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Avatar of GI KoreaBy on January 2nd, 2013 at 5:36 am

Houses Passes Budget Deal, Taxes and Deficit To Increase

» by in: Politics-US

Despite the media’s so called “Fiscal Cliff” fearmongering a deal has been passed to avoid pending budget cuts:

The House seemed on track to torch the legislation, a hard-fought bipartisan bill crafted by Vice President Joe Biden and  McConnell that sailed through the Senate by a lopsided 89-8 margin in a vote shortly after 2 a.m.

The compromise bill averts the sharpest tax increase in American history. But it hikes rates on income above $400,000 for individuals and $450,000 for households, while exemptions and deductions the wealthiest Americans use to reduce their tax bill face new limits. The accord also raises the taxes paid on large inheritances from 35% to 40% for estates over $5 million. And it extends by one year unemployment benefits for some two million Americans. It also prevents cuts in payments to doctors who treat Medicare patients and spares tens of millions of Americans who otherwise would have been hit with the Alternative Minimum Tax. And it extends some stimulus-era tax breaks championed by progressives.

The middle class will still see its taxes go up: The final deal did not include an extension of the payroll tax holiday. A report released by the non-partisan Congressional Budget Office Tuesday complicated matters further. It said that the Senate-passed compromise would add nearly $4 trillion to the federal deficit over 10 years.  [Yahoo News]

Here are some thoughts on all this nonsense.  First of all I liked how the media after the election all got together and decided to call it the “Fiscal Cliff” instead of “Sequestration” which was the term used before.  They changed it to “Fiscal Cliff” to make it seem as scary as possible.  There were even networks using countdown clocks just like some of them used for the Maya Apocalypse earlier last month.  This just shows that this was all made for TV entertainment.  Despite all the Fiscal Cliff doomsday talk the politicians were able to just simply pass a bill that puts off the automatic spending cuts off for a few months that many real analysts predicted would happen.  So much for Sequestration being something that was supposed to force Congress into making hard choices.

So the majority of the tax fighting is over and the next fight will be over cutting spending in a few months when the debt ceiling will have to be raised:

“Now the focus turns to spending,” Boehner said, vowing his party would “hold the president accountable for the balanced approach he promised, meaning significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt.”

There is no way there is going to be enough politicians to vote to make significant cuts in entitlement programs like Medicare and Medicaid.  It would be political suicide.  So I expect something superficial that doesn’t really solve the nation’s fiscal problems to be passed after much made for TV drama.  I would not be surprised though if more defense cuts are made because that is something that is politically easier for them to do.  After it is all done the buck will once again be passed because no one wants to be blamed as being the ones who had to make hard choices that would get the nation’s fiscal problems in order.

Anyway I prefer Korean made for TV political theater because it is definitely more exciting than watching Fiscal Cliff doomsday clocks day after day.

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  • tbonetylr
    6:41 am on January 2nd, 2013 1

    “So the majority of the tax fighting is over”

    Huh, you think agreeing to not cut taxes for 98% of Americans was “simply passed” but was and will be the “majority” of the “fighting”?

    “There is no way there is going to be enough politicians to vote to make significant cuts in entitlement programs like Medicare and Medicaid.”

    You forgot the military/jobs bill budget.

    They used “fiscal cliff” last year didn’t they? And it became a “fiscal cliff” when republicans decided to make a big deal about the debt ceiling as the black president took office.

    “The debt ceiling has been raised 74 times since March 1962,[13] including 18 times under Ronald Reagan, eight times under Bill Clinton, seven times under George W. Bush and three times (as of August 2011) under Barack Obama.”

  • Glans
    9:44 am on January 2nd, 2013 2

    “The compromise bill averts the sharpest tax increase in American history. But it hikes rates on income above $400,000 for individuals and $450,000 for households, while exemptions and deductions the wealthiest Americans use to reduce their tax bill face new limits. The accord also raises the taxes paid on large inheritances from 35% to 40% for estates over $5 million.”

    If this persecution of the successful doesn’t stop, they’ll take their talents elsewhere. Heavenly Father, we pray for Thy mercy: please don’t let the door hit them in the back on the way out.

  • Denny
    5:18 pm on January 2nd, 2013 3

    We’re now paying for the wars in Iraq and Afghanistan, so…

  • jeffg
    5:39 pm on January 2nd, 2013 4

    “If this persecution of the successful doesn’t stop, they’ll take their talents elsewhere. Heavenly Father, we pray for Thy mercy: please don’t let the door hit them in the back on the way out.”

    Where is John Galt? Be careful what you wish for.

  • Sonagi
    6:16 pm on January 2nd, 2013 5

    Don’t worry, Glans. A few very special job creators were looked after in the fiscal cliff bill:

    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/02/from-nascar-to-rum-the-10-weirdest-parts-of-the-fiscal-cliff-deal/?tid=pm_pop

    The whole debate about cutting entitlement spending bothers me forso mnay reasons. First, Social Security is structured to be self-funded with a trust fund to help cover retirement costs for baby boomers. Why should I suffer a cut in benefits I paid for ecaue Congress chose to borrow my money to pay for many either expenditures, including teo foreign wars? Second, while Medicare does indeed pay recipients more than what was paid in though FICA, there is littl talk about th causes of the imbalance. We spend more per capita on health care than any other country on earth. Exhorbitant health care costs are surely one reason why Medicare is in the red, Entitlement foes, most of whom are vested in government pension programs with generous medical benefits, refuse to discuss lowering health care costs as a strategy for saving Medicare. They just want to slash and burn spending by upping the retirement age or reducing coverage. another relevant fact overlooked by the

  • Teadrinker
    6:29 pm on January 2nd, 2013 6

    “Exhorbitant health care costs are surely one reason why Medicare is in the red…”

    Government social programs aren’t for profit.

