Presenting The US Economy's Coming Fiscal Cliff

Tyler Durden's picture

The size and scale of 'current law' expectations for spending in 2012 and 2013 are dramatic to say the least. As Morgan Stanley notes, these are huge economic and political challenges to any deficit reduction - which we discussed last week (courtesy of James Montier) is critical if we are to maintain corporate profit margins. Presenting, with little pomp and circumstance, the US economic fiscal cliff...


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LongBalls's picture

Suicide by not another name.

vast-dom's picture

most drawn out suicide i ever did witness. please hurry up and die so we can start living again.

economics9698's picture

As long as bankruptcy is not declared politicians can enslave the people.  Why would they want things to change when Ben prints their ass out of trouble?  Every time Ben prints that’s a tax increase on you and me.

TruthInSunshine's picture

Peeps, it's just like a credit card.

It's all good for as long as the minimum monthly payment can be made. Just hope that the minimum monthly payment doesn't increase and that one's fiat is always accepted, and live large, bitchez!

comrade pravda's picture

We are in a new age of austerity.  B.S. Bernanke's helicopter is grounded for lack of fuel.

So let's stop calling him Helicopter Boy.  It is time for a new name: Ben Shitter.

Ben Shitter's job is to shit Benjamins to keep the status quo going.

Ben Shitter, how does it feel to be the fall guy for the destruction of the American economy?  What did you get for your efforts?  Rubin stole a huge pile and had the good sense to slink away.  Summers got fat, got to be president of Harvard and got paid by Wall St.  Greenspan got laid and convinced the public that he is more than fucking moron.

Dre4dwolf's picture

The parasite is strong, it might kill the patient before it dies.

economics9698's picture

Declaring bankruptcy would be best.  Reducing the federal governments consumption of the GDP to 18%, its 24.1% today, would be second best.

Raising taxes over 30% is a waste.  People and corporations avoid taxes.  Cutting taxes to 25% makes more sense in collecting taxes than raising them over 30%.  Over 30% less taxes will be collected.  Under 25% the increased economic activity will pay for the tax cuts if they are in;

1.  Corporate taxes.

2.  Capital gains.

3.  Personal taxes (Type S corporations).

ZH writers have a block when it comes to understanding basic tax collection economics.

vast-dom's picture

changing your handle won't help you avoid the discrimination that your discrimination fosters.

Spastica Rex's picture

Let me guess - you're one of those wackos who doesn't believe in easy answers.

LawsofPhysics's picture

My guess is it would depend if you are one of those hypocrites that believes in bailouts.

economics9698's picture

Why would I believe in bailouts?  I know raising taxes over 30% is a waste.

Why are you people idiots when it comes to tax policy?

I changed from 1996 to 9698 because of a problem with the ZH account.  Nothing to do with the comments, positive or negative.

vast-dom's picture

change your racist attitudes man.

economics9698's picture

Fucking Yid police are everywhere.  

Spastica Rex's picture

What are your thoughts on Ronald Reagan?

economics9698's picture

Reagan set the deficit record at 6% of the GDP that held until Obama shattered the record at 10%.

Spastica Rex's picture

Easy answers are like assholes; everybody's got one.

OldPhart's picture

...and they're all full of shit.

LawsofPhysics's picture

This would work if we lived in a world where the shareholders (owners) and management where actually held financially responsible for the debt incurred by their company when it failed.  Unfortunately, all these folks now expect a fucking bailout from the taxpayer (but then they don't want to raise taxes). Fuck you and the socialization of your losses.


blunderdog's picture

How can it be that the past 30 years of tax-cuts haven't fixed the economy?  Seriously. 

How can it be that the same solution which has been "failing upwards" for my entire adult life is ONLY NOW going to really fix things?

VisualCSharp's picture

Your argument is a straw man. What if there is little or no causative effect between the tax rate and the economy? I submit that cheap energy availability has far more to do with our prosperity than any tax rate. Yes, taxes do have an effect, but in and of themselves I do not think they drive all economic activity.

blunderdog's picture

I didn't make any argument, I asked a question.  The answers (so far) don't address the question.  Your answer seems to be that taxes don't affect the economy, so I'd call that a "push"--neither of us know.

I'm not in favor of taxes, but lucky for me,  I don't earn enough money to be upset by the fact that they're confiscated from my paycheck.  Money just isn't one of the big priorities in my life.  To each his own.

