It appears that a deal has been struck to extend the Bush tax cuts for two years for all taxpayers. In addition, unemployment benefits are to be extended 13 months, a two percent point reduction in the Social Security taxes employees (but not employers) pay, and the first $5 million of estates will be exempt from tax, with a a 35% tax rate on the amounts in excess of that. Along with a few other provisions, the deal, if passed, is expected to cost $900 billion over two years.
Of course, we don’t actually have $900 billion so this will be paid for with additional debt.
If this passes – and I’ve little doubt that it will – it will demonstrate that neither side is willing to make tough choices. And it will show that Democrats have no backbone, something we knew, anyway.
VIVIAN J. PAIGE | All Politics is Local 
“neither side is willing to make tough choices.” Fixed it for you.
Thanks – was writing this while waiting – in a freezing cold room – for my car to be serviced.
But but the Debt! The Deficit! The Debt!
Oh, wait. That’s right. All the people yelling about that don’t *actually* care about it. Just another tool in the ongoing and dishonest conversation.
Yep.
Should have gotten a better deal. At least decoupled the middle class tax cut, making it permanent, from the upper class cut, which could have been renewed for two years. That would have actually accomplished something, from the Democratic perspective. This was just a total capitulation.
Well, Democrats have to be committed to *something*.
“And it will show that Democrats have no backbone, something we knew, anyway.”
So what are we going to do about it?
Get better Dems elected.
Well, sure, but how? Primary the bad ones? Start a third party movement to push Dems to the left?
There seems some basic shortcomings with the Dems: failure to admit that Fed. govt. needs an overhaul; unwillingness to retaliate vs. Blue dogs; feckless media infrastructure et al.
How do you define a “better Dem”?
Primarying the bad ones makes sense to me. I don’t think a 3rd party makes sense.
Better would be a no-confidence vote a couple of months before the general election. If you lose that, you cannot run for that seat in the next election.
So the president wants to extend the Bush/Republicans’ tax cuts for another two years woo who! So what does this mean? Well the Goverment will borrow money from China to give us(mostly the rich) tax cuts in hope that we will all head on down to Wal-Mart to buy cheap Chinese made products to stimulate who’s economy?
Cutting taxes is not a problem, it is a solution. Cutting out at least half of the present entitlements would more than recude the need for such high taxes to begine with.
And which of YOUR entitlements are you willing to give up?
Which of my entitlements am I willing to give up? I want none. Which ones am I getting that I asked for in the first place? And which chsarities are you willing to have me give up on this year? (I quit giving to most of them until they sever their ties with politics).. Call em scruge for now.
Give me the capacity to hire more people and there will be fewer unemployed.. Blame me for about 35 people being unemployed this year.. its all my fault.. I can’t afford to rehire them when Obamacare forces us to leave them off the payroll.
Would it be possible to have a post about the tax reforms in the deficit reduction commissions plan? I am interested to see what people think of their proposal that the entire tax code should be scrapped in favor of a flat income tax with three rates depending on income. The math shows it to be a tax increase, but personally I wouldn’t care.
If it takes an effective tax increase to get rid of virtually the entire IRS code, I think that’s a fair deal. The income tax rates are all greatly reduced, there won’t be much paperwork at all, and no one will have to bang their heads up against the wall trying to understand the tax code.
The only downside is that you might be put out of a job, but I think you could find a new one at the Virginian-Pilot or something…
Sure. I’ll put something up tomorrow.
You’ll need accountants and tax attorneys regardless. Income still needs to be defined, accounted for, and reported. The disputes that arise over that alone should keep plenty of people employed.
Fundamental reform of the tax code has to overcome a huge hurdle though: all the various parties that lay claim to little and big nuances in the code. We saw what a mess heath care reform was with all the parties involved there. This is even bigger than that.
I heard an idea that might work on NPR today. Instead of wholesale elimination of tax expenditures, limit all of them to a percentage of income. Then gradually reduce that percentage over time. You phase in the rate changes contemporaneously. And voila! Over time you’re there. This still assumes that all the people involved would even agree to a gradual phase out even if it was a shared reduction with everyone else.
No social security, no Medicare for you, huh? What else do you describe as entitlements?
“Give you the capacity to hire more people….”? So you do want someone somewhere to “give” you something? Are you willing to eschew all tax breaks you get as a business? Why, for example, should I have to pay for your research? So no tax deduction for research. The costs should come off your bottom line not paid for by otehr taxpayers. Why should I have to pay for it by paying more taxes to offset your tax break?
