The Fiscal Cliff

[Joe Public]

I think there is a decent chance (30% to 50% maybe?) that nothing gets done by the end of the year. If that turns out to be the case, I think there is a decent chance that the stock market takes a bit of a short-term nose-dive before the folks in Washington figure out they better do something. I'm not talking looting in the streets types of societal breakdowns, but maybe a 5%+ drop. I am thinking of getting out of the stock market almost entirely in a week or two and seeing if there are bargains to be had in early to mid-January.

Feel free to tell me if I am being an idiot.

No AMT patch means delayed tax refunds for millions of constituents. It's possible, but I would put the odds somewhat lower.

[FMCoug]

Why isn't there talk of raising the 110K max contribution for SS/Medicare? Seems like raising that to 150K (or even more) would make a big difference.

[Pelado]

Why isn't there talk of raising the 110K max contribution for SS/Medicare? Seems like raising that to 150K (or even more) would make a big difference.

Coupling that with means-tested benefits could go a long way to salvage the system. It also makes the system increasingly redistributionist.

[wuapinmon]

Taxing the rich doesn't necessarily mean a significant increase in tax revenue. I believe Obama's own estimate was something in the neighbor of $70 Billion. In fact, a tax increase on the rich can actually cause a decrease in tax revenue as states and other countries are finding out the hard way.

I am still trying to figure out why going over this "fiscal cliff" is such a bad thing. So the Bush tax cuts will expire for everyone which will add something like $500 billion to tax revenue and another $500 billion will be cut from the budget. Is that the end of the world?

Not for the rich. For the working poor, it can hurt. But, with many people with one spouse 'working for insurance' maybe Obamacare mitigates some of it. Here are my ideas (which I've shared before).

1. Gut Social Security with a strict means test. But, we all keep paying FICA until 2035. Pay off part of the debt with the overage.

2. End Medicare completely for anyone 50 and younger. We all keep paying FICA on this until 2050. Then, it's gone.

3. Universal coverage for all citizens under age 18, and then up to 25 for those enrolled in college, vocational school, or other qualifying program. Pay for it with a tax on wages, however much that needs to be. We're throwing healthcare dollars the wrong way.

4. Tax & penalty holiday, without limits, on all overseas earnings by US based companies. Let's bring those billions home and get them in our banks, stimulating our economy, and promoting capital improvements here rather than abroad.

5. End the War on Drugs, completely. All habit-forming substances can be purchased from state-owned dispensaries. Use the savings and taxes (high taxes) to promote agriculture, addiction services, and attorneys general/public defenders programs. Non habit-forming drugs will still need an Rx, so that normal people don't hurt themselves unwittingly.

6. All cellphone contracts get a $1 a month tax to support Veterans Services. End free medical coverage for veterans for illnesses/injuries not related to their service.

7. Bring the troops home from several locations around the world, especially Afghanistan. It's interesting on the MW3 map of users, places like Diego Garcia, Djibouti, and Kuwait are all glowing green with nothing around them at all. I'm guessing that our troops spend their free time gaming. I wonder how many of those little green glimmers represent billions spent annually to maintain posts.

8. 25¢ a gallon tax on all fuels. Use this to fund infrastructure federal highway projects.

That's my start.

[Goatnapper'96]

The President's initial offering came from Secretary Geithner today:

A.) 1.6 Trillion in more revenue (roughly $160 billion/yr)
B.) $400 billion in cuts to medicare and other entitlements (roughly $40 billion/yr)
C.) Delaying sequester cuts to defense for one year

That, my friends, is a balanced approach! Although I don't think even he really thought it was serious. For those of you keeping track our deficit has dropped from $1.5 trillion to closer to $1.3 trillion, as of the last final #s which was FY 2012 and the the 2013 has a projected deficit of only $900 billion, and this plan would move it down to $1.1 trillion- $700 billion/yr. But what is $400 billion amongst friends!

[Paperback Writer]

Coupling that with means-tested benefits could go a long way to salvage the system. It also makes the system increasingly redistributionist.

I support raising the income ceiling on which SS is taxed and would be OK with means-tested benefits as long as it takes into account earnings accumulated over one's working life.

I would not be OK if Uncle Sam just looked at retirement benefits or 401K balance or something like that.

