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Is the US about to go over the (fiscal) cliff?


gijoe

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Joined
Jul 26, 2010
Messages
15,419
If no deal can be struck between Republicans and Democrats prior to the new year in a lame duck Congress the US will be implementing approx $1/2 trillion in spending cuts and tax increases for 2013 - split roughly 50:50. It is estimated that even with good private sector growth this will put the US back into recession and of course the rest of the developed world will follow suit. The markets are dreading this possibility but I wonder if letting the fiscal cliff take place would not work out as being good for the overall economy?

Sure their will be some short-term fallout but if the US finally addresses it debt situation it can repair its long-term economic outlook. And other added benefits is that it should see a big decline in commodity costs, especially oil, and will keep interest rates low for longer. Outside of the obvious implications this has for our own fiscal maths the overall impact for people may not be so bad if commodity prices in particular take a sharp fall leading to a period of deflation.

Maybe going over the cliff may not be such a bad idea after all?
 

True Republican

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Apr 3, 2008
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4,067
there will be another fudge or the republicans congress will actually compromise with obama. Obama should get bill clinton to talk to the republican congressional leadership for 2 weeks, there is no better man for striking a grand bargain, boehner probably acknowledges there will be some tax increases but whether he can sell it to the gop is another matter.
 

Man or Mouse

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Nov 17, 2010
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7,110
Americans must be the most selfish people on earth, not to mention dumbest. A relatively minor tax increase at the upper levels would work wonders for their economy.
 

ManOfReason

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4,328
Americans must be the most selfish people on earth, not to mention dumbest. A relatively minor tax increase at the upper levels would work wonders for their economy.
That must explain why Europe is thriving....all those minor tax increases.
 

Man or Mouse

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That must explain why Europe is thriving....all those minor tax increases.
With the exception of Ireland and Britain, you do really get a bang for your buck in Europe. I'd hate to live in a society that loathes its weakest and poorest.
 

Troy_337

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Joined
Oct 17, 2012
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614
With the exception of Ireland and Britain, you do really get a bang for your buck in Europe. I'd hate to live in a society that loathes its weakest and poorest.
Yes, with the exception of Ireland and Britain...During the administration of Republican President Dwight D. Eisenhower, a 92 percent marginal income tax rate for top earners in the United States remained from the previous administration of Harry S. Truman. At the time, the highest tax bracket was for income over $400,000.This was nearly the highest tax rate for top earners in the century, just under the 94 percent rate for income over $200,000 instated during World War II under Franklin D. Roosevelt's presidency.
In 1954, the 92 percent marginal rate decreased to 91 percent under Eisenhower. The maximum tax on long-term capital gains was 25 percent -- a rate that remained in place for a decade.

The good old days.
 

firefly123

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Joined
Dec 8, 2009
Messages
28,155
Yes, with the exception of Ireland and Britain...During the administration of Republican President Dwight D. Eisenhower, a 92 percent marginal income tax rate for top earners in the United States remained from the previous administration of Harry S. Truman. At the time, the highest tax bracket was for income over $400,000.This was nearly the highest tax rate for top earners in the century, just under the 94 percent rate for income over $200,000 instated during World War II under Franklin D. Roosevelt's presidency.
In 1954, the 92 percent marginal rate decreased to 91 percent under Eisenhower. The maximum tax on long-term capital gains was 25 percent -- a rate that remained in place for a decade.

The good old days.
But as you well know America in the fifties was a backwards hellhole where no scientific development happened as people fled high taxes to be entrepreneurs elsewhere. Or something.
 
D

Dylan2010

Dont let facts get in the way of a bit of ol' daydreaming


So, let's get more complicated. When there was a 94% top rate in 1944-45, there were so many deductions and exclusions that the taxable income was not comparable to someone's entire income. First, the top rate started at $200,000, which today is equal to $2,413,059.90 — so the maximum EMTR would apply only to incomes of $2.5 million. But, that's still taxable income, not earned income.

In 1944, you could deduct business meals, all business travel, all forms of interest payments, and much more. You could even deduct spousal travel expenses on a business trip! (Why travel alone?) Companies could also "loan" or "provide" almost anything to an employee, from an apartment to standard benefits. It was possible to shelter tens of thousands of dollars from taxable income. Three-martini lunches and expense accounts were important realities, skewing tax calculations.

As a result of deductions and exclusions, even the theoretical maximum Real Rate of taxation at 60% in 1944 overstates taxation dramatically. The reality? On earned income, the richest U.S. taxpayers paid close to 40 percent of their earned incomes in taxes in 1944. We simply didn't count much of the compensation as taxable income.
 

Analyzer

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Feb 14, 2011
Messages
46,201
Americans must be the most selfish people on earth, not to mention dumbest. A relatively minor tax increase at the upper levels would work wonders for their economy.
Ever meet Irish popstars going Dutch ?
 

Howya

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Joined
Feb 29, 2012
Messages
1,690
The Americans seem to love all the high drama associated with the fiscal cliff. Not the first time that there has been a budgetary standoff between the White House and Congress. It will probably go down to the wire and get sorted, allowing both sides to claim victory....yawn.
 

momentimori

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Joined
Jan 29, 2011
Messages
614
With the exception of Ireland and Britain, you do really get a bang for your buck in Europe. I'd hate to live in a society that loathes its weakest and poorest.
Let me tell you how it will be
There's one for you, nineteen for me
'Cause I'm the taxman, yeah, I'm the taxman

The Beatles sang about Britain's top tax rate of 95% but the country flourished. An average 3% unemployment in the 1960s sounds truly like hell.
 

