Fiscal cliff deal?
Note the question mark; I don’t trust any reports of a deal until it’s set in stone.
Maybe not even then.
So, for what it’s worth, here are the supposed details of the supposed agreement. You can wade through them if you wish; or look at Ace’s summary of the main points.
It seems that liberals are not all that happy with it, which surprises me. Neither are Republicans, which does not surprise me. I’ve always felt that Obama held most of the cards in this matter, and that it would take the sort of courage and creativity that the current crop of Republicans appears to entirely lack to turn this around in any meaningful way. And Obama and the MSM would make sure Republicans got blamed no matter what the outcome (short of complete and total capitulation by the GOP, and even then the Republicans would have gotten blamed for taking too long to go belly-up).
As always, Lucy snatches the football. Throughout the campaign Obama said we need a balanced approach to the deficits — revenue and cuts. The Repubs agree to the revenue and the cuts never happen. Who could have seen that coming?
“Throughout the campaign Obama said we need a balanced approach to the deficits – revenue and cuts. The Repubs agree to the revenue and the cuts never happen. Who could have seen that coming?”
Anyone who has been paying attention these last four years. 🙁
Baraq’s presser comments sound like he’s a reporter, not a player.
I think sequestrations would, eventually, do the country a lot of good. Especially since we have Repubs like McCain who are more concerned about PR results than about the fisc.
WHOA!!
I just spotted a can flying down the road . . .
Must be a deal’s been a-strucked.
Lest we forget: the Treasury can get on by the debt limit in exactly the same fashion as before: crossing monies across the ledgers.
The real crunch is months away… when the Treasury can’t shift monies out of fully drained accounts.
Further, the composition of the House and the Senate is going to shift this week.
So any legislation that will actually pass is going to be initiated with the new Congress.
This duck is not even a floater.
Most Dems are gleeful, like Harkin. It’s faux outrage just to bring the House along. The Dems who should be freaking out are red state Dem Senators who are up for re-election in 2014. Obama will screw them to the wall and not bat an eye.
Just about anyone could have written how this all went down, line by line. The republicans knew it too. I am sick and tired of them getting out maneuvered.
On the first morning of the new year, I’ve just finished reading a summary of the ‘deal’ in the NYT and the details are much better than the headlines sound.
The Republicans and Democrats have cleared away a lot of pesky but important details.
Most people get to keep their tax rates while the ‘rich’ got their’s raised including additional measures on investment income.
The Dairy subsidies got put back on hold. Unemployment got extended. The inheritance tax exemption was continued along with a permanent fix for the AMT which if the House passes this will now be indexed to inflation.
And the icing on the cake is that the spending cuts that were locked in have been delayed only for two months?!?!? Obama was demanding two years.
This deal – if it passes the House – is just a modest skirmish in a larger longer war. Our side lost a very big and important battle last Nov 6th and has been in a chaotic retreat since. This little skirmish is a win for our side – pending.
The Dems want to raise taxes / the Repub want to cut spending. The mob was demanding some rich blood on taxes and for the Repbub to stand in the way was pretty much a lose lost situation.
The economy is already heading downward again – that’s a given. If the Rep had refused to compromise now they likely would have gotten the blame for the downturn already in the works. Any refusal now would have made things worse because of those pesky annoying details which will hit a lot of people in high profile ways – higher milk prices, no unemployment insurance, those inheritance taxes, and not least those higher taxes on everyone including AMT.
So what this deal does is remove taxes on the rich and all those potentially harmful other programs that needed to be extended are now out of the way / off the table. The mob got their higher taxes on the rich.
And now the focus is ONLY on spending, and it will be in everyone’s face NEXT month and possibly until either interest rates begin rising (radically shifting the debate) or the 2014 elections – I don’t expect major real spending reform as an option.
This is a huge success IMO and any talk about how the ratio of spending cuts to tax increases misses the point or can’t see the forest for all the trees.
Now the focus – whether Obama and the Dems like it or not – will increasingly be on the fact we are spending far in excess of tax revenues accumulating debt at unsustainable rates to pay for it, and because that increasingly rare species is near extinction – I’m referring to people with money stupid enough to buy the fixed rate long bonds to finance the fantasy economics – we have the Fed printing money to buy the long bonds which by some accounts is in excess of the 90% now.
Unless Bernanke, who is essential to Obama and his spending spree, wakes up today or soon and ceases his top down interference and monetization this will end badly in very high interest rates high inflation and a downturn that makes us forget what’s come our way since 2008. When that happens then this little skirmish will be largely forgotten except that it did set up Obama and the Democrats to take the blame – along with Bernanke – for the turmoil heading our way.
Otiose, thanks for your summary.
Otiose, thanks for a positive perspective on this. As an optimist on the USA, it made my morning to read your comment. Now, if only they can break their addiction to spending. It will not be pretty. Much like watching an alcoholic dry out, IMO.
We are in a long struggle and unfortunately are now committed to go through some very difficult times.
There was a chance if Romney Ryan had been elected to escape some of the worst, but that chance is gone. With Obama’s election – elected by a majority of voters! – we’ve lost any hope of real reform regarding the triple threats – 1) runaway spending (with the explosion in debt), 2) an out of control Fed – 99% of the PhD economists there act like devotees of fantasy economic theories not so different from Krugman, and 3) anti-capitalist/business regulatory rule/law making.
