Well, this'll wrap it up for 2012 here at the Funhouse. Yes, I'm aware there's some work to be done over in D.C, but from what I can tell, we won't see any real action on this before the new Congress comes in on Thursday. This is fine with me, as a lot of the members of the lame-ass current Congress are either gone or will have new constituencies due to redistricting, so why have these people make decisions when they won't have to face the voters for the consequences of their actions? Plus, any moves made in January can be made retroactive to January 1, and if played right, could be given out as a tax rebate check that people can see and will spend.
I really haven't changed my mind on the way I think this should be resolved. I'll forward to you the CBO report that was released going over the various parts of the fiscal changes, which not only shows the effects on the deficit, but (more importantly to me) shows the changes in GDP that would happen as a result of all these measures. And those figures estimated the drop in 2013's GDP that would result from keeping the tax cuts on the rich vs. getting rid of them to be all of 0.1%. Add to the fact that the lowering of tax rates for the rich has led to stangnant wages for most Americans, larger amounts of inequality, and profit-hoarding, and letting these taxes go up is a no-brainer to me.
I'm even a bit perturbed at the possibility that the Dems and Obama may allow the tax cuts to stay for the $250K-$450K wage group, although if they raise cap gains and dividends and don't touch Social Security and Medicare benefits, I'd live with that compromise. It'd be even better if they kept the 4.2% Social Security tax rate, but extended it to every dollar instead of capping it at $113,000 or so, (the current system is really a back-door tax cut for the upper incomes that most of us don't get, and getting rid of it would make Social Security be fully funded). But failing that, I'd live with going back to 6.2% if it keeps Social Security on the level for the next generation (which it would).
Otherwise, I basically said what I needed to say in detail last month, and I'm sticking with it. Keeping the economy growing still needs to be our priority, and doing so will reduce the deficit every bit as much as cutting spending on needed domestic programs and keeping our safety nets and economic security in place. And it would prevent us from falling into a constant austerity cycle that continues to plague Europe, resulting in the Eurozone falling back into recession with record un-employment. This recession was brought on by deficit-based budget cuts, which led to slower growth, which led to more deficits and cuts, and basically everyone gets screwed except the lucky few who have the right connections to the people in power.
Because I don't see us falling into the austerity-cycle trap, I'm not fearing the fiscal issues in early 2013- and I'm fairly certain something will get passed before the damage gets too great (though it'll be fun to see CNBC and co. freak in the next few weeks as their gravy train ends). And if the Dems play tough and expose the GOP as the clueless fiscal fools they reall are, it could set the stage for "Wipeout 2014," which could make 2006's wave look small.
See you on the other side of the cliff in 2013. I'm off to prepare for the festivities to kiss this year good-bye.