Analyzer

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Feb 14, 2011
Messages
46,201
America does have a borrowing problem.
 

kryton101

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Joined
Sep 21, 2012
Messages
108
America does have a borrowing problem.
Every country in the world using money has a borrowing problem. The fractional reserve system where you lend out ten times the amount you have as a deposit is hitting (has hit!) the top of its curve. A state of contraction is an inevitable side effect after such a growth stage.

The hard thing to appreciate is that to tackle the debt problem in terms of paying it off would require all the money in existence as all money is effectively debt (even what people like to call growth.)

It doesn't just get magiked out of thin air and given away for free! It is sold as a loan or debt somewhere by a lending institution who use the fractional reserve system to bend the laws of economics to their advantage.

I would recommend Modern Money Mechanics as reading material which better expalins this in detail.
 

owedtojoy

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Joined
Feb 27, 2010
Messages
45,512
If no deal can be struck between Republicans and Democrats prior to the new year in a lame duck Congress the US will be implementing approx $1/2 trillion in spending cuts and tax increases for 2013 - split roughly 50:50. It is estimated that even with good private sector growth this will put the US back into recession and of course the rest of the developed world will follow suit. The markets are dreading this possibility but I wonder if letting the fiscal cliff take place would not work out as being good for the overall economy?

Sure their will be some short-term fallout but if the US finally addresses it debt situation it can repair its long-term economic outlook. And other added benefits is that it should see a big decline in commodity costs, especially oil, and will keep interest rates low for longer. Outside of the obvious implications this has for our own fiscal maths the overall impact for people may not be so bad if commodity prices in particular take a sharp fall leading to a period of deflation.

Maybe going over the cliff may not be such a bad idea after all?
I think the US may go over teh fiscal cliff and cause a double-dip recession.

I also think President Obama is quite prepared to let that happen. Look at it from a brutally political perspective - Congress comes up for re-election in 2014 and with the stigma of recession, there would likely be a furious "throw the bums out" election like 2010. The President might just take his chances with re-gaining the majority in the House, especially if he starts campaigning in 2013.

The last Congress was already the most unpopular in American history, but the next one will probably be more so.

However, the signs are that the Republicans are ready to climb down. Boehner has already signalled to his caucus that he expects them to get into line.

Their party lost, badly, Mr. Boehner said, and while Republicans would still control the House and would continue to staunchly oppose tax rate increases as Congress grapples with the impending fiscal battle, they had to avoid the nasty showdowns that marked so much of the last two years.

Members on the call, subdued and dark, murmured words of support — even a few who had been a thorn in the speaker’s side for much of this Congress
Boehner Tells House G.O.P. to Fall in Line - NYTimes.com

What the compromise will be I do not know. The Bush tax cuts will go, at least partly. There will be cuts to military spending. There will be trimming of Medicare, Medicaid, and Obamacare. There may be a carbon tax. There will be a tax break for the middle class. The payroll tax cut will continue. There may be a Jobs bill.
 

owedtojoy

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Joined
Feb 27, 2010
Messages
45,512
But, but, Super Obama is in charge, all world ailments are solved now... or something like that....



Foodstamps Surge By Most In One Year To New All Time Record, In Delayed Release | ZeroHedge

Everything is under control....
I have been asleep in a cave in the Twelve Pins for the last month and need to catch up with the news.

CS, could you tell me who won the recent Presidential election, and how many votes did the Libertarian candidate (Gary Johnson) get?

While you are at it, obtain a copy to the Idiot Guide to American Government, where you will find that the President of the United States is not a Dictator, but in fiscal matters (and most other) shares power with an elected Congress, who are also responsible for teh country's financial and social situation.
 

Pat Gill

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Joined
Jun 16, 2011
Messages
5,301
Website
www.energyco-ops.ie
Twitter
Pat_Gill
Every country in the world using money has a borrowing problem. The fractional reserve system where you lend out ten times the amount you have as a deposit is hitting (has hit!) the top of its curve. A state of contraction is an inevitable side effect after such a growth stage.

The hard thing to appreciate is that to tackle the debt problem in terms of paying it off would require all the money in existence as all money is effectively debt (even what people like to call growth.)

It doesn't just get magiked out of thin air and given away for free! It is sold as a loan or debt somewhere by a lending institution who use the fractional reserve system to bend the laws of economics to their advantage.

I would recommend Modern Money Mechanics as reading material which better expalins this in detail.
kryton101,

Sadly most people just don't seem to have any interest in finding out what is really driving the ups and downs of their daily lives and how contrived the system really is
 

Oblivion.

Well-known member
Joined
May 10, 2010
Messages
375
Maybe going over the cliff may not be such a bad idea after all?
Your optimism would have some justification - had you typed that post 10 years ago. Even as recently as 2007, a case could have been made, at a stretch, for the US putting it's fiscal house in order. It would have required immediate and monumental reform - and pain for millons - but it was still possible to postpone calamity until the 2020's. That was then. This is now. The light is fading fast.
 

bob3367

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Joined
Jan 11, 2007
Messages
8,083
A deal will be struck, it always is.
 

gijoe

Well-known member
Joined
Jul 26, 2010
Messages
15,419
That must explain why Europe is thriving....all those minor tax increases.
The tax increases come to something like $170billion for those earning under $250k and $75billion for those over $250k. Not exactly minor.
 
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