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Obama’s (dumb) Line in the Sand
So both Boehner and Obama have done their post election photo ops. They have spelled out their positions on the looming fiscal cliff. No surprises at all. The Republicans are saying “No” to any increases in tax rates while Obama has said he will outright veto any bill that is presented to him that does not raise taxes on rich folks.
I was surprised by the reaction in the press to the positions set forth by these two. The headlines make it seem like B&O are ready to work together, and achieve the necessary compromises to avoid falling off a cliff. I think the press has it wrong. We’re headed into a bitter fight; in part, because the President has drawn a very dangerous line in the sand.
The President has said that the recent election has shown that the majority of American’s want the rich to pay more in taxes. What is the President insisting on? Is he pushing for something that would make a difference? I don’t think so. More importantly, the Congressional Budget Office does not agree with the President’s position.
The CBO put out a report on this topic last week. It spelled out the consequences of an increase in the tax rate for those making over $250,000 (versus reversing all of the Bush tax cuts). It does not add up to much.
The tax that Obama wants to increase will result in a lousy $42Bn in 2013 and $38Bn in 2014 according to the CBO. That’s peanuts to a government that spends $3.6T a year. The tax increase that Obama is insisting on comes to three days of spending.
No tax increase comes without a cost. The CBO evaluated the implications of raising the taxes on those making $250k and up. The consequences to both GDP and jobs:
Raising high end taxes will reduce GDP growth by .1% and will result in 200,000 less workers finding jobs. It will do these bad things by the 4th Q of 2013. Some context for these numbers:
The .1% drop in GDP translates to $16Bn less growth in 2013. On average, the government takes in about 20% of GDP, so the drop in GDP relating to the tax increase will translate into a shortfall in revenue of $3.2Bn.
The tax increase mandated by the President will translate into 200,000 less jobs for 2013. If the people who did not find work as a result were forced to stay on unemployment it would cost the government $4.6Bn.
So Obama’s “must have” tax increase will generate $42Bn in revenue, but it will cost ~$8Bn. The Obama's plan is to decrease the deficit by about $34Bn in 2012, and by less than that in future years. These numbers are beyond chump change. It comes to 0.9% of total spending and just 3.0% of the deficit. It does not move the needle at all.
My conclusion is that we are in for a fight. Talk of compromise and “coming together for the good of the country” is just noise. The President is insisting on a tax increase that will not achieve anything of substance. Obama has drawn a very visible line in the sand over this issue. I can’t imagine how the House Republicans will go along with it. The President’s opening position on how to work through the fiscal cliff is about politics, not economic substance.
Get ready for a failure in these negotiations. We are going to fall off of that cliff in 53 days!
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Alot, cause they are all on their best behavior.
Here's an easy prediction. At the end of 2013 we won't see any cut in the deficit. In fact it will be higher by close to at least another $Trillion. Obama's policys will continue to cost Americans more jobs. Were already seeing companies announcing layoffs now that the election is over. Darden Restaurants will cut their part time workers from 30 hours to 28. This keeps them from having to pay for healthcare that would have been mandated under Obamacare. Many companies will lay off more just to keep from pushing past that magic 50 number which would then require them to pay for their employees healthcare. Environmental regulations that would have been eased had Romney won, will now cost thousands more jobs. Here in my neck of the woods, Exide Corporation is closing its plant cutting 150 workers. They can't afford to meet the EPA requirements to stay in business. 200 coal fired power plants are soon shutting down. How many workers along with coal miners will be out of work. Many of these folks will be added to the Millions who are already collecting food stamps. Thats how Obama got elected. He bought the electiion one food stamp recepient at a time. At least 10 million more added to the food stamp rolls since Obama took office. Does anyone believe those getting a free handout would vote against the risk of losing their freebies?
A quadrillion thumbs up muldar....
It's a shame that so many think they are "freebies".
Technically, you are correct - they are not freebies since the rest of us ahve to pay for them.
28 hours, 30 hours, what's the difference? You still need two jobs to even have a chance of earning a living wage and you still don't get benefits. So big deal.
But I agree Obamacare sucks, its crony capitalism. What we needed was Universal Health Care, which would be a big benefit to small businesses.
