- Analysis: “Fiscal cliff” deal called a dud on deficit front (Reuters, Jan 1, 2013):
WASHINGTON – In the controversy surrounding the “fiscal cliff” issue, it’s easy to forget that the origin of the entire debate was a professed desire to reduce swollen federal deficits.
Whether the target was $4 trillion over 10 years, as proposed by the Bowles-Simpson deficit reduction commission, or in the $2 trillion range, as tossed around by House of Representatives Speaker John Boehner and President Barack Obama, the idea was to rein in total debt that now tops $16 trillion.
By those standards, the bill passed by the U.S. Senate early on New Year’s Day to avoid the cliff’s automatic steep tax hikes and across-the-board spending cuts, looks paltry indeed.
The legislation, which as of Tuesday evening had yet to be passed by the House, would add nearly $4 trillion to federal deficits over a decade compared to the debt reduction envisioned in the extreme scenario of the cliff, according to the non-partisan Congressional Budget Office.
- Moody’s Warns On USAAA Rating; IMF Piles On (ZeroHedge, Jan 2, 2012):
Moody’s has stepped forward with the first warning shot across the bow that:
- *MOODY’S: MORE MEDIUM TERM ACTIONS MAY BE NEEDED TO SUPPORT Aaa
Has contradicted itself (from September) on the debt-ceiling breach; and warns that while the deal ‘mitigates’ some fiscal drag, it does not remove it. To wit: the IMF piles on:
- *IMF SAYS `MORE REMAINS TO BE DONE’ ON U.S. PUBLIC FINANCES
- *IMF SAYS U.S. DEBT CEILING SHOULD BE RAISED `EXPEDITIOUSLY’
Full statements below. Continue reading »
- The “fiscal cliff” deadline has passed (AP, Jan 1, 2013):
WASHINGTON – The “fiscal cliff” deadline has passed – technically, at least.
The beginning of the New Year in theory means across-the-board tax increases and spending cuts kick in, but Congress is working to cancel them before they can have an impact.
- Happy New Year Middle Class: The Fiscal Cliff Is Going To Rip You To Shreds (Economic Collapse, Dec 30, 2012):
The middle class has quite a gift welcoming them as the calendar flips over to 2013. Their payroll taxes are going to go up, their income taxes are going to go up, and approximately 28 million households are going to be hit with a huge, unexpected AMT tax bill on their 2012 earnings. So happy New Year middle class! You are about to be ripped to shreds. In addition to the tax increases that I just mentioned, approximately two million unemployed Americans will instantly lose their extended unemployment benefits when 2013 begins, and new Obamacare tax hikes which will cost American taxpayers about a trillion dollars over the next decade will start to go into effect. If Congress is not able to come to some sort of a deal, all middle class families in America will be sending thousands more dollars to Uncle Sam next year than they were previously. And considering the fact that the middle class is already steadily shrinking and that the U.S. economy is already in an advanced state of decline, that is not good news. You would think that both major political parties would want to do something to keep the middle class from being hit with this kind of tax sledgehammer. Unfortunately, at this point it appears that our “leaders” in Washington D.C. are incapable of getting anything done. So get ready for much smaller paychecks and much larger tax bills. What is coming is not going to be pleasant.
So what happened? Continue reading »
Dr. Paul Craig Roberts:
- How The Fiscal Cliff Talks Collapsed (ZeroHedge, Dec 23, 2012):
The collapse of the Fiscal Cliff talks should come as no surprise to anyone (except, of course, for all those “expert” political commentators virtually all of whom saw a deal by December 31: a full list of names is forthcoming). The reason: a simple one – a House torn, polarized to a record extreme, and a political environment in which the two parties, in the aftermath of a presidential election humiliating to the GOP, reached unseen before antagonism toward each other. In this context, it was absolutely inevitable that America would see a replica of last summer’s debt ceiling collapse, which mandated a market intervention, in the form of a crash, and the wipeout of hundreds of billions in wealth – sadly the only catalyst that both parties and their electorate, understand. We had prefaced this explicitly in early November when we said that “the lame duck congress will posture, prance and pout. And it is a certainty that in the [time] remaining it will get nothing done. Which means, that once again, it will be up to the market, just like last August, just like October of 2008, to implode and to shock Congress into awakening and coming up with a compromise of sorts.” Which of course brought us to Thursday night’s mini-TARP moment.
If you missed Thursday’s ES flash crash, fear not: there will be more “TARP moments” as first the Fed is brought into action (as we reminded yesterday), and then, as the final deadline – that of the expiration of various debt ceiling extension gimmicks which takes place in March, and which is the real deadline for a deal. Nonetheless, there are those forensic detectives who are addicted to every single political twist and turn, and who are curious just where and when the Fiscal Cliff talks broke down in the past week. In this regard, the WSJ provides a useful timeline.
From the WSJ:
Mr. Obama repeatedly lost patience with the speaker as negotiations faltered. In an Oval Office meeting last week, he told Mr. Boehner that if the sides didn’t reach agreement, he would use his inaugural address and his State of the Union speech to tell the country the Republicans were at fault.
At one point, according to notes taken by a participant, Mr. Boehner told the president, “I put $800 billion [in tax revenue] on the table. What do I get for that?”
“You get nothing,” the president said. “I get that for free.”
Well, you can’t fault the man at not demonstrating “leadership” at crucial junctions: after all it’s only fair he gets something for free. Continue reading »
Dr. Paul Craig Roberts:
And why do we hear very little about this?
- Fiscal Cliff: Let’s Call Their Bluff (Web of Debt, Dec 19, 2012):
The “fiscal cliff” has all the earmarks of a false flag operation, full of sound and fury, intended to extort concessions from opponents. Neil Irwin of the Washington Post calls it “a self-induced austerity crisis.” David Weidner in the Wall Street Journal calls it simply theater, designed to pressure politicians into a budget deal:
The cliff is really just a trumped-up annual budget discussion. . . . The most likely outcome is a combination of tax increases, spending cuts and kicking the can down the road.
Yet the media coverage has been “panic-inducing, falling somewhere between that given to an approaching hurricane and an alien invasion.” In the summer of 2011, this sort of media hype succeeded in causing the Dow Jones Industrial Average to plunge nearly 2000 points. But this time the market is generally ignoring the cliff, either confident a deal will be reached or not caring.