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Cliff Deal - Winners and Losers

Bruce Krasting's picture




 

Note: I wrote the following after watching the Prez on TV. His smiling demeanor and tough guy talk led me to believe that a "patch" on the cliff might happen. Four hours later, and that is not the case. The House will not vote on anything today.

There is a chance that the House could vote tomorrow. This would bring results along the lines I describe below. But if the House does not vote, then it means there will be a long fight. A fight that could go on until the debt limit shuts the government. 

These people are desperately trying to fail.

 

2209935122_2dc0b8e20d

 

My read of the President's speech is that there is a deal that will avoid the cliff. So go enjoy New Year’s Eve. Give it another 30 days, and we’ll be right back into the soup. My scorecard on the deal.

 

-If you’re unemployed, you’re a winner. You get another extension of benefits.

 

-If you’re employed, you’re a loser. Fully 155m workers are going to pay 2% more on income starting tomorrow. The increase in FICA taxes will come to a lumpy $120B. This will rank as one of the largest YoY tax increases in history. This is a very regressive tax increase. There is a $108K cap on what is subject to FICA taxes, so high incomes do not feel the bite. But those who earn an average income will see a meaningful reduction in disposable income ($2,000 per household).

 

This is a decidedly un-Democratic outcome. The rich avoid taxes, lower incomes pays a disproportionate share. Who insisted that this unfair outcome was part of the deal? Answer: Harry Reid, Nancy Pelosi and Barack Obama. Don’t blame the Republicans when your next check has an extra bite out of it. “Go figure?”, on this outcome.

 

-If you make between $250 and $400k, you are a very big winner, congratulations. Half of the top 2% just got a free pass.

 

-If you make over $450k, the cliff deal says you may have to pay more taxes. I wouldn’t worry too much about the top 1% - that group has 18% of all income. The move from 35 to 39.6% for America’s richest will not matter a bit. None of them paid the old rate, they won’t pay the new higher rate either.

 

-If you’re one of the 33 million taxpayers who avoided falling prey to the Alternative Minimum Tax (AMT) by the last minute patch, you dodged a bullet. This would have taken an average of $4k out of your pocket. I’m happy for you.

 

-If you’re one of the 4 million hopeless losers who have been stuck with AMT in prior years, you’re going to get stuck again. I’m one of those poor souls who is mired in this tax trap. It's a very unfair outcome for me. I make a fraction of the top 1%, but because of AMT, I pay a minimum federal tax of 28% while the top 1% pays an average of only 15%. Where’s the damn cyanide?

 

-The defense industry will have the bubbly out tonight, no sequestration for them for the time being. Phew! I was really sweating this one!

 

-Investors will also have the Champagne out. They dodged a bullet – at least for the next 60 days…..Keeping the 15% Cap Gains rate for most incomes is a plus, the new 20% rate for the top filers is a gift.

 

-The American people are very big losers. The cliff deal just sets up another crises before the snow melts. Nothing has been accomplished that addresses the uncertainty factor. The deal insures a big deficit for 2013. It will not increase tax revenue from the top 1%. It will result in a big increase in payroll taxes that will hurt the bottom 40%.

 

-Washington is the biggest loser of all. Democrats, Republicans, Senate, House and Obama all come off looking like chumps. They didn’t deliver anything but a Band Aid. I give the cliff deal a D-.

 

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Mon, 12/31/2012 - 21:11 | 3111192 scraping_by
scraping_by's picture

Ah yes, the Ponzi slogan. Ripped from the headlines for people who don't know how insurance works.

Government spending is determined by the budget process. If you want spending cut, get involved with the budget process. Point out how much per day is spent in Afghanistan, on the Navy floating off Iran, on the drone assasination program, on the low-key invasion of Africa. Try writing your Congress critter. Or would that damage the 'The Government' thing?

If you're talking about COLA increases, join Barry and his fellow wingers in sneering about buying vodka with food stamps. Or was that another winger?