As far as your Exide Corp goes, maybe they'll move to Mexico where the govenment doesn't protect citizens and the environment from lead poisoning. As far as coal plants go, they aren't competitive with cheap natural gas, so what do you expect?
And if you think that being on food stamps is the good life, you should try living on $11,000 a year. I can't imagine why they didn't choose to vote for the flip-flopping plutocrat.
Dude...go post somewhere else...like Huffpo or Daily KOS....please.
And let the propaganda flow without rebuttal? Besides, I find knee jerk liberals even more unbearable than knee jerk libertarians.
what a freakin loser...
brilliant rebuttal, as usual. Time to re-up on those propaganda soundbites.
Exide plant is in the Reading, PA era (where I am from originally and still have family). Exide is closing it primarily not due to EPA regulations but the antiquated nature of the facility (dates back to the 30s and has very old capital equipment) and the ability to handle the demand at 3 of their other US facilities. This was covered in the local paper last week.
Sure the EPA regulations added additional cost compared to if the facility was located in Mexico but as usual there several reasons why they decided to close the plant in Reading with the main ones being demand & higher costs required to operate aging physical plant equipment.
But---the cost of upgrading the old plant and equipment to meet the (new) EPA standards makes it prohibitive. And, open a brand new, modern, efficient plant in Mexico where you are confident you won't have to deal with the current (or FUTURE) EPA restrictions. And you get a cheaper work force too.
Right. Fuck those mothers who don't want their babies drinking the contaminated groundwater. We're talking about profits here.
Well, you're throwing out facts, from 1st hand knowledge. You should be in Government. Nah, they would eat you alive and spit out the core.
"Thats how Obama got elected. He bought the electiion one food stamp recepient at a time."
And don't forget your Obamaphome!
When the people who have nothing have the right to vote themselves more stuff from the people who do, guess what is going to happen? That 47% just turned to 51% and the cycle heads downhill fast.
How can you tell? This is the valuable information saved until after the election: http://www.zerohedge.com/news/2012-11-10/foodstamps-surge-most-one-year-...
It just boggles the mind sometimes.
It's chump change compared to what was given to the TBTF banks and the rest of Wall St.
More than few here still in shock and nursing election night wounds from the bursting of their weltenschauungs carefully nurtured by Faux News, and left wondering what happened (It was a squeaker, right? Right? Unfortunately, no it wasn't.) Doctor prescribes drug store supplies a healthy dose of conspiracy theory nonsense to ease the pain, although I have to agree Benghazi was obviously some kind of CIA operation where there is more going on than meets the eye. Perhaps it is as simple as the fact that Petraeus's gal pal is a spy.
As for Bruce's observation, Obama's position is no sillier than Boehner's, and both are posturing and that is all it is.
If angry Repubs want to derive any comfort, take some from the fact that Tweedle Dee is the same as Tweedle Dum.
If Tweedle Dee and Tweedle Dum are the same, why do you go on spouting red/blue stuff like you're supposed to make someone feel bad because they "lost"? We all lost and yet you gloat on some smashing victory that wasn't, while conceding the point that there is something to this Benghazi thing, albeit without conspiratorial "nonsense."
What did you do, win fifty bucks on a bet or something?
Sounds like you have a lot of making up your mind to do. It's okay. We'll wait.
:D
If you didn't notice, there are a preponderance of posters who feel they did lose, and big.
As for making up my mind, the game is nuanced, and red and blue lines are what they wish us to draw. Nobody lost or won - in fact, nothing happened at all.
Weltanschauung
GRIDLOCK....honestly folks, it's a truly wonderful way to run a government! I would be happy if they didn't accomplish one damn thing over the next 4 years, let it all go to hell in a hand basket and see what remains of this duplicitous system, perhaps the American People will finally awaken to the fact that this government is bought and paid for, controlled and managed by the same criminals on both sides of the isles. The Two-Party System is purely a cosmetic wrapping paper, sparkling with glitter for the public to consume, trusting that every few years they get to choose one or the other hand-picked "leader". Over the fiscal cliff....hell, the bottom might be just the spot of enlightenment.
Gridlock has been negated by Executive Orders which are being utilized with increasing frequency. Don't really understand why congress has let Presidents get away with this.
