US expected to hit "fiscal cliff" on Monday, no agreement reached

[Commissar MercZ]

Leading up to the elections, the "debt cliff" was a buzzword applied to the current debt problems with the US as it edged towards the debt ceiling that was raised once. Both candidates provided their options for it and promised that after the elections they would go about solving it.

Unsurprisingly this is easier said than done. In Congress the Democrats and Republicans have proposed different plans here. The White House tried to push a compromise solution in the past few weeks which would have entailed some tax increases on those with incomes over a million in exchange for some spending cuts. John Boehner has been working mostly on the House end for his Republicans, though it has been difficult to secure the tax increases from them, either due to tea party pledges to not raise taxes under any circumstances, or criticisms about exactly what areas the White House is offering to cut spending in.

The debt ceiling is supposed to be hit on Monday, so there has been some special sessions tabled for Sunday to try it one last time. If the debt ceiling is hit, then automatic tax hikes across the board as well as spending cuts to medicare, medicaid, and defense (collectively referred to as sequestration) will set in, an austerity type emergency failsafe.

http://www.nytimes.com/2012/12/28/us...scal-deal.html

[Octovon]

The easy (and correct) solution is to raise taxes and cut spending, but both parties have done their absolute best to make this issue to be a lot more difficult than it really should be.

It sure as hell didn't help when they put the debt issue on the political back-burner for so long after raising the debt ceiling.

[Mihail]

1. Cut the military spending

2. Reinvest

3. ???

4. Profit

But lets be honest, that's not going to happen and that's the really the only solution at this point, American industry is dead as dead can be, taxes hikes on the population only works for so long and since there is barely a middle-class to tax anymore it will only hurt the people who are already being hurt from the lack of industry, so....

[Asheekay]

The american government can be expected to do anything except a cut in the military budget. Thanks to the meddling in afghanistan and iraq, stationed armies in arabia, and consulate attacks (happening and being planned), the american state is now reaping the thorny fruits of the prickly crops it has been sowing for the last few decades.

[MrFancypants]

I think the idea of a fiscal cliff is great. Every country should implement something similar. The only problem with the idea is that the US will still make a lot of debts after the cliff.

As it is the cut will probably cause a recession which may spill over to other countries. But that's better than the Greece-style collapse the US would eventually end up with.

[Pethegreat]

Originally Posted by Mihail

1. Cut the military spending

2. Reinvest

3. ???

4. Profit

Reform on entitlements would save more money in the long run and keep the programs solvent for the next hundred years. Unfortunately the military-industrial complex is a big part of the US economy. We won't get rid of one of our best industries for exports, neither will the Russians or the Chinese. Killing people is always good business.

But lets be honest, that's not going to happen and that's the really the only solution at this point, American industry is dead as dead can be, taxes hikes on the population only works for so long and since there is barely a middle-class to tax anymore it will only hurt the people who are already being hurt from the lack of industry, so...

The rising cost of energy and rising wages in Asia are sending manufacturing jobs back to the US. It took years to outsource millions of manufacturing jobs, and it will take years to bring them back. A dollar that stays in country is a dollar that can get spent more and taxed more.

The US needs to go over the cliff. Tax rates and spending will go back to Clinton era levels which history has shown us to be just fine. The 1990's was the best time for the american economy since the boom after WWII. A few more percentage points on taxes won't stop companies from expanding to meet demand nor will it stop consumers from spending money.

[Mihail]

Reform on entitlements would save more money in the long run and keep the programs solvent for the next hundred years.

Entitlements can be accounted for nearly anything in the entitlement program, which also accounts for a decent amount of defense spending as well but it's the discretionary spending which makes up over half of the budget including it's sub-sectors, chopping that by a quarter or even a third would have a far greater impact then cutting anything else, what else do you draw from? education which is already a small slice of the pie, or how about welfare for those children sitting in foster homes? these aren't exactly the ideal in my book.

We won't get rid of one of our best industries for exports, neither will the Russians or the Chinese. Killing people is always good business.

Sure, making things to sell is one thing, making to keep is another.

The rising cost of energy and rising wages in Asia are sending manufacturing jobs back to the US. It took years to outsource millions of manufacturing jobs, and it will take years to bring them back. A dollar that stays in country is a dollar that can get spent more and taxed more.

Not exactly, the raising wages in Asia is slowing down growth, which is fixing inflation which is good for these countries, manufacturing is still Asia's game by a long long measuring stick and will stay that way, the dollar you are referring to is a non-exisiting dollar with no actual backing behind it, with the debt to the ceiling and money being printed regardless this leads to a very very steep hill, the only thing keeping the US afloat at the moment is the same thing that's causing the problem is the retail market which is basically recycled money from the banks which are loaned then payed back by consumers buying into life-debts, this is essentially what you would call a non-sustainable system.

The US needs to go over the cliff. Tax rates and spending will go back to Clinton era levels which history has shown us to be just fine. The 1990's was the best time for the american economy

Which rode high due to the unleashing of the banking system and stock markets to do what they please in conjunction of NAFTA and the WTO, Clinton like alot of other democrats in the use are white washed a bit too much, they had their hands breaking the system just as much, Robert Rubin, Alan Greenspan all laying the ground work for the big break of 2008.

A few more percentage points on taxes won't stop companies from expanding to meet demand nor will it stop consumers from spending money.

Sure, but it won't effect just companies, this will hit the poor and the mostly non-existent middle-class the hardest.