“Which ones am I getting that I asked for in the first place?” I assume you meant “didn’t” ask for? Either way, which ones are you getting, besides tax breaks, etc.?
Companies should not be paying income tax anyway. Just think how much money companies could save if they didn’t spend all that money on tax lawyers and accountants just to figure out what their taxes are.
Companies are just groups of owners. Tax the owners on the income that gets to them in dividends.
“Companies are just groups of owners. Tax the owners on the income that gets to them in dividends.”
That reflects a view of how companies operate that it totally divorced from reality. And it is here that much of the argument for “free enterprise” collapses. Corporations are structured so that the “owners” power is greatly diminished. It’s the CEO and directors, who are chosen and paid (bribed) by the CEO, who have inordinate power, rendering the “owners” impotent.
Until that dynamic is corrected one cannot view corporations as “just a group of owners” as if they were a dozen families in a condo timeshare.
I would be in favor of free enterprise, but that’s not what we have now–and haven’t really had since the late 19th century.
If we did have free enterprise, I would agree that corporate taxation is not a good thing. Moreover, I, unlike many progressives, favor a lower tax rate on dividends and capital gains. I’d rather encourage savings, instead of spending.
But in an environment where we have one party–with a straight face–say that it is concerned about the deficit but wants to give folks whose tax burden has fallen by two-thirds over the last 50 years another break costing nearly $1 trillion, I’m not hopeful of a rationale discussion of anything anytime soon.
Even so, we should be taxing the CEOs and directors on their income, and the shareholders on their income.
Bob, Social security should have been a safety net to help those on the bottom economic rung to get by in their old age. It was turned into a retirement package that is so mismanaged that it will not be worth a damn for most people paying into it now. No I do not want it although I have paid into it for 36 years. I do not want medicare either, it is a scam. I do not like taking something from kids who have not entered the workforce yet and in fact you people who depend on medicare and social security got a real surprise coming.. Look into the eyes of children and thank them for paying for your failure to elect a govenment that you people lacked the courage to elect.. And write them another IOU. You people are charging your interest payments on their credit card and really screwing them. Feel good yet? They will love this when they reach the workforce and look at their pay stub.. Do you people think they will be stupid enough not to know what their elders did to them? Whiskey Tango Foxtrot!
As far as giving me the capacity to hire more people, Damn right! Leave it to government to drain dollars from a viable tax positive business that employs taxpaying citizens. The more money I make, the more taxes I pay and the more taxes are collected from people who are productive all the while reducing people living on the hind tit of government aka welfare and handouts. Yes I said that and stand by my words. I am nauseated by the democrats in congress who rammed obamacare through instead of ramming tax releif for job creators. All you got was a bunch of make work government job growth so I hope you dems and rinos are proud of yourselves.
As for research, if the research is genuine and leads to new products that can be manufactured and taxed at time of sale, HALLELULAH! Tax breaks for research is brilliant, without them many more things will not only be made in China, they will be engineered there too.. just what an ailing economy needs to grease the wheels of socialism.
As for tax breaks, yeah I get a few but as it stand now I am paying about 95% more taxes than most and since I cannot justify keeping 133 people working this year DUE TO DEMOCRATS PARTISAN PROVISIONS OF OBAMACARE, I will downsize permanently and lose a lot of sleep knowing I let good people go while I also let go of some slackers who supported the leaders who will now tax me to fund their unemployment.
Yeah Bob, you got me PO’d this fine morning. Have a blessed day.
We have found some common ground. Social Security should be a safety net: Raise benefits for the less well off and means test it so those over a certain retirement income get none of it.
Same should be true of Medicare, though without a control on costs, there will be precious few who can afford their own health care in old age.
Re research tax breaks, you seem to making the argument that we need them to compete. But that’s not free enterprise, is it? It’s taxpayer sponsored enterprise.
Re thinking our children would be so stupid, well, alas, our generation has set the bar. After all, after the predominance of the American economy in the post WWII years when income tax rates on the wealthy were markedly higher so that our parents generation could build the interstate highway system and other public projects, we now argue that lower taxes will return us to the glory days.