Four more years of this back and forth shit.
Barry will be flying to some F500 head offices at the request of the CEO's to get a lesson on how things will be done - and very soon.
Bumma will be on the golf course, only called in for a "bit of work today Mr President" to read from an autocue
I think Bush and Clinton had a little policy input, felt like it, but we have to go back to Reagan to find a Presidential puppet equal to this drip
Please. The CBO is a joke.
The Republicans should just let Obama run the country into the ground. Socialism is failing all over Europe and we're the only ones dumb enough to say: “Let’s have more of that!”. All so we prove we’re not racist by having a black president.
AUSTERITY is failing all over Europe too. But will that stop the "socialist" from making the Grand Bargain to make cuts to the safety net?
"Worse, Obama intends to begin to unravel the safety net (Social Security, Medicare, and Medicaid) to convince the Republicans to enter into this Faustian bargain. Just as only a conservative Republican could visit “Red” China, only a Democrat can begin the destruction of the safety net. The difference, of course, is that normalizing relations with China was a good thing while unraveling the safety net is a terrible thing."
http://truth-out.org/news/item/12524-the-great-betrayal-and-the-cynicism...
The “promise” of austerity in Europe is the only thing keeping their sovereign bond yields from going through the roof and their economies from collapsing. The second part is just silly and would blow up in Obama's face.
A collapse and leaving the euro would be preferable to the slow death of austerity.
In an economic collapse, austerity is no longer an option. THERE IS NO more public debt to pay for government programs. You are insane.
Yeah, I'm insane. So is Greece, I guess, who has put a Euro exit back on the table:
http://www.forbes.com/sites/afontevecchia/2012/11/06/dont-forget-europe-...
if past is any indication, obamma will talk for long time but the actual outcome will be exactly the opposite of his words, meaning, there will be tax cut for the richs.
The line in the sand is not dumb, there will not be any consensus, the expiration of FDIC insurance on transactional account and new Repo pricing will make shortvend yields negative. So the Rich get fucked by taxes and then fucked by negative yields.
Bruce it is dangerous both for cash and equities not for employment or consumers in debt. You make the short end negative and you steepen a tiny bit long end. So you fuck the Corporations in the pussy sitting on their cash doing nothing and force them to spend, and then you steepen a bit the long end of the curve by diminishing twist, so you fuck the CEO of the corooration in the ass with rising long yield which hurts PE multiples downward and stock options. Next you gag him with higher taxes. Et voila. Nominal GDP rises with steeper curve.
Regarding the 200,000 jobs that would be lost in 2013 by letting the tax cuts expire for the rich, the cuts would also reduce the 2013 deficit by $42 billion. That comes out to $210,000 per job. Pretty expensive way to boost employment.
Over ten years, it would reduce the deficit by almost a trillion dollars.
http://www.huffingtonpost.com/2012/08/24/bush-era-tax-cuts-revenue-expir...
The total tax take will go down after the first year. Always does.
We are already inside the event horizon, so it matters little what
they pretend to do to fix a terminal situation.
Jackals fighting over tidbits ,on the corpse, left by the lions.
And for those who know, HERE we are
Surfing upon the winds of fate
at the event horizon of the Apocalypse.
So what if it goes down. Its still a net reduction of the deficit with little negative economic impact.
So over ten years and 10 trillion in new debt, Obama will have reduced the debt from 26 trillion to 25 trillion?
Yeah. Every trillion helps.
Bruce, you cite CBO estimates:
"The CBO evaluated the implications of raising the taxes on those making $250k and up. The consequences to both GDP and jobs"
This is the same CBO which has been completely wrong on deficits:
"In 2000, after more than 40 years of nearly consecutive budget deficits, both the White
House Office of Management and Budget and the Congressional Budget Office (CBO)
projected decade-long budget surpluses. Moreover, both agencies projected that publicly
held government debt (then about $3.5 trillion) would be eliminated by 2010."
Sorry, CBO predictions are worth less than a bucket of warm piss. It is dumb to use CBO estimates except as a joke.
http://research.stlouisfed.org/publications/review/12/01/21-40Kliesen.pd...
Yeah, if you want a hoot just look at the projections for Medicare and Medicaid made in the 1960s when they were initiated.