The connection between social insurance and the destruction of personal liberties is obscure. I thought card-carrying members of the ACLU were also keen on coddling useless eaters. Or maybe that was a different generation of libruls. In any case, the pretext for gay hand rape and domestic terror machines is the WOT, not large scale financial welfare for firms. Or taxpayers.

 

 

Mon, 12/31/2012 - 19:02 | 3110867 hooligan2009
hooligan2009's picture

3.7 trillion of spending v 2.4 trillion of taxes means 20% movement in both to get close to stabilising debt via zero deficits

Mon, 12/31/2012 - 20:18 | 3111016 OneTinSoldier66
OneTinSoldier66's picture

But why did we ever have 1.3 Trillion spending of money that we don't have, every year, in the first place?

 

Why has deficit spending been on the rise my entire life? Other than one time when they made it look like they had a balanced budget by stealing from the S.S "Trust" Fund, and using hedonics and manipulation of statistics, during the Clinton years.

 

Why did Nixon need to "defend the dollar from the speculators" in 1971 and turn the dollar into a pure fiat currency? You sure he wasn't just devaluing the dollar of it's value and purchasing power in order to defend his "special interests"? Why has my purchasing power been being stolen from me bit by bit, my entire life?

 

If debt is wealth then I guess we must be the richest nation on earth. But what if it's not? Just because Nixon said we're all Keynesians now does not make it so.

Mon, 12/31/2012 - 16:01 | 3110159 BeagleOne
BeagleOne's picture

BK:

I often disagree with your positions, but  the "so called" solution fucking sucks. Time for the revolution to begin.

 

Mon, 12/31/2012 - 16:06 | 3110186 Snakeeyes
Snakeeyes's picture

Winner: commodities, gov't cronies

Losers: middle class, lower class

http://confoundedinterest.wordpress.com/2012/12/31/no-inflation-housing-...

Mon, 12/31/2012 - 18:07 | 3110737 OutLookingIn
OutLookingIn's picture

Agreed.

Raping is not done yet!

The 1%'ers have more wealth to accumulate from the bottom 40%'ers  yet.

It will not stop until every last crumb is vacuumed up. Then they'll come for your life!

Mon, 12/31/2012 - 19:03 | 3110877 WestVillageIdiot
WestVillageIdiot's picture

"They'll come for your life"

Hell, they have already been sending your kids off to die, and get maimed, for the past 12 years.  Isn't that close enough? 

All we would have to do is refuse to participate in their wars and then you'd see how tough they are. 

Mon, 12/31/2012 - 19:19 | 3110929 Bob
Bob's picture

Hudson lays out a damn strong and comprehensive case that this is the War of the Banksters against everybody else:

http://michael-hudson.com/2012/12/americas-deceptive-2012-fiscal-cliff/

Mon, 12/31/2012 - 20:43 | 3111142 S.N.A.F.U.
S.N.A.F.U.'s picture

What a worthless piece of crap (both the article and the author).

He's just a dumb-ass greenbacker that thinks the government should print more money so it can spend even more of our wealth (but greenbackers generally don't really understand the difference between money and wealth).  Choice quotes from the Micheal Hudson article to save non-morons the time of reading the article:

The myth (perhaps we should call it junk economics) is that (1) governments should not run deficits (at least, not by printing their own money), because (2) public money creation and high taxes (at lest on the wealthy) cause prices to rise.

...

The other myth is that it is inflationary for central banks to monetize public spending.

The stupid greenbacker "we can print ourselves to prosperity" meme is so ridiculous on its face that the position Michael Hudson takes with complete seriousness has been used by Ron Paul as a form of reductio ad absurdum:

If you believe that the world will continue to take our dollars no matter what our debt is, Americans shouldn't have to work anymore, because we can just print all the money.

Tue, 01/01/2013 - 11:52 | 3112019 oddjob
oddjob's picture

What the hell do you expect from somebody prognosticating about Tiger Woods upcoming year?