I think it very unlikely that Obama and the Democrats will voluntarily change course. It’s only after their policies are clearly seen to be at fault for what’s to come will we see enough voters shift power back to people who will then have the mandate to undertake reform and attempt to clean up the mess.
Yes, I guess you can count me among the optimistic.
I don’t mean to imply that the Republicans in two months or over the next two years will be able to negotiate real spending reform with the Democrats. The opportunity is for the Republicans to attempt to negotiate publicly for spending reforms in a way that will put the blame where it belongs for any failures down the road.
This BTW is not easy. You might have thought that after the Republicans didn’t vote for the stimulus package and then it – predictably – failed to encourage growth that the people pushing those fantasy theories would be in full retreat, but that is not the case. They are patiently explaining why we should not believe what we see and instead rely on some new imaginative variation as to why we need more spending, more debt, and more government.
The reason they’ve gotten away with this is that their policies haven’t yet brought about enough fully manifested pain. Things are still closer to normal than not and there are many in power who believe that with a few tweaks here and there we can reignite another credit expansion, and normality will be restored.
People who thought we needed to make more than a few modest adjustments lost the election.
One key foundation of modern civilized life is the invention of a mechanism to move value through time – that would be what we call money – and that is what those in power are now directly threatening. When this aspect of money is disrupted suddenly civilized life becomes unsustainable. When done slowly and deliberately it’s a clever way for certain people (often government) in the know and power to transfer value surreptitiously. Amazingly, many people are convinced that slowly stealing their value is a good thing and at worst a necessary cost in order to keep the economy going.
Anyway, the runaway spending and currency creation (as opposed to money or real money) is eventually going to undermine that all important underpinning of civilization – the ability to move value through time – and it’s when that is threatened, we’ll see change politically.
The trick is to make sure that those who are the real cause get the full measure of their responsibility.
Thank you for the links and analysis, Neo-neocon. I think we’re pretty much in synch
If I have it right, this deal barely makes a dent in the deficit. $600 billion over 10 years = $60 billion per year. This barely shaves 6% a year off our trillion dollar plus deficits. Even if Obama had gotten all the taxes he wanted, by his own estimate that’s only $1.6 trillion over 10 years, or $160 billion per year, still a drop in the bucket when you’re running trillion dollar plus deficits.
The only good news is that defense sequestration will not take place… yet, anyway. But in the face of everything else that’s not that big, and all they did was kick that can down the road a bit farther too.
Sure, liberals aren’t happy because it doesn’t meet all of their class-warfare goals of punishing the wealthy. What I saw in the last election, and a lot of the analysis that I have read since, has convinced me that to them raising taxes has a lot less to do with raising revenue and a lot more to do with “social justice.”
Otiose Says:
There won’t be any spending cuts (as I think you say but can’t really tell) except in defense (the one place we need to spend more) because Obama and the liberals won’t allow it, so how in hell is this a “huge success?”
And yeah I know we lost the election but I damn sure am not going to put on your rose-colored glasses and whistle gaily while they strike deals that achieve nothing.
Otiose Says:
And by the time that happens the situation will most likely be irreversible. Mark Steyn has it right in “After America,” I’m afraid. And it’s not just the spending, it’s the “Life of Julia” that so many Americans have come to accept.
So from what I can tell this deal accomplishes nothing of long-term significance. The bottom line is that unless we change the way the entitlements are structured, and do so NOW we are sunk as a nation. No amount of increased taxation will close the budget deficit gap.
Yeah, happy new year, everyone.
Tom, the thing about entitlements – especially the future kind – is that they’re very much like promises – they can be broken. That means the more material threat is made up of actual paid out amounts supported by debt. That limits it to no more than the next few years at most another 5 at the rate we’re accumulating debt.
The re-election of Obama has likely ensured that we will have to go through a national ‘bankruptcy’ in which a lot of promises are going to be broken and many if not most of those promised entitlements will never get paid.
Hopefully like the 70’s we will pull back before too much damage is done.
I’m afraid though that the way this is playing out and the sheer global scale of it all guarantees it can’t play out like the 70’s. Too many people are focused on the national boundaries as if these were real barriers to the very developed financial and economic interconnections and not just paper thin markers – more in our minds than reality.
The Fed has already stepped in on more than one occasion to rescue European banks (e.g. they paid off AIG derivatives to banks at full nominal amounts). When the Fed pumps money into the system much of it is going abroad where it is generating inflation. Inflation for very low income people is not an inconvenience it’s life threatening as for example modest increases in energy and food represent a bigger % to someone living on a few dollars a day. It’s not a coincidence – the timing of the Arab Spring and the Fed’s recent attempts to stimulate the US economy. The costs are not immediately apparent nor are they so obvious.
Eventually their manipulations will cause a surge in interest rates on US dollar denominated securities instead of pumping up the equity markets. And just as leverage in a company can magnify profits and losses, the dollar’s deeply embedded use within the global system as a means to transfer value through time will be very aggressively negative once circumstances move against it.
Much damage will be done before the necessary changes are made, but I don’t believe the situation is hopeless.