"As Ways and Means Chairman Wilber Mills remembers it, "We were told by Bob [Meyers], the actuary, that the cost of Medicaid over Kerr-Mills in the first year would be $250 million, nationwide. It was $250 million in New York State alone...?
I agree. The 42 billion will turn out to be about 15.
"...B&O are ready to work together, and achieve the necessary compromises to avoid falling off a cliff..."
B wants no NEW taxes ...O wants no tax CUTS
The middle ground is hiking rates (theft) on existing taxes.. of course neither B&O can do maths and both are grasping at an illusionary fiscal straw taxpayers can bail these losers out. The 'easy option' of taking food off others table as Jabba the Hut Govt cannot stop its glutony or organise a Weightwatchers diet in DC
raising rates on existing taxes is a 'middle ground' that still kicked off the Boston Tea Party, a rise on Tea tax that was the final straw in non-stop abuse and parasitical Govt of people that can actually look after themselves (unlike politicians) kicking off the Tax Revolt
so when B&O send their parasitical pick-pockets (IRS?) in for more food off your table, because eating the US out of house and home 10 times over is never enough, it's one epic excuse for another 'PARTY'
Don't Pay Tax ....these suckers can't do maths and can't do diets, you organise it
"I think the press has it wrong."
Really Bruce??? You just now figured it out that the press is wrong???
Please gut the defense budget. Thank you for listening.
And that is precisely Obama's intent, as for the fallout of going over the cliff it will be blamed on Boner and the T-party. The best thing the Repubs can do is to take a long vacaiton and let O do whatever he pleases.
Mmm?! ...not sure leaving socialists (Democrats) alone in the house is a great idea ..both the USSR and Commie China were absolutely gutted, their houses fit only for demolition
any 3 term socialist squatter scum (Labour Party) in Britain and the house is also utterly broken ...after Blair and Brown had spent us into oblivion one MP left a note, "Sorry, we've spent it all" ..ditto Greece, Spain et al
Cut it all. Hold the line. The House can defund anything. Use ju jitsu and defend the war. Bring the troops home where they are needed. The threat is internal not external. The vote theft was astronomical. If we have red team blue team then why did the Dems/Soros work so hard to steal it with their thugs.
I think the across the board spending cuts are the big ones...not the tax increases. I definitely agree this is the "no deal" President...and he's not in a dealing mood having one (Obamacare...which i supported and still support btw) "without any help from Republicans." (which is true i might add. I don't blame the President for how he feels!) Hence i think you are spot on BK. I fail to see how "blaming Republicans for massive across the board spending cuts" will work when it was plan agreed to by Democrats in the first place...but of course "the blame game works" so we'll see what happens. I'm not sure the Republicans are in a position to deal anyways. They really aren't into Obama's Wars...the support for Israel on the Right is nil...the right wingers got slaughtered anyways (thank God for that!)...if "no deal" = "recession" next year i'm not sure the Republicans would be opposed given the strength in the oil and land rich regions for their Party...and the socially "conservative" South still looking strong Right. The big losers in No Deal are big Cities with Big Problems. And why should rich states like Iowa support destitute States like Illinois anyways? It's not like if the shoe were on the other foot Illinois would help that's fer sure ("pay to play, right Rahm?. well how about "Play to pay" then?) We shall see. Our moderate Republican candidate won up here in a landslide. It's the first piece of good news we've had in these here parts probably since the end of World War II. We have ethanol plants under construction, hopefully our farmers will prosper...with the next stop securing our water resources which out of towners keep trying to steal (and insodoing harm the environment in real time i might add. talk about a Fish-kill Fall this year.) hopefully the willingness to drill for shale will pan out as well...with a now completely collapsed and bankrupt New York City as backdrop the politico's should feel thankful they have something they MIGHT be able to fall back on...unlike say Connecticut or New Jersey. I'll look forward to hearing more. The USA is powering ahead one way or another. You can either be on the A train...or be run over by it now. I say tell the "No Deal Democrats" to stick it where the sun don't shine.
Was that rolled enough for ya, dv?
Ha!
Good thing is that if Bruce averages over a hundred responses per thread, he makes a Million Dollar Bonus!
:D