Mon, 12/31/2012 - 15:50 | 3110129 Panafrican Funk...
Panafrican Funktron Robot's picture

Consider the game in this.  A tax increase on "the rich" (however that is defined) is in the cards.  If you're "the rich", wouldn't you prefer to see shared pain on the part of the plebs?  Particularly if that share is way the fuck more painful for them?  No deal, over the cliff.  False flag will take care of the defense cuts.  

Mon, 12/31/2012 - 15:44 | 3110104 DR
DR's picture

"I pay a minimum federal tax of 28% while the top 1% pays an average of only 15%. Where’s the damn cyanide?"

 

Damn....I always pegged you as a 1% guy, being from WS and all.

 

 

Is the cyanide for you or Mitt Romney?

Mon, 12/31/2012 - 16:08 | 3110203 Bruce Krasting
Bruce Krasting's picture

Divorce busted, dot com busted, stock market busted, RE busted, no yield busted, tax busted....

But 12 years ago I was doing okay, and fell into AMT. Once you're in, you never get out.

Mon, 12/31/2012 - 19:58 | 3111032 Nehweh Gahnin
Nehweh Gahnin's picture

In seriatim, huh?  Wow, that sucks for a decade.  Soon as my ex- saw the rest coming, she hopped into bed with the nearest mouth-breather and ensured it all happened at once.  Except the real estate.  She was always too smart for her own good there.

 

I enjoy your stuff, too, Bruce.  Thanks for the post.

Mon, 12/31/2012 - 19:56 | 3111028 Vendetta
Vendetta's picture

Same here, 12 years ago was fine.  Dot com bust and outsourcing destroyed my life built up over 20 years, have recovered some since then but trust is gone and the stacking began.

Mon, 12/31/2012 - 20:28 | 3111120 Blano
Blano's picture

The most money I've ever made (so far) was 12 years ago.  2013 will break that though finally, I believe.

Just wish I knew then what I know now.

Mon, 12/31/2012 - 23:04 | 3111408 Tango in the Blight
Tango in the Blight's picture

Gold was so cheap 12 years ago. Why didn't I realized that?

Mon, 12/31/2012 - 17:49 | 3110669 Imminent Crucible
Imminent Crucible's picture

Okay, Bruce, so your last 12 years have pretty much been a downhill ride. This is a GREAT time to turn things around, get out of the rut and build a new life as a freelance writer. It's what you always wanted to do anyway. You probably won't make any money, but you can do it from anywhere, like, say.....Zihuatenejo. People don't buy too many hardback novels any more, but those 99-cent downloads from the Kindle lists are HOT, dude.

You're not getting any younger.

Mon, 12/31/2012 - 18:28 | 3110791 Bruce Krasting
Bruce Krasting's picture

Wadaya think I've been doing the past four years?

I have 1000 articles. Average 500 words. Comes to half-mil words. Your avererage novel goes 70-90K, so I've penned 6 full sized books. A full fucking book every nine months. And you suggesting maybe I should get into writing.... Where the fuck is that cyanide?

If I did this in real life, it would be worth at least $5m. So far, the best I've done is a stupid hat from Business Insider....

 

What I really, really wanna do is write comedy. Fuck this financial stuff......

 

Tue, 01/01/2013 - 17:49 | 3112889 monad
monad's picture

"Where the fuck is that cyanide?" Is not going to win a Nobel prize. Try "The women belong to the people", and say nice things about socialism. And Jesus.

Mon, 12/31/2012 - 21:17 | 3111203 Clever Name
Clever Name's picture

What I really, really wanna do is write comedy. Fuck this financial stuff......

 

Let us know BK, I'll come see your show in DC!

Mon, 12/31/2012 - 20:30 | 3111121 Imminent Crucible
Imminent Crucible's picture

Believe me, Bruce, if you can write this stuff, you can write comedy. You saw how Michael Lewis parlayed his stint at Salomon into Liar's Poker. I know you can spin your long gig at Drexel Burnham Lambert into some very funny, and meaty stuff. And gouge a few deserving eyeballs out while you're at it. You just have to go for it.