  • Sonagi
    6:57 pm on January 2nd, 2013 7

    Another relevant fact overlooked in the media is the 40-credit requirement for vestiture in Social Security and Medicare. 40 credits is earned after about ten years of full-time employment. Social Security benefits are calculated based on total earnings, but Medicsre is not. Someone who paid into FICA for only 15 years gets the same benefits as someone who paid in for forty years. Upping the number of credits required to earn full Medicare benefits while charging modest premiums to those with insufficient work history would help balance the Medicare budget in a fair manner. I would guess that most retirees with limited work hiistory are either stay-at-home spouses and older immigrants,, mostly parents of naturalized US citizens who immigrated here themselves as adults. While there are married women of my grandma’s generation who never worked until the kids were grown up, most married women of my mom’s and my generation will put in 20-25 years of full-time employment combining the periods before the kids were born and when the mom returned to the workforce, Medicaid and SSI eligbility would need to be revised so that it iis no longer a dumping ground for older immigrants with little or no work history in the US and a haven for middle-class and upper middle-class retirees who sign over their assets to their children to get Medicaid-funded assisted living care.. SSI for children needs to return to its original purpose -to provide badly needed money to parents burdened with caring for severely disabled children by restricting eligible disabilities to serious ones like cerebral palsy and blindness, not relatively minor health impairments like speech delay and ADHD.

  • Sonagi
    7:12 pm on January 2nd, 2013 8

    Government social programs aren’t for profit.

    No, but government-funded health care is provided mostly by private physicians and medicine by Big Pharma. One of my brother’s chemo meds costs $4,000 a month for the brand name while the generic version cost half that,l. My mom tried to fill a prescription at a local pharmacy and was refused because they carried only the generic and Medicaid required pre-authorization to substitute the generic for the brand name. She expected it would be the opposite – that the generic would be the default and the more expensive brand name needing approval. I told her the pharmaceutical company which manufactures the brand name may have a special agreement with Medicaid and possibly Medicare. My mom had to drive all th way back to the hospital to get the name brand version of th drug.

    In the US, nearly all physicians are paid per service rendered, rather than a salary. This provides a huge incentive for doctors to order lots of tests., especially if they own or lease the imaging center or lab.

  • Kingkitty
    12:56 pm on January 3rd, 2013 9

    Well kittens now that they failed to do things right…..100% of working Americans will now have a higher SSN Tax and the Free Health Care Tax. Expect more Taxes very soon as President Obama said yesterday more revenue increases are being considered. So nothing was accomplished last weekend except to stick it to anyone earning just more then President Obama and increase the National Debt.

    This is what happens when people vote in leaders based on “hope and change” speeches and less on their record (which was dismal). See then they hire their buddies and those who gave lots of money to them and well these people have no clue what they are doing or an understanding of economics.

  • Glans
    6:02 pm on January 3rd, 2013 10

    French actor Gerard Depardieu has sought and received Russian citizenship to avoid high taxes on the rich in France. Here’s the story at Al Jazeera.

  • Teadrinker
    6:51 pm on January 3rd, 2013 11

    #10,

    Depardieu? Pfft. He’s helping out his buddy Putin take a jab at Hollande. Actually, what’s most significant is Bernard Arnault (the richest European) applying for Belgian citizenship.

    Not only does Hollande expect this tax to bring in 10 billion Euros from the wealthiest French, he also wants to increase taxation to get 10 billion Euros from corporations and an additional 10 billion Euros from the general population.

    One of the issues this raises is that of fiscal harmonization within the European Union. Smaller states which have a smaller budget have been and will be able to attract wealth and investment. However, fiscal harmonization itself is not a solution to France’s current budgetary problems, which are a product of the previous government’s policies.

  • Glans
    11:09 am on January 15th, 2013 12

    The Chinese continue to buy our long-term debt. Yet they have no control over us, and they understand that the US Treasury is the safest place to park their cash.

    Daniel Altman says:
    “China has actually decreased its short term U.S. bond holdings by 5.1%. China holds $US 3.7 billion short term U.S. paper. On June 2011 China held $US 4.9 billion of short term U.S. paper. So basically all the debt that China holds are long term treasuries now. Interesting to know, China had $US 200 billion in short term U.S. debt in May 2009. So they divested all short term paper to long term paper.”

    Dan Drezner says:
    “In other words, contrary to the fears of debt hawks in 2009 — including, it should be noted, Hillary Clinton — China has not exercised an iota of influence over the United States via its debt holdings. Indeed, the shifting pattern of their debt purchases strongly suggests that the Chinese have recognized the futility of such an approach.
    While Beijing has recognized this truth, certain Very Serious People who write Very Serious Columns persist in being afraid of China’s mythical debt leverage. So, on occasion, as a public service, this blog will continue to remind its readers that U.S. remains clothed in immense financial power.”
    Kevin Drum says:
    “Rising U.S. debt hasn’t caused inflation. It hasn’t sent interest rates skyrocketing. It hasn’t reduced Chinese demand for American bonds. It hasn’t reduced demand for long-dated bonds. Really, it hasn’t done any of the things that conservatives have been predicting with apocalyptic fervor for the past four years.”

    At Mother Jones, Drum gives links to Altman and Drezner.

 

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