For instance, my wife and I talked with another couple over Thanksgiving weekend who were trying to talk us into going on a cruise with them. We won't sign up because of the cost and because we have other financial priorities right now. It lead to a discussion of financing kid's colleges, retirement planning, etc. In short, this couple is barely saving for retirement and if they don't make significant changes they will never be able to afford retirment. When when told them a ballpark figure of what we had saved and where we hoped to be when we retired, their response was to "borrow" against our 401K to finance the cruise.

I anticipate that these folks will be the ones who lobby for means testing of SS so they can get their benefits at the expense of those who responsibly saved for retirment.

[Moliere]

I think a Super-Super-Committee would be a good idea. I'm sure they could fix this.

[FMCoug]

I think a Super-Super-Committee would be a good idea. I'm sure they could fix this.

Elections are too far away to save social security and medicare.

[Blueintheface]

Taxes paid as a percentage of GDP don't take tax %'s into account. I think the US is getting about 15% of GDP in tax revenues and it has historically gotten 17-19%. I think the Laffer Curve demonstrates that no matter what your tax rates are you will never receive more than 19% of GDP in tax revenues and if the tax% increase to get higher than that it becomes self-defeating. But I don't think Liberals think much of Art's scholarship.

Something d-o-o economics. Voodoo Economics. (Sorry I couldn't resist)

[Joe Public]

Something d-o-o economics. Voodoo Economics. (Sorry I couldn't resist)

[Uncle Ted]

Not for the rich. For the working poor, it can hurt.

So the working poor were hurting before Bush Jr. cut their taxes?

[New Mexican Disaster]

Not for the rich. For the working poor, it can hurt. But, with many people with one spouse 'working for insurance' maybe Obamacare mitigates some of it. Here are my ideas (which I've shared before).

1. Gut Social Security with a strict means test. But, we all keep paying FICA until 2035. Pay off part of the debt with the overage.

2. End Medicare completely for anyone 50 and younger. We all keep paying FICA on this until 2050. Then, it's gone.

3. Universal coverage for all citizens under age 18, and then up to 25 for those enrolled in college, vocational school, or other qualifying program. Pay for it with a tax on wages, however much that needs to be. We're throwing healthcare dollars the wrong way.

4. Tax & penalty holiday, without limits, on all overseas earnings by US based companies. Let's bring those billions home and get them in our banks, stimulating our economy, and promoting capital improvements here rather than abroad.

5. End the War on Drugs, completely. All habit-forming substances can be purchased from state-owned dispensaries. Use the savings and taxes (high taxes) to promote agriculture, addiction services, and attorneys general/public defenders programs. Non habit-forming drugs will still need an Rx, so that normal people don't hurt themselves unwittingly.

6. All cellphone contracts get a $1 a month tax to support Veterans Services. End free medical coverage for veterans for illnesses/injuries not related to their service.

7. Bring the troops home from several locations around the world, especially Afghanistan. It's interesting on the MW3 map of users, places like Diego Garcia, Djibouti, and Kuwait are all glowing green with nothing around them at all. I'm guessing that our troops spend their free time gaming. I wonder how many of those little green glimmers represent billions spent annually to maintain posts.

8. 25¢ a gallon tax on all fuels. Use this to fund infrastructure federal highway projects.

That's my start.

What would the oldsters do without Medicare?

[frank ryan]

What would the oldsters do without Medicare?

I'm thinking he meant Medicaid

[wuapinmon]

What would the oldsters do without Medicare?

We pay for it until 2050. After that, people will know it's coming and can save for it. Health dollars should go to the young, not the old.

I'm thinking he meant Medicaid

I did not. I would end Medicaid for anyone over age 18 if not enrolled in 501(c)(3) taught higher education/vocational training. Up to age 25 for those who are.

[Portland Ute]

I support raising the income ceiling on which SS is taxed and would be OK with means-tested benefits as long as it takes into account earnings accumulated over one's working life.

I would not be OK if Uncle Sam just looked at retirement benefits or 401K balance or something like that.

For instance, my wife and I talked with another couple over Thanksgiving weekend who were trying to talk us into going on a cruise with them. We won't sign up because of the cost and because we have other financial priorities right now. It lead to a discussion of financing kid's colleges, retirement planning, etc. In short, this couple is barely saving for retirement and if they don't make significant changes they will never be able to afford retirment. When when told them a ballpark figure of what we had saved and where we hoped to be when we retired, their response was to "borrow" against our 401K to finance the cruise.

I anticipate that these folks will be the ones who lobby for means testing of SS so they can get their benefits at the expense of those who responsibly saved for retirment.

Yep