You may not realize how famous you are these days.

Mon, 12/31/2012 - 19:12 | 3110906 Colonel Klink
Colonel Klink's picture

The financial stuff IS a comedy, ok well a tragicomedy.

 

Here's wishing you a Happy and healthy 2013 Bruce.

Mon, 12/31/2012 - 19:09 | 3110895 Bob
Bob's picture

Now that was funny! 

Happy New Year, man.

Mon, 12/31/2012 - 18:43 | 3110820 negative rates
negative rates's picture

Well your comedy is the best too. That shopping cart story was just over the top.

Mon, 12/31/2012 - 16:45 | 3110369 DR
DR's picture

"Divorce busted, dot com busted, stock market busted, RE busted, no yield busted, tax busted...."

 

In that order? Too bad the divorce didn't come at the end of all the other busts...less money for the ex.

 

Have a Happy New Year and thanks for posting your diggs on Zerohedge!

 

 

 

Mon, 12/31/2012 - 18:38 | 3110813 Bruce Krasting
Bruce Krasting's picture

The 12 year run, in order.

I get sick, damn near die.

Divorce busto followed shortly after I lived??

Then Dotcom, 2008 blowdown, RE shitter, and all the way paying maximum tax, no shelter for me.

I'm still standing okay. All that crap's just a bump in the road.

Tue, 01/01/2013 - 14:35 | 3112422 S5936
S5936's picture

Bump in the road ? How about a 59th street pothole. Keep your chin up .

Tue, 01/01/2013 - 04:28 | 3111707 infinity8
infinity8's picture

testing, testing. . . feel your pain. Stay strong and Happy New Year, Bruce. Always enjoy your work. It's true when it rains, it pours - so it seems. Had a bad run myself wihich coincided shitty timing-wise with our great financial crisis - weird fall that fucked up the back, busted "relationship", company I worked for for a long time sold out to asshats, dad got sick and died quick, sued for violation of non-compete (they didn't have a leg to stand on but dragged on for a year). Still standing. The back more fucked up than ever but I imagine myself as Popeye and keep on keepin' on.

Mon, 12/31/2012 - 20:26 | 3111114 Blano
Blano's picture

Dang, and I thought I had a crappy several year run.

Doing better now though, thanks to my move to Texas.  Hope things are still looking up for you as well in 2013.  And of course, hoping Red Dress crosses your path again.

Mon, 12/31/2012 - 18:58 | 3110861 WestVillageIdiot
WestVillageIdiot's picture

Bruce, how I wish you had banged the chick in the red dress.  I would go into the New Year so much happier knowing, "Bruce nailed the chick in the red dress".  There's always next year. 

Happy New Year, Bruce

Mon, 12/31/2012 - 17:00 | 3110426 ElvisDog
ElvisDog's picture

The sad thing is a lot of ex'es know exactly when to file the papers. Which is another screwed up thing about our society. One spouse can sit on his/her ass while the other spouse busts his/her ass to get promotions and a high paying job. The ass-sitting spouse can file for divorce and gets half of the worker's current income.

Tue, 01/01/2013 - 08:05 | 3111767 Bruce Krasting
Bruce Krasting's picture

Well, my ex got Mia Farrow's divorce lawyer. She thought that would be a good idea, seeing that this lady lawyer had squeezed Woody Allen for everything she could.

So that period started and ended bad.....

 

Tue, 01/01/2013 - 19:23 | 3113109 neidermeyer
neidermeyer's picture

Dude! you could have hired a crackhead for $500 to fix that problem...

Tue, 01/01/2013 - 14:26 | 3112401 QQQBall
QQQBall's picture

Hahhaha! Laughing with you brotha! Pump and dump. I will never get remarried.

Mon, 12/31/2012 - 19:21 | 3110943 Will To Live
Will To Live's picture

Income, Pension, Business, Jewalry, House, Car(s), Tools ("not the tools"), Balls (Testicles), etc.

