America is on the edge of a fiscal cliff

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In the context of government, the word “fiscal” means “of or relating to government revenue, especially taxes.”
Mamta Badkar reports for Business Insider, May 17, 2012, that investors and analysts everywhere are warning of the fiscal cliff that is approaching at the end of 2012 that could significantly hit the American economy. Unless Congress acts, more than $600 billion in tax and spending provisions will change at the end of the year. And this will impose fiscal restraint at a time when the U.S. economy is growing very gradually.
The “fiscal cliff” refers to a number of different policies that are set to change at around the same time, most on January 1, 2013. Together, they will amount to significant fiscal tightening that will hurt the economy:
1. The 2001 and 2003 tax cuts are going to expire:
This includes the current schedule of marginal tax rates, expanded credits and deductions for middle income households. Most Democrats and Republicans are in favor of extending the middle-income tax provisions, while most Republicans are in favor of extending the upper-income provisions.
2. The Alternative Minimum Tax (AMT) will hit more people:
The AMT was enacted to prevent individuals and households with high income from using deductions and tax breaks that enabled them to pay little or no taxes. The AMT establishes a minimum tax — generally 28% — on income above a certain exemption amount. This amount is not indexed for inflation but is usually increased every year or two by Congress. Failing to extend the AMT relief would result in $132 billion in additional tax liabilities, most of which would come due in the second quarter of 2013.
3. Payroll tax cut will expire:
Congress lowered the Social Security payroll tax on employee wages from 6.2% to 4.2% starting January 2011, and then extended it through the end of 2012. Payroll taxes will increase by about $120 billion in 2013, if the tax cuts expire.
4. The Sequester will slash domestic and defense spending:
The super committee’s failure to reach an agreement last year meant that spending cuts will take effect January 2, 2013, unless Congress acts sooner. This would reduce spending by $86 billion in CY2013 (calendar year), mostly through cuts to discretionary spending and roughly half of this would fall on defense spending.
5. Unemployment benefits will run out:
Emergency unemployment compensation (EUC) and extended benefits (EB) pay benefits of about $3.7 billion per month to about 3.1 million jobless workers who have used up the 26 weeks of benefits. Under current law, EUC and EB are both set to half payments after the end of the year 2012. Over the next several months about 700,000 individuals are likely to lose eligibility. Expiration would cut payments to individuals by about $34 billion in CY2013, compared with 2012.
6. Around the same time the debt limit will be breached again:
The statutory limit on public debt is $16.394 trillion, which is expected to be reached in November of December 2012.
7. Other miscellaneous year-end issues that need to be resolved, two important ones are:

  • Doc fix: This prevents a scheduled cut of more than 25% to Medicare physician payments from taking effect.
  • Tax enders: A collection of mostly corporate tax preferences, such as the R&D tax credit that are temporary but are extended so frequently that most corporate taxpayers have come to expect further extension.


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0 responses to “America is on the edge of a fiscal cliff

  1. waiting for the shoe (er,stone) to drop…. I just read an essay by
    former (?) sheriff Jim Schwiesow that pointed out that we,
    as a nation, have been blessed…but are not entitled and indeed
    should not be surprised at the Hand of Providence being removed
    and chastisement for the toleration of political correctness and the
    normalization of perversion that has swept over our land….

  2. The simplest way is to reinstate Glass Steagall. Even Elizabeth Warren is circulating a petition to have the Glass Steagall principle reinstated, following the debacle of JP Morgan just recently. Robert Reich is another person who is highly recommending the reinstatement of Glass Steagall. That would effectively hand back the 1.2 Quadrillion worth of derivatives trading instruments etc back to the banksters themselves to cover if they continue to prove to be as worthless as we are beginning to realise. This time around, unlike the situation that occurred under FDR, there would not be enough money left in the oligarchical “monetary” system, to be adequate to fund large enough infrastructure and scientific platform projects that would turn the human economy around, so we would have to have Congress utter credit, under a US Constitutional Credit System mindset, based on the future of the American economy due to our citizens being able to work productively once more with higher more creative, and scientific standards, to create a higher level of civilization, with better sources of energy, not “green” energy.
    Seeya Solandra, wouldn’t wannabeya. This Credit Utterance which is unique to the way our Constitution was envisioned would yield much more than money, profit or whatever you can measure in dollars and cents.
    It would allow We the People to be as God created us to be, in his image, as creators of new ways of doing things that make it possible to support the growing population of the planet. The Credit System could be shared with other sovreign nations worldwide, through treaties, and with a fixed exchange rate, like Bretton Woods, so that the huge projects we would necessarily have to undertake would be able to run their course, taking up to two generations to complete, and keep people working and looking forward to a decent future for themselves and their progeny. ETCETC as Yul Brunner would say in the King and I. We can do it, more people have signed onto the RETURN TO PRUDENT BANKING ACT of Marcy Kaptur which is to reinstate Glass Steagall and was introduced into the House last year, and only has to come to the floor to be debated and voted on. Maria Cantwell who was all for Glass Steagall is picking up steam again, her amendment with John McCain that was never allowed to see daylight when the Dodd Frank bill was being rigged, and gotten out of it’s mothballs.
    We can do it, we just have to promote the current trend towards Glass Steagallo to become reality, and get to work on rebuilding our republic and inspiring other nations to follow. Russia and China are already in the midst of huge plans for irrigating vast areas of land for food production and making progress with mag lev railroad systems. Argentina is making progress too, their oil industry has just been nationalized so that the country can benefit from the oil and get the gas stations running properly again, as well as spending lots of money on science and food productuion. They refused to pay off their bank debt and are so much better off for it. Many young Spanish people are flocking to Argentina for work in all their expanding industries, because there is fifty percent unemployment in Span for young people. Even Bolivia has gotten inspired and has nationalized it’s transportation system I think, and this “Contagion” has the EU money men absolutely furious………….
    They are huffing and puffing but the BRI
    C leaders have embraced Argentina and are going to include it in their next big meeting in June. So yes, you are Right ON!!!!!

  3. That poor little goat…..


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