# A Breakdown of the Fiscal Cliff



## Denton (Sep 18, 2012)

The rest of the article can be found here, at the Market Oracle:
http://www.marketoracle.co.uk/Article37168.html

In the third quarter of 2011 the US Congress agreed to rather severe tax increases and spending cuts that would kick in as of January 2013, as a way to get a deal done to increase the debt ceiling. In addition, the Social Security payroll tax cut and extended unemployment benefits are also scheduled to go away in January. All told, if nothing changes, this abrupt shift in fiscal policy would result in a hit to the economy of about $650 billion, or a little more than 4% of GDP, at a time when the economy is likely growing less than 2% a year.

Let me break down the major components of the Fiscal Cliff:

Abolition of the Bush tax cuts, which amount to $265 billion, of which $55 billion is for the "wealthy" and $210 billion for the "middle class" (everyone else). Almost no one on either side of the aisle wants to actually go forward with axing the tax cuts for the middle class. Republicans want to hold on to the top-level tax cuts, and to my mind that's a bargaining chip (see below).

The Budget Control Act, or the debt-ceiling deal, comes in at roughly $160 billion, with $110 billion of that in sequestration, mostly for defense; and there seems to be a growing consensus that not all of these cuts should be made.
The 2009 stimulus will also roll off (this is the 2% Social Security break and extended unemployment benefits). This amounts to $140 billion all on its own, or almost 1% of GDP. Almost everyone agrees that these tax cuts were supposed to be temporary.

The "ObamaCare" $24-billion tax increase on high-income households is almost sure to be allowed to go through.

Technically, there is $105 billion in the temporary "doc fix" and Alternative Minimum Tax, which every year are supposed to expire and every year are postponed, which of course allows Congress and the president (whoever is in control) to project lower deficits in the future, even though those cuts never happen.

_If you add the $105 billion of fixes in #5 and the middle class tax cuts, you get $315 billion, or almost half of the Fiscal Cliff, which reduces the impact to 2% of GDP. Take some of the sting out of defense and you get to less than 0.5%._


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## AquaHull (Jun 10, 2012)

Over my head on that one, and I read most of the article


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## WoadWarrior (Oct 10, 2012)

All of this just makes me depressed. But... it gives us another good reason to invest in ammo.


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## jandor123 (Oct 24, 2012)

I try to be diversified. I have the usual Gold and silver stockpiles, i have items of value that i keep for trade. I dabble in the market, and have done well at times, and miserable at times.
The only thing i can do as an individual is take car eof my own debt and try to make sure that what i have I own. Countries have been in debt and have failed time after time throughout history. We have no control, no way to affect the outcome. So, the best, an only policy i see is to be as responsible and self reliant as i can possibly be. Then let GOD take care of the rest.

;-)


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## scramble4a5 (Nov 1, 2012)

Well the one thing the Washington politicos love is their power and money. In order to keep those they need to get re-elected. If they let the country fall off the fiscal cliff they will risk losing their jobs. I expect an 11th hour deal with some hidden provisions that screw the normal folks over without actually telling them so.


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## rim (Nov 17, 2012)

Im a fed, and we are being told to "not worry", LOL...seriously. The DoD has some ability to move funds around, but operations and overseas commitments take precedence over CONUS crap...not sure how much the non-DoD funds can be moved around, I've read a crap-load of DHS, FBI, etc will be affected.


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## pharmer14 (Oct 27, 2012)

Denton said:


> The rest of the article can be found here, at the Market Oracle:
> http://www.marketoracle.co.uk/Article37168.html
> 
> In the third quarter of 2011 the US Congress agreed to rather severe tax increases and spending cuts that would kick in as of January 2013, as a way to get a deal done to increase the debt ceiling. In addition, the Social Security payroll tax cut and extended unemployment benefits are also scheduled to go away in January. All told, if nothing changes, this abrupt shift in fiscal policy would result in a hit to the economy of about $650 billion, or a little more than 4% of GDP, at a time when the economy is likely growing less than 2% a year.
> ...


The fiscal cliff is no accident. This is something the media has been successful at portraying it as. The cliff is the direct result of politicians raising the debt limit last year without a long term plan. The only answer to this problem is increased REVENUE (note. NOT rates) and spending cuts.

If you ask me, the Republicans are doing a horrible job at portraying conservative solutions to this mess. They should propose an across the board tax rate cut. Yes. Across the board from the current Bush levels. It would show the American people who exactly is in favor of lower taxes.

