Fiscal Cliff

You're talking about "day traders" who lose more than they gain. That's because it's impossible to predict the market.

"I'm not planning on losing the tax debate we're having right now"

WALL STREET MIND MELD: HOW OBAMA WINS THE CLIFF — M.M. spent some time recently with top financial executives privy to some of the White House thinking and strategy in the fiscal cliff talks. According to these people, President Obama’s commitment to top marginal rate increases is unshakable and based more in basic math than a desire for redistributive fairness. The president does not believe, the executives said, that it is feasible to achieve a reasonable revenue target of $1 trillion or more by simply closing loopholes or capping deductions. Indeed, even if such revenue could be found, the risks to harvesting the money are simply too high …

THE PROBLEM WITH DEDUCTIONS — Making a big change to the mortgage deduction could hurt the housing market. Limiting charitable deductions could wind up hurting the neediest. Limiting state and local tax deductions from federal returns could play havoc with local finances and bond markets. So rates will have to rise. The president believes enough Republicans will eventually support this because polls show the public is with him on the issue and the White House has a powerful set of advantages: Obama is already bringing extensive corporate support to his side (see today’s CEO meeting and other similar events) and plans to use his campaign machinery to take the issue back to the public (see the Twitter and Facebook campaigns and the Friday trip to Pennsylvania on Friday.)

THE BULLY PULPIT STRATEGY — If Republicans hold the line and refuse to support a deal that includes new revenue through higher marginal rates and the government goes over the cliff in January, Obama is likely to hammer Republicans as the culprits (something the public is already inclined to believe) with two massive bully pulpit events: His second inaugural address and the State of the Union speech. Republicans, while attempting a PR push of their own, simply lack the means to command anywhere near the same audience these two events provide the president.

The thinking is that the mere threat of this kind of pummeling coupled with the aggressive PR offensive this week and next will knock the GOP off its no-marginal-rate-increase stance. Some Republicans are already backing off the position (see Rep. Tom Cole below), arguing that supporting the extension of 98 percent of the Bush tax cuts and simply letting current law prevail on the others is not tantamount to voting for a tax increase. Instead, it amounts to voting for a huge pile of tax cuts while taking no action on others.

THE DEM PROBLEM — The financial services executives and several other people close to the matter interviewed yesterday noted that the president is well aware that Democrats (see Sen. Dick Durbin et al) are currently showing a strong disinclination to accept any significant entitlement spending cuts as part of a fiscal cliff deal and also want an increase in the debt ceiling as part of the cliff package. Obama also knows Republicans will have to get some spending concessions in order to sign off on tax increases and may resist a debt limit bump. So the president along with Treasury Secretary Tim Geithner and others will have to sell the party on some immediate trims along with a commitment to further reform. One senior Dem told M.M. that despite current posturing, the party will eventually rally behind the president.

Durbin and others have called for Social Security — which is less of a long-term deficit issue than health care programs — to be left totally out of the talks. But including might actually ease the talks. Because the easiest spending fix — changing the calculation of benefits to one that relies on a less generous inflation rate (chained CPI in wonk-speak) — comes from Social Security …

Bottom line from M.M’s reporting: A deal probably gets done that includes an increase in rates, though perhaps only on $500K and above incomes, along with something like a switch to chained CPI and a commitment to address entitlement and tax reform early next year.

If Obama doesn’t extend all the Bush tax cuts, Norquist suggested at a Politico Playbook breakfast, Republicans should raise the debt ceiling “monthly if he’s good, weekly if he’s bad.”
Norquist made the same point in an op-ed in The Hill, writing, “The debt ceiling that Obama’s plans bump into every month or so for the next four years provides plenty of ‘leverage’ for the GOP to trade for spending cuts — as done in 2011 — or continuing the lower rates.” More

The pledge is not for life, but everybody who signed the pledge including Peter King, and tried to weasel out of it, shame on him,” Norquist said on CNN’s “Piers Morgan Tonight” on Monday, adding, “I hope his wife understands that commitments last a little longer than two years or something.”

"I think the fact that you're not hearing any details is good," Coburn said during an appearance on Fox News. "You don't hear people trying to manipulate the negotiations that are ongoing through the press or the media. So look, we're going to solve this problem one way or the other."

Coburn also said he did not put much stock in public statements by key negotiators, including President Obama, arguing that even potential sticking points like entitlement reform, will be on the table and likely part of a deficit deal.