Tax breaks for research are not tax payer sponsored enterprise.. Tax breaks for research are a means for a company to offset their lost income. Research is often a money loser big time.. I know, I spent milions of corporate dough on natural gas fuel systems R&D over a decade ago and maybe if the company is lucky they will break even in the next decade.. Yes, I am projecting a 20 year payback.. Private industry is not in the welfare business, they are obligated to their stock holders. If they fail to produce enough profit, they get dropped and their stock value crumbles. Tax payers lose when a company does not take financial risks by conducting research intended to lead to future products that often take decades to succeed in the market place. Electric auto propulsion has been on a 60 year r&d cycle and is just now beginning to bear real fruit but it will take another decade plus to reach parity with conventional petrol fueled vehicles. Without tax breaks, less R&D activity could take place and less would mean more dependence on imported energy.. Same is true for medical research and many other industries such as the hundreds of specialty companies that make that screen you are reading this on.. R&D makes it so affordable that printed newspapers are no longer making economic sense today.
As for the higher taxes on us wealthy snobs, the tax code is forcing many of us under Bob. The vanderbilts are long gone and fewer in between.. Those expanding family dynasties now reside in parts od europe, the middle east and Asia where wealth creation of industrialists via exported manufacturing is not penalized as severely at present. In these times there are a few creating wealth but it is rare that they are doing it by manufacturing and massively exporting overseas. Just visit any Walmart.. Each one is one of thousands of distribution hubs for chinese goods.. same is true for most shoe stores.. A lot of that stuff crossed the ocean on chinese owned freight ships.. Our ports and trucks are busy though.. see the problem?
Our children are not stupid, neither are you. But they will know they have been snookered by the previous generation. And that generation is US.. Get my drift?
“As far as giving me the capacity to hire more people….”
You have fallen into their trap. It is not that the government can give out that capacity, but it takes that capacity from those who might otherwise have it.
They are doing the same with the taxes — saying it is “giving too much to the rich,” when what they really mean is “it’s not taking enough from the rich.”
Reality is that neither an extension of the tax cuts or the unemployment insurance was going to survive a vote on their own. Nor was the hole in the deficit created by both programs going to get fixed in a lame-duck session.
It’s the least worst option.
Least worse? Is that the best we can do?
Least worst is what you usually get when you compromise, which is what legislatures are supposed to do. Look at the Affordable Care Act. 3/8 of the population think it goes too far; 3/8 think it doesn’t go far enough. That’s how these things work out.
+1 Coby, you get it. Government solutions are by their very nature a compromise.
How about a bipartisan move to cut something, anything, that both the Democrats and Republicans can agree on?
Out of the hundreds of agencies and departments there really isn’t one that they can say they can live without and join together in removing in order to save money?
I remember reading 20 years ago that the Treasury could save $1 billion a year by dumping the dollar bill and going exclusively to coins. I’m willing to start with that. Seems like a no-brainer.
Canada did that — hence the Loonies and Toonies.
Japan’s smallest bill is 1000 yen, about $10.
If there were a lot of easy choices here, they would have done it already.
And there has been a bipartisan move to cut something just recently. A group of Senators wrote both Reid and McConnell and stating their support for ending ethanol subsidies.
The defecit is the greatest danger to our country, not international terrorism. If the US government defaults, which is more a question of when and not if, then forget the US bases abroad, social welfare programs, and funding for infrastructure improvements.
A restive and angry population will still require well-funded government agencies spying on its citizens to keep it under control, however.
And who is responsible for the deficit?
So who, then, is presents the greatest danger to our country.
Maybe if Congress did only what the Constitution says it can do, we would not be in this mess.
We need to have taxpayer lawsuits against these programs, and take them to the Supreme Court. Subpoena the congressmen that sponsor these bills, and get them to point out which section of the Constitution gives them the power to do the $h!t they are doing.
Considering that we have Senators that do not know their role in an impeachment, and a VP who does not know he is still in the Legislature, they would be completely lost trying to find Constitutional backing for their usurpations.
Let’s have a round of applause for the Fair Tax.
Keep everything you earned. Pay taxes when you buy.. No penalty for saving and wise investing. No penalty for your offspring when you die.
Hey Turbo, sworn off Medicare and social security yet?
Re the estate tax, I find it curious that conservatives, who often believe that people should earn what they make are for giving people (i.e., their children) who haven’t done anything to earn it, a huge chunk of cash that was most likely enabled by an infrastructure that was paid for by someone else, i.e., taxpayers.
Brilliant Bob.. So when I die, tax my surviving family.. They simply have to shut the business down to pay the taxes and everybody gets fired. Ya know what.. hmm.. Maybe I should do the right thing and fire people now while I am alive and prepare for when I am gone. A lot of people are already doing that and sending their funds into skipping trusts and other gimmicks overseas. Yes, even democrats do this.. no wait, a lot of conservatives have done this too. Now go find those willing to admit to to lol.. Can’t make this stuff up.