Mon, 12/31/2012 - 16:41 | 3110349 negative rates
negative rates's picture

You know which restaurant to find me at, after the end, we'll be just fine.

Mon, 12/31/2012 - 15:38 | 3110078 AGuy
AGuy's picture

" There is a $108K cap on what is subject to FICA taxes, so high incomes do not feel the bite."

Its goes to $113.5K for 2013. There is no cap on the Medicare Portion of FICA. The Medicare portion also doubles for those making over $200K ($250K for joint filers of married couples). This is for the ACA (aka O'bamaCare) and has nothing to do with the Fiscal Cliff.

FWIW: I doubt this "deal" will pass. They already said many many times they were close to deal, but it always fall apart. Its likely they are still far apart behind closed doors.

Most people are probably not aware that Medical ther insurance costs will rise, due to O'bamaCare. Any Deals in Congress will likely be offset by the increase in Med. Ins. costs.

The Deal has no Spending cuts, so we go on running $1+ trillion deficits. Bernanke is still running the printing presses, so nothing gets fixed. In my opinion going over the cliff would be better since it contains some spending cuts. The spending cuts and the higher taxes would make a small dent in the deficit. As we stand now, The deal is meanless. Congress should include a budget cap. where there is a forced limit on how much the gov't can spend. The gov't would them have to prioritze its spending, making cuts in some programs for increases in other programs.

Bruce your way too generous. You gave them a D+, They earned an "F", with a grade point average of 0.0!

 

 

Mon, 12/31/2012 - 15:34 | 3110072 TheMayor
TheMayor's picture

Being as old as I am, I am not sure why I even care anymore.

What I don't understand is why aren't young people rioting in the streets over the massive deficits and the debt being dumped on them?

Atlas Shrugged.

Tue, 01/01/2013 - 12:25 | 3112116 SmoothCoolSmoke
SmoothCoolSmoke's picture

Hey Mayor, be honest, what was your response when the young kids tore up Seattle during the G20?  What was your response to OWS?  I bet you wanted to see skulls cracked. Most old farts I knew did. 

Tue, 01/01/2013 - 03:35 | 3111692 Dane Bramage
Dane Bramage's picture

I only care as much as I can control.  I shrugged and deprived the beast of any of my flesh long ago.  But rioting?  Perhaps am too old too.  I really don't see the ROI of rioting.  So I've been left with no choice but to profit from the combined stupidity.  I suspect we'll see riots when the crack-up boom really takes hold.  I'll watch it from my heavily fortified bunker. ;-)

Tue, 01/01/2013 - 00:25 | 3111528 Radical Marijuana
Radical Marijuana's picture

TheMayor, in my opinion, the reason is that it is NOT possible to come up with any sane way to protest! ... "Rioting in the streets?" ... As a protest against a globalized electronic fiat money fraud, backed by the threat of weapons of mass destruction??? Within the life time of those still alive now, the weapons have become trillions of times more powerful. Fighting a real war would become suicidal. Fighting a real revolution is also equally insane. I am not aware of anyone, anywhere, who can correctly tell young people what they should do, which are realistic, practical and worthwhile ways to protest the runaway, exponentially accelerating social insanity situations that they have been born into.

There is no doubt that the younger you are, the more you are being lied to, cheated and robbed by the system you were born into. However, that system has become astronomically amplified, so that there are now quadrillions of units of funny money, flying around a global cybercasino, being used to gamble with, by the people who can make those funny money units out of nothing. Thus, that political system is terminally corrupt. However, it HAS invested very, very heavily in preparing to impose martial law. The only way that might backfire is if, eventually, the orders get so insane that some significant proportion of those charged with carrying out those orders balk, and refuse to, which triggers then WHAT??? ... Back to the dilemmas of the original insanities!!!