"It's obvious that he's going to have to stand behind some significant changes in entitlement and I think what [GOP negotiators are] asking him is, 'Where is your plan?'" Coburn said. "And I'm okay if he doesn't have to say that publicly right now, as long as he's saying that privately in negotiations and we'll see what comes out of that."

The Oklahoma Republican added that "most conservatives have said we understand more revenue is needed," but that the hope was that a recovering economy would fuel that additional government income.

"The key is there has to be a combination package of both revenue increases and a revenue program that actually promotes real growth, in other words, tax reform that actually promotes growth, combined with significant structural changes in the long-term expenditures for a major entitlement," Coburn said.

Coburn also warned it would be "putting your head in the sand" to not touch entitlement programs, if for no other reason than the looming insolvency of some important programs.

"For everybody that's on disability, the one in 17 people in this country, one out of every 17 now is collecting a disability check, there ain't going to be money in less than two years. same thing in terms of Medicare Part A," Coburn said.Source

He suggested Republicans should push for a one-year extension of all the Bush tax cuts and then demand that Congress come up with comprehensive tax reform as part of any deal to avert the fiscal cliff.

Norquist said by having negotiations in public, Republicans would be able to “change the playing field” from raising taxes to holding Democrats’ feet to the fire over spending cuts. Republicans could have the upper hand by challenging the President on not cutting spending.

“We have a spending problem, not a failure to raise taxes problem,” Norquist said.

Still Norquist said that revenue could be achieved through tax reform and economic growth. Raising taxes, he said, would not solve the country’s economic woes.

“I’m all in favor of real revenue, not imaginary revenue,” he said.
He would not directly answer Allen’s questions if there was wiggle room for Republicans to raise taxes without breaking his no-new-taxes pledge. But he did call Rep. Tom Cole’s (R-Okla.) proposal for Republicans to agree to a tax cut for 98 percent of Americans and negotiate the top rates later “an interesting tactic.”


Read more: http://www.politico.com/news/stories/1112/84320.html#ixzz2DWyMeJmW

Raising taxes on income over $250,000 remains a broadly popular approach to dealing with the country’s budgetary woes, according to a new Washington Post-ABC News poll.


Sixty percent of all Americans back higher taxes on higher incomes in the new Post-ABC data. Earlier this month, an identical 60 percent of voters in the presidential election said income taxes should be raised on income over $250,000, according to the national exit poll.

In the new poll, 73 percent of Democrats support such tax hikes, including a majority, 57 percent, who do so “strongly.” Among political independents, 63 percent back an increase, while 59 percent of Republicans oppose such a move.

Other proposed solutions to shrinking the debt are far less popular with the public. Only 44 percent support new limitations on the deductions people can claim on their federal income taxes — a proposal that former Massachusetts governor Mitt Romney put forward during his unsuccessful 2012 presidential campaign.

Even fewer — 30 percent — favor raising the age for Medicare from 65 to 67, part of a bid by Tennessee Republican Sen. Bob Corker to avert the automatic spending cuts and tax increases that would hit if there is no deal by the end of the year.

Limiting deductions gets only tepid support across party lines, with greater numbers strongly opposed than strongly supportive among Democrats, Republicans and independents alike.

Democrats, Republicans and independents also unite in opposition to hiking the entry age for Medicare, with the opposition particularly stiff among Democrats. Opposition to such a change peaks (naturally) among those aged 50 to 64 — the very people who will soon reap those benefits.

He is also resorting to name calling and other school yard tactics.

Maybe Cole’s argument will prevail, or maybe it won’t. But here’s an indication that it has appeal among Republicans: a couple of veteran GOP communicators — Ari Fleischer and Brad Dayspring — are already providing House Republicans free framing advice in the event they decide to go this route. Even if the tax cuts for top earners expire, they note, Bush tax rates for 98 percent of Americans will be made permanent. Huge victory for Bush and Republicanism.

That’s true as far as it goes. It’s also consolation — the Bush tax cuts for high earners constitute about 20 percent of the Bush tax cuts’ overall revenue cost. Hardly an unalloyed victory for the GOP.

So far these are the only two Republican flacks framing the issue this way. And it’s worth keeping in mind that both of them, in different capacities, worked for George W. Bush, whose legislative legacy is at stake. But Dayspring is best known as Eric Cantor’s former adviser and communications director, and currently advises Cantor’s SuperPAC — not exactly someone you’d expect to clear the runway for Obama’s tax plan, unless he knew Republicans were preparing for a (possible) emergency landing. More