorts of other Federal taxes. *Plus* you pay disproportionately more–up to 3 times more, in fact–of your income state and local taxes as do people at the top 1 %.
So no, the bottom half of the country isn’t undertaxed. Those at the top, OTH, pay a lower tax than I do.
-stewartm
“CADreaming” is repeating an old right-wing talking point, a propaganda line by the top 1 % to make them look “oppressed”.
It’s baloney, for a whole host of reasons.
-stewartm
“Responsible decisions”? You mean like the decisions they made which have led up to economic crash after economic crash, not only in 1929, but also 2008 (and maybe 2012-2013, if things keep going this way)?
“Calculated risks?” You mean how they take risks, and when these go belly-up, big-time, then get their bought-for congresscritters to rob the little people’s funds in order to make sure they don’t lose a dime? You talking about CEOs who wreck their companies and parachute out with hefty bonuses? Hedge fund managers who demand their bonuses even when they screw up, big time?
THAT kind of “responsible decisions”? THOSE kind of “calculated risks”?
Just wanting to see if we’re talking about the same people here.
-stewartm
I’m hep. That’s why I asked for, (but have yet to receive), some citations for that figure. You’re absolutely correct though; 50% of the population is a FAR cry from 50% of workers.
Yeah, you wonder what the same stats were from the prosperous 1950s, when the single-breadwinner family was the norm. What about all those “nonworking” housewives who work nowadays?
I’d suspect the 1950s figure for the % of the population that works would be significantly lower than today’s. Now you see even retired people working in order to make ends meet.
-stewartm
Oh come on! You wouldn’t want the people CADreaming is defending to have to put off that yacht upgrade or the Lear jet, would you?
I notice through history that the prosperous 50s had very high tax rates on the rich, very high indeed. Yet those times were indeed prosperous. Sorta blows CADreaming’s whole argument out of the water , eh?
Well, whatdya know. Here is it, and from the Heritage Foundation to boot!
http://blog.heritage.org/2012/02/19/chart-of-the-week-nearly-half-of-all-americans-dont-pay-income-taxes/
Another eye-popping number was the percentage of Americans who don’t pay income taxes, which now accounts for nearly half of the U.S. population. Meanwhile, most of that population receives generous federal benefits.
There it is. Percentage of Americans, not percentage of workers or families or filers.
Further proof:
For the year 2000, take this graph showing the age distribution of the US. By eyeball, I estimate approximately 125 million out of 281 million (in 2000) of the population was either less than 20 years old, or greater than 65 years old, and not working age. That’s 44 % of the population by itself.
Throw in our current unemployment rate, and you easily approach 50 %.
-stewartm
Trying arithmetic, eh? Well maybe it will succeed where simple fairness didn’t but I won’t hold my breath. Thanks for the link. :)
It’s also life experience. Anyone who has worked for minimum wage, or near minimum wage, knows that income taxes get withheld from one’s paycheck.
In April, you’ll get most of it back, but not all, when you file. You pay in. Even if you averaged only 30-something hours a week, you’ll have a net pay-in.
The only workers who don’t pay are workers making so damned little is that their incomes don’t qualify for even the government’s miserly standard deduction and personal exemption. Usually those didn’t work anywhere close to full-time.
The only workers who benefit from a negative income tax (i.e., get credits back) are those who qualify for the earned income tax credit, which means that they have to have dependants.
Anyone who’s worked at low-wage job knows this. People who make “CADreaming”‘s argument show that they have never experienced life as one of the working poor, or are a propagandist who doesn’t care.
-stewartm
Shove you ignorant comment right up your ass.
.
The stupidity in your argument the rich aren’t rich enough is a waste of time.
For workers, only if we had a commitment to full employment, including a permanent WPA. I have no problem them paying taxes. I’ll bet you that if they make more money, neither will they.
But no-go making all those babies work.
-stewart
Congress always does it’s best work when it does nothing. Letting it all slide would let tax rates go back up and automatically trim the DoD budget.
Then we could have the real fight over entitlements and the safety net. You wanna’ be the Republican that tells Granma’ she’s got to take a pay cut?