Archive for the ‘fiscal cliff’ Tag

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Retailers are preparing for a triple whammy as the restoration of the payroll tax, surging gas prices, and stagnant employment and wages take a bite out of consumers’ disposable income, leaving them with less cash to spend on clothing, groceries, and eating out.

As a result, more than three years after the recession officially ended, American consumers might be preparing to downshift again, if only slightly, with low-income consumers hit the hardest. Sensing consumer trepidation, retailers are scrambling to adjust.

Retailers, restaurants, and consumer goods companies like Wal-Mart are lowering sales forecasts and adjusting marketing campaigns ahead of expectations that consumers will slash spending, the Wall Street Journal reports.

In a survey released Thursday, the National Retail Federation (NRF) said some 46 percent of consumers plan to spend less as a result of the payroll tax increase. One-third said they will reduce dining out and one-quarter will spend less on “little luxuries,” like manicures and trips to coffee shops.

“A smaller paycheck due to the fiscal cliff deal early last month, higher gas prices, low consumer confidence and ongoing uncertainty about our nation’s fiscal health is negatively impacting consumers and businesses across the country,” Matthew Shay, president and CEO of the NRF, said in a statement.

Originally enacted in December 2010 to help taxpayers weather the recession and to spur economic activity, the payroll tax cut expired Jan. 1 of this year. The restoration of the tax effectively raised the rate from 4.2 percent in 2012 to 6.2 percent in 2013, shaving 2 percent from consumers’ take-home pay.

That means Americans making $50,000 a year will pay $83 more in taxes each month, almost $1,000 more each year. Those making $75,000 will pay $125 more each month, or $1,500 more each year. As retailers see it, that’s $1,500 less a consumer has to spend on groceries, household goods, and dining out.

Multiply that by 153.6 million people in the labor force and retailers start to panic. According to an estimate by Citigroup, the expiration of the payroll tax cut will move $110 billion out of consumers’ pockets.

http://www.rawstory.com/rs/2013/02/23/wal-mart-worried-payroll-tax-could-cut-consumer-spending/

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Nobel prize-winning economist Paul Krugman on Sunday explained to Wall Street Journal columnist Peggy Noonan that she was wrong to slam President Barack Obama for not compromising with Republicans on the debt ceiling because you don’t negotiate with “hostage takers” who are trying to “blow up the world economy.”

“The White House position, which is right, is that there should be no bargaining over this,” Krugman told a panel on ABC’s This Week. “If the Republican majority in the House wants to cut spending, let them propose legislation that cuts spending and pass it, not