You people make me weak with the laughter but the irony is that you are digging your own graves.. People with the drive to create wealth are looking offshore to avoid taxes not because they do not want to pay their fair share but because the US govt makes it impossible for them to PROFIT from their ideas. OOPS, I said a dirty word.
The estate tax can be reformed so that legitimate productive businesses cannot be forced to liquidate to pay the tax. However, if the heirs close the business, they pay the tax.
Besides, the evidence that what you worry about happens is scant. If the estates of less than, say, $5 million were protected, in 2009 there would be about 100 small businesses and farms that would have been subject to the tax.
The estate tax can indeed be reformed so legit biz is not forced to commit hari kari so why has Obama and congress turned a deaf ear to that wisdom? It is because heirs pay death tax that goes up jan 1 2011 that many business are now closing out for better or worse.
It is wrong headed to force the breakup of working businesses and farms (full disclosure I live on a working farm) but that is the result. Forcing heirs out worked gloriously in the USSR too.
Here’s an idea — instead of taking Social Security and Medicare, just take the money directly from your kids and grandkids and cut out the middle-man — the wasteful government bureaucracy.
There are different attitudes about where the country is headed economically but it doesn’t look good. And if these decisions had a damaging impact on the economy President Obama will have a lot of trouble to win his re-election.
Vivian, while you are researching Max’s request, maybe you can address this.
Everyone is talking about the continuation of the Bush tax cuts as being an increase. Saying how the extension will add to the deficit. My question, how is a continuation an increase? Have budgets been drafted based on the expected increase in revenue this would bring, causing a greater deficit?
Is this not just media hype? A way of demonizing a change, regardless of the side on which you sit regarding the issue.
A big problem is people don’t seem to understand what changes mean, they look to the media to think for them.
I must be mistaken, but where?
To answer your question Doug, when the CBO scores a bill or does a budget outlook, they look at two scenarios;
1. Extended-Baseline Scenario – expiring tax provisions in the 2001 Economic Growth and Tax
Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief
Reconciliation Act of 2003 (JGTRRA) would not be extended and the Alternative Minimum
Tax would be left as is and not indexed to inflation
2. Alternative Fiscal Scenario – EGTRRA and JGTRRA would be extended and the ATM would
be indexed to inflation
You don’t even want to know what scenario two looks like over the long term. It’s nothing short of disastrous. I have a summary I put together of the long term budget outlook from June of 2009, its a little dated, but it will give you a good picture of what will happen under both scenarios.
Click to access 2009CBOSummary.pdf
Thanks for the info.
Isn’t 2080 long term, even my kids will be dead!
From the way I read your report, at about 2080 the revenue won’t cover “entitlements”, not to mention debt.
GEEEZ! Glad I’ll be dead, kinda like the commmercial shown about the candidate Hugh Jedebt that is running these days.
Oh it will be long before 2080 that revenue won’t cover entitlements or interest on the national debt.
If you look at statistics for M1, M2, and M3, you see a hugely inflated money supply. The Fed’s statistics for inflation rely primarily on housing prices, so they are massively skewed.
Interest rates are going to have to rise and very soon we will be unable to even afford interest payments. We are heading towards a train wreck that no one seems to want to acknowledge. The government is consistently lying about the numbers and no one has the balls to call them out on it.
China and Russia have already dumped the dollar for bi-lateral trade and the Gulf Coast Council is working out the details of a new currency to replace the dollar for oil deals and pricing. The EU crisis is going to lead to a new treaty or agreement giving the European Central Bank much greater in terms of issuing currency and lines of credit. Everything points to the demise of the dollar in the near future (5, 10, 15 years).
I used to be called crazy for saying this stuff; oh how the tables have turned…
The only way we turn around in our lifetime is if the china bubble bursts AFTER we monetize the debt. All the more reason to audit the fed immediately and put real economists back in DC where they can do something useful when, not if, the um.. opportunity strikes. If we do not reach peace and harmony through a transparent audit of the fed this could undo our economy and our lives as we know them. amajor problem is the sheer number of us that take our livelyhoods for granted. A lot of the mistakes we are making are easily understood by real economists and Obama has none in place worth a damn but he does have a ton of academics who have never turned a company around. Read Iacocca’s book “Where have all the leaders gone?”. http://iacocca.com/ It is brutally sobering to read something so profound from someone who has rescued a company from the brink AND instinctively knows the problems we now face.