WTF_247's picture

That one is easy - no amount of anything can help the US government when it spends far in excess of its capactity to tax.  If you raised taxes 50% from here, it would not balance the budget either.  Politicians face nothing if they enact stupid policies with no way to pay for it - most are out of office by the time the damage is done.  The more you raise taxes the more the govt will spend, the more the govt will hire negating any positive effects on the deficit.

Any amount you take away from citizen A prevents that citizen from spending that money.  Democrats never understand this - if you tax someone 10%, they have 90% left to spend.  Since we are a consumer based economy the more you take from citizen A in terms of taxes, the less they can spend regardless of any other policies.

Unfortunately the government is very very poor about translating dollars spent into GDP - its just not efficient at all.  If you tax someone 30%, that 30% going to government does not translate to the economy at 30% - more like 10%.  So instead of citizen A spending 100% of his money into the economy, only 80% of his money goes into the economy.

I would love for ANYONE to show me how taxes improve the economy - it cannot be done.  How taxes raise the living standard for anyone - cant be done.  If  I have $100 and baseball cards cost $1.00 each, I can buy 100 cards.  If the seller makes 50c per card, they net $50.00 from my purchase.  If the government takes 30% of my money, I now can only buy 70 cards - the seller makes $35.00 from the sales.  

A certain amount of taxes are needed for things society deems important (police, fire, national security etc) - however over the years that has creeped to be so large and all encompassing that it is impossible to maintain and there is no realistic method to EVER collect enough taxes long term to pay for what they have created.

donsluck's picture

Sorry, had to ding you one point. Your Democrat baiting early on revealed you to be a political hack, content to blame some party or other for some special guilt. Don't forget that your man Bush lead the largest increase in Federal spending in history with his reaction to 9-11.

Watauga's picture

Why do you assume that because someone is critical of Democrat Party policies, he is a Bush lover?  Can one not despise both Democrats and Republicans?  Can one not be critical of the policies of one Party, hate it and the other major Party, and support positions quite opposed to both of them?  "Your man Bush."  Should we assume, by this comment, that you are a raging, lunatic, dyed-in-the-wool Democrat responsible for supporting the fools who, since 2009, have run up more debt than Bush did in 8 full years?  The fact that Bush was a fool and Statist does not mean the Democrats cannot be criticized.  Why so defensive?

TMT's picture

Because he points out an inherint fallacy of the democrat's platform makes him a "political hack"?  Come on ... that's quite a leap.  I can more easily deduce you are a political hack, from your comment, than conclude he is a political hack for making a point.

This often happens to me as well.  I illustrate the lunacy of liberal dogma then I'm painted as a Bush lover.  I think the red and blue cheerleaders are equally damaging to our country.  They both suck ... period.

BTW donsluck, update your stats ... Hussein just overtook Bush as the biggest spender ever (queue the Bush lover tripe).

DosZap's picture

How can it be that the past 30 years of tax-cuts haven't fixed the economy? Seriously.


Seriously, you jest?,you SPEND more than you take in.

The Boomers and other Americans are getting slammed when the WORST culprit of all is responsible

US GUB,never met a few Billion or Trillion they cant waste.

ClipperBASIC's picture

When producers shift their focus from production and sales to tax avoidance; that's the point where higher tax rates yield lower gross collections.

blueridgeviews's picture

The US economy is beyond help with just lkower taxes. You would have to go through every regulation that constricts business and start cutting out the ones that are the result of some OCD bureaucrat.

km4's picture

A Fistful of Euros

The Fed has promised to provide unlimited amounts of dollars to the ECB, should circumstances require it. It boggles the mind. Of course when Fed officials first entered into these swap agreements with the ECB last September, they did so quietly. The American public only found out via websites of the ECB, the Bank of England, or the Swiss Central Bank.

The Fed already has pumped trillions of dollars into the economy since 2008, and US banks currently hold $1.5 trillion of excess reserves. So why don't American banks lend those excess trillions to European banks if they really need dollars? If US banks could earn 1 or 2 percent on those loans, they might just be interested. But they can't compete with the ½ percent interest rate charged by the Fed to the ECB. That's one glaring example of the harm caused by the Fed's ability to create money and loan it at below-market interest rates.

The Fed has placed a hundred-billion dollar bet on the future of the Euro, with the strength of the dollar on the line. This is absolutely irresponsible, and directly contrary to market discipline. Let private banks, European or otherwise, take their own risks. Let foreign central banks inflate their own currencies and suffer the consequences. In other words, it’s time to apply market principles to banks and money.

Helicopter Ben is worse than Greenspan in catering to the 1%

Joeman34's picture

Of course the Fed is happy to provide unlimited dollars to anyone – as long as they can loosely justify it.  If the world is awash in dollars, it helps us retain reserve currency status.  It’s much easier to usurp a reserve currency no one has or uses…


In fact, I believe this is one reason why the Fed is fine debasing the dollar through continued printing.  It’s a virtuous feedback loop.  The Fed continues to print so the world continues to use dollars because anyone with money in his pocket doesn’t want to be the first to admit it’s worthless and he's therefore broke…


LongSoupLine's picture



...and all of it being feed into AAPL's HFT slaves right now...what horseshit!

asteroids's picture

I bet you won't hear a word about new taxes during election season. The winner of said election, is going to be forced to raise taxes up the wazoo.


There's only one candidate who would not do this.  All the other cocksuckers sold out already to get where they are.

economics9698's picture

The politicians are already raising taxes up the wazoo, its called inflation.

easypoints's picture

The '13-'16 president could likely be the most unpopular president in history, regardless if it's Obama or someone else. Even Ron Paul. We are past the point of no return, and it's all going to end up on their shoulders. Whipping-boy in Cheif.

maximin thrax's picture

Exactly my sentiment. My suspicion is that those who really want to run things are waiting for the time to be right for people to accept an overlord. The next administration, and its party, is going to take the fall for the failure of today's extend and pretend.

LongBalls's picture

Taxes can not pay this back. See Greece. This is the issuance of so much debt that Americans will be forced to abandon the Constitution for the new debt vehicle. SDR's anyone? The game is already over. It just has not been announced to the public yet. It is time to see what the American is made off and for what is he made. Using SWIFT as a war tactic was a pure mistake. The alternative is being drafted as we speak. Gentlemen.....prepare yourselves for in the coming months this is to get REAL and ugly on all fronts of our lives.

economics9698's picture

The only bail out now is printing.

distopiandreamboy's picture

I was reading up on the fall of Rome recently and one of the causes being discussed was a Romans propensity to elect the leader who promised the most free games, grain and wine...modern society and the events preceeding the fall of Rome are becoming increasingly similar.

"Though indivually the Romans were exceedingly economical and carefeul in the management of their private property, the state as such was extravagant and careless with state revenue. It was found impossible to protect the public property from being plundered by private individuals, and the feeling of powerlessness resulted in reckless indfiference."

-Wilhelm Ihne

Dapper Dan's picture

reply to distopian,

In Jared Diamonds book,  Guns, Germs, and steel,  there is a chapter dedicated to exactly this topic, see part 3, chapter 14

"from egalitarianism to kleptocracy"

The entire book was insightful.

Totentänzerlied's picture

"from egalitarianism to kleptocracy"

this is a political axiom

gjp's picture

Why would they be forced to raise taxes.  What in current/past behaviour makes you think politicians and bankers would turn to direct taxation over the tried and true indirect confiscation via inflation.  There's a Keynes quote somewhere about how easy it is for the rulers to steal by inflation ...

It isn't an accident that most collapses of prevailing social order are accompanied by monetary debasement.

Bear's picture

Read my lips ... "Muchos Mores Taxes"

ClipperBASIC's picture

Or cut spending by $1T.  But we all know that the one candidate making this suggestion will not be allowed to win. 

fxguy's picture

No new taxes are needed, they will simply remove any and all deductions.

ArkansasAngie's picture

I'd be happy with that
But ... Surely Romney Nor Soros nor Buffett would NOT go along with that.
This will not end well

TMT's picture

Hell no!  Your 1%er talk is growing old.  Remove all deductions and you'll have some paying well over 50% in taxes.

If taxes were 100% I think we would all agree that you are a slave.  How about 99%, 98%, 97%, etc.?  I say that if you pay a dime over 50% in taxes you are in fact a slave of the state.

Solution:  20% flat tax on everyone, no deductions.  Fair and easy.