[Kilobyte]

Originally Posted by Pethegreat

The US needs to go over the cliff. Tax rates and spending will go back to Clinton era levels which history has shown us to be just fine.

I've wondered if this was some political dance in order to do just that.

If the country found out that taxes were going to be hiked, it could cause problems sooner, such as panicking, over reacting, or impeachments. Or otherwise result in the end of the careers of one, or both/all parties.

The way it is occurring now, both parties can shift blame to the other when the cliff is reached, and largely protect their own careers. Also, because there is both hope, and concern, there is a cautious preparation for the fiscal cliff. Cautious preparation is better than panic.

[Pethegreat]

Entitlements can be accounted for nearly anything in the entitlement program, which also accounts for a decent amount of defense spending as well but it's the discretionary spending which makes up over half of the budget including it's sub-sectors, chopping that by a quarter or even a third would have a far greater impact then cutting anything else, what else do you draw from? education which is already a small slice of the pie, or how about welfare for those children sitting in foster homes? these aren't exactly the ideal in my book.

43% of federal spending is entitlement programs compared to 19% for defense. States pay for some programs such as unemployment and children's health insurance.



The US can cut defense spending by asking European nations, Japan, and South Korea to spend more on their own armies. However a 10% cut in entitlement spending will give the same effect as a 25% cut in defense spending. A 25% cut in defense spending will help reduce the deficit, but it does nothing to address the hemorrhaging of money from programs like medicare and social security. These reforms would not reduce the level of benefits to recipients. Instead they would cap what doctors could charge for medicare funded procedures, bump up the SSI eligibility age for healthy workers, and double the income that can be subject to social security tax from $106k to $250k

Sure, but it won't effect just companies, this will hit the poor and the mostly non-existent middle-class the hardest.

The 4 percentage point income tax hike will only affect those making more than $250k. Social security taxes will return to their pre-stimulus levels of 6.5% versus 4%. The SS tax must return to 6.5% to keep the system solvent for the near future.

Sure, making things to sell is one thing, making to keep is another.

Funny you mention that. The US army asked congress to not give them money for 2500 new Abrams tanks. The number of tanks in active and reserve duty is more than enough for a major ground war with both Russia and China. Congress shoved the 2500 new tanks down the Army's throat. The US realizes the threat the J-20 and PK-FA pose a serious threat to older aircraft such as the F-15 and F-18. The F-22 and F-35 are intended to replace the F-15 and F-18. Those aircraft will be sold off to the air forces of other countries rather than stockpiled.

Not exactly, the raising wages in Asia is slowing down growth, which is fixing inflation which is good for these countries, manufacturing is still Asia's game by a long long measuring stick and will stay that way

If demand picks up in the US companies will expand to meet demand. Growth in manufacturing industries is based almost exclusively off of demand. As early as 2010 companies began to move production back to the US. Custom machined part manufactures moved back to the US due to lower shipping costs and faster shipping times. A Chinese part that took 3 days to reach a US factory can reach a US factory in 8 hours if produced in the US. When a customer wanted their part yesterday, a $30/hr US machinist is worth much more than a $5/hr Chinese machinist.

[Mihail]

The US can cut defense spending by asking European nations, Japan, and South Korea to spend more on their own armies. However a 10% cut in entitlement spending will give the same effect as a 25% cut in defense spending. A 25% cut in defense spending will help reduce the deficit, but it does nothing to address the hemorrhaging of money from programs like medicare and social security. These reforms would not reduce the level of benefits to recipients. Instead they would cap what doctors could charge for medicare funded procedures, bump up the SSI eligibility age for healthy workers, and double the income that can be subject to social security tax from $106k to $250k

Problem is, those nations don't need to spend more on their armies, they also need to spend less since they are just as weak as the US, cutting medicare and social security does nothing but put the millions of baby boomers who are now in their 60+'s into a weaker position of life, and at the age of SSI already at 65, what do you want people to work till their death? no cutting military spending which is over bloated is the only logical choice.

The 4 percentage point income tax hike will only affect those making more than $250k. Social security taxes will return to their pre-stimulus levels of 6.5% versus 4%. The SS tax must return to 6.5% to keep the system solvent for the near future.

That hasn't been decided yet, and assumes the republicans will agree.

Funny you mention that. The US army asked congress to not give them money for 2500 new Abrams tanks. The number of tanks in active and reserve duty is more than enough for a major ground war with both Russia and China. Congress shoved the 2500 new tanks down the Army's throat. The US realizes the threat the J-20 and PK-FA pose a serious threat to older aircraft such as the F-15 and F-18. The F-22 and F-35 are intended to replace the F-15 and F-18. Those aircraft will be sold off to the air forces of other countries rather than stockpiled.

Problem is 2500 tanks doesn't really cost shit in light of a new fleet of "ford class" carriers priced at 13.5 billion each plus equipping cost, and the continuing of production and development of MRAP class vehicles which only have one useage which are occupation.

If demand picks up in the US companies will expand to meet demand. Growth in manufacturing industries is based almost exclusively off of demand. As early as 2010 companies began to move production back to the US. Custom machined part manufactures moved back to the US due to lower shipping costs and faster shipping times. A Chinese part that took 3 days to reach a US factory can reach a US factory in 8 hours if produced in the US. When a customer wanted their part yesterday, a $30/hr US machinist is worth much more than a $5/hr Chinese machinist.

Custom machined parts... those jobs never left and if they did it was because of faulty stock piling issues.