The democrats are playing this thing extremely smart. They're backing the republicans into a position where they will be forced to go along with whatever the democrats say. If they don't? The democrats simply let the current rates expire and vote first thing January to modify the middle income tax brackets back down, and THEY get to be seen as the party that cuts taxes, when in actuality, they raised the top rate to 36.9%.

I think it is astounding that in places like NY, CA, and HI, American citizens will only be able to keep 1 out of every 2 dollars they make. It's absolutely incredible.


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## pharmer14 (Oct 27, 2012)

Also, there is no guarantee that the tax rates going up will drive up revenues. Why? Unemployment. What happens if rates make the jump back, but unemployment doubles? We may still make some revenue, but it won't be the number anyone claims, AND we'll have to spend money on that many more people collecting benefits. 

If you ask me, allowing rates to go up is not a good way out of the cliff. Higher rates --> less take home pay -->less money for people to spend --> less products purchased --> less jobs.


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## jc-hunter (Nov 13, 2012)

This is a complete setup by Obama so either way it goes, the "voters" end up pissed off,and he can blame it on the Republicans. Either way its Loose/loose for America, and win/win for Obama. I have said it before. He will let us go into the crapper, then convince 51% of the voters that Congress is no longer beneficial to the people. He will then present his promise to " fundamentally change" the USA to the voters. Say good bye to The Constitution and Liberty. Ron Paul and Glenn Beck had Obama pegged since 2008.


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## Smitty901 (Nov 16, 2012)

Why we are headed for trouble . Take from everyone else but give to me. Hide the truth . American can't figure it out. The so called rich pay all the taxes now they have for a long time. Any other line is just not true.
Obama wants to bring America down. Read his own words. Most will fall for it. My own union puts people in forums like this one as plants they pretend to be here for good reason but they have a real mission to plant seeds. Blame it quietly on the rich
Obama's goal is the same as his one time hero Hugo. To nationalize everything. to take over every aspect of the country. 
If you think that is a good thing if you want it go for it. I don't agree. Class warfare never ends well . Obama can pay the promises he made to take and give now. He is sure we are not smart enough to figure it out . After all we are dumb sheep in need of his care. Lot of people expecting him to bring them someones else bacon well it may not show.


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## inceptor (Nov 19, 2012)

Smitty901 said:


> Why we are headed for trouble . Take from everyone else but give to me. Hide the truth . American can't figure it out. The so called rich pay all the taxes now they have for a long time. Any other line is just not true.
> Obama wants to bring America down. Read his own words. Most will fall for it. My own union puts people in forums like this one as plants they pretend to be here for good reason but they have a real mission to plant seeds. Blame it quietly on the rich
> Obama's goal is the same as his one time hero Hugo. To nationalize everything. to take over every aspect of the country.
> If you think that is a good thing if you want it go for it. I don't agree. Class warfare never ends well . Obama can pay the promises he made to take and give now. He is sure we are not smart enough to figure it out . After all we are dumb sheep in need of his care. Lot of people expecting him to bring them someones else bacon well it may not show.


They can say what they want but the truth of the matter that no one hardly talks about is that the majority of the tax burden falls on the middle class. Class warfare has been subtle so far but the amount of people in the middle class is dwindling. We are becoming extinct slowly but surely. The gap between the rich and poor is growing wider. Biden states he is part of the middle class but he lives in a 5 million dollar home. Not many politicians fall in the middle class. If you think they want to lower their standard of living you are sadly mistaken. The majority of people think that in Jan only the taxes of the rich will go up. Watch your pay check. Social Security will be taking more and so will the IRS. I am a long way from being rich but I expect O'mans attitude of my way or the highway will see our paychecks shrink.


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## scramble4a5 (Nov 1, 2012)

inceptor said:


> They can say what they want but the truth of the matter that no one hardly talks about is that the majority of the tax burden falls on the middle class. Class warfare has been subtle so far but the amount of people in the middle class is dwindling. We are becoming extinct slowly but surely. The gap between the rich and poor is growing wider. Biden states he is part of the middle class but he lives in a 5 million dollar home. Not many politicians fall in the middle class. If you think they want to lower their standard of living you are sadly mistaken. The majority of people think that in Jan only the taxes of the rich will go up. Watch your pay check. Social Security will be taking more and so will the IRS. I am a long way from being rich but I expect O'mans attitude of my way or the highway will see our paychecks shrink.


I am not rich but certainly not poor. The feds, state, county, locals all get plenty from me every year. Amen to the above


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