Everything is automatically getting worse, faster. As this article stated, middle income people will suddenly lose $2,000 of their disposable income next year, to higher taxes, OUCH!!! Yet, they will not get anything back from that, since the established systems are a runaway fascist plutocracy, which is already terminally corrupted. There is nothing left within the feasible political means to actually do anything to fix how fatally flawed those systems have become. More people will be defrauded and robbed, by legalized lies, backed by legalized violence. The fiscal cliff will push millions more people off the edge ... HOWEVER, what can they do about that?

Unfortunately, my answer is NOTHING. Their society is terminally insane, and so, headed towards psychotic breakdowns. Each increment, like this fiscal cliff fiasco, just takes us another step closer to crazy collapse into chaos. BUT, rioting in the streets would only accelerate that happening. It would not, and could not, make anything better. ... I WISH I could think of something to do that makes sense, however, I can not. I tend to believe that young people both intuitively know how bad things are, and intuitively know how practically impossible it is to repair that. I have spent several decades learning about and working on these kinds of problems, and yet, I have nothing whatsoever to offer to young people as any kind of worthwhile suggestions regarding what they should do.

Mon, 12/31/2012 - 20:02 | 3111047 BurningFuld
BurningFuld's picture

Really? That's what you don't understand? As a Canadian watching this pathetic gong show what I DO NOT UNDERSTAND is why there is not another political party coming into being. Hello people to the south..we have the fucking internet now..get your shit together and THROW THESE BUMBS OUT!!!!

And and big "high" five to Washington state for legalizing pot. Yah!

Mon, 12/31/2012 - 21:39 | 3111240 DosZap
DosZap's picture

why there is not another political party coming into being.

IF the House Tea Party members cave there will be, BANK THAT.

Mon, 12/31/2012 - 20:07 | 3111058 akak
akak's picture

 

As a Canadian watching this pathetic gong show what I DO NOT UNDERSTAND is why there is not another political party coming into being. Hello people to the south..we have the fucking internet now..get your shit together and THROW THESE BUMBS OUT!!!!

Perhaps you were not paying attention in 2008 and again this last year to the lengths to which the one TRUE political challenger to the US status-quo system, Ron Paul, was demonized, attacked, censored and sidetracked by that same system?  The fact is that the system is hopelessly closed and corrupt --- voting in the USA is NEVER going to meaningfully effect any change (which is why I have totally given up playing that cynical and idiotic game).

Mon, 12/31/2012 - 20:51 | 3111161 Jreb
Jreb's picture

Same problem in Canada too. We are just smaller, don't have reserve currency status and are not as far along the road to serfdom. If things don't change here soon we will be no different than you...

Happy New Years from another banker owned state... eh!

 

Mon, 12/31/2012 - 16:12 | 3110219 Whatta
Whatta's picture

"What I don't understand is why aren't young people rioting in the streets over the massive deficits and the debt being dumped on them?"

Because they are most of the jags that are voting the likes of Barack Obama into office.

http://www.marketoracle.co.uk/Article38189.html

Little they understand that they are hastening THEIR OWN plunge into the abyss....voting for entitlements they will pay for but never receive, while the Greatest Generation and the first wave of Boomers make out like bandits.

Mon, 12/31/2012 - 16:05 | 3110183 Lendo
Lendo's picture

Most of the young and college kids voted Obama with promises of free stuff.  They also are taught that the status quo is fine and sustainable.  Government is good, etc.

And with idols like the Jersey Shore and the Kardashians, this should come as no suprise.

Mon, 12/31/2012 - 22:57 | 3111394 Tango in the Blight
Tango in the Blight's picture

Sadly Hurricane Sandy didn't asswipe the hometown of Jersey Shore when those cretins were there.

Mon, 12/31/2012 - 16:32 | 3110307 LFMayor
LFMayor's picture

did they?  or are you just repeating what you were told?

This "vote" thing, I do not think you really know what it means.  And I sure as hell don't know why you think it will change anything.

Do NOT follow this link or you will be banned from the site!