By Ariana Pekary, producer
The conventional knowledge about the so-called fiscal cliff is that it would paralyze our economy, as taxes rise for all income levels while automatic budget cuts would equate to difficult austerity measures. With an election win under his belt, President Obama has some political capital to make Republicans heed his will, but as any Beltway watcher knows, that’s easier said than done.
Doyle McManus is Washington columnist for the Los Angeles Times and this week, he helps Bob break down some of these numbers being tossed around. One of the many good points he makes is that by letting the Bush tax breaks expire on people earning over $250,000 a year, the revenue generated will cover about 25-percent of Obama’s $4 trillion plan.
There are a couple of scenarios that have been floated in recent days: one, by President Obama himself on Thursday which includes $1.6 trillion in new taxes (let’s call that his opening bid); and a second, by Mike Allen and Jim VandeHei of Politico (which indicates $1.2 trillion in revenue from taxes, $400 billion cut from Medicare and other entitlements, and about $1.2 trillion in other budget cuts, i.e., war spending). They say neither side would publically admit this is the emerging deal, but Allen and VandeHei must have their good reasons for committing the numbers to ink (so let’s call this the bid at market).
This is a great and easy to read FAQ about the fiscal cliff, complete with a pie chart breaking down all the cost elements of the so-called cliff.
Oddly, this article from Investor’s Business Daily makes it seem that the deficit is a non-issue right now. “Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.” But that is just a side note, I guess.
Whatever the final numbers may be, taxes are almost certain to go up on the wealthiest in the country. As this piece points out, many don’t understand the marginal rate and how it’s calculated (psst, it’s not as painful as it sounds).
Republicans and Democrats will be wrangling over all of these details, at least until December 23 (they loath the thought of working through the holiday). This is a breakdown of how close the two parties are right now: Obama’s start is a ratio of cuts to revenue of 1.5 to 1 while Republicans are closer to an ”1 to 3 revenue to cut ratio.”
Alas, this story is to be continued….for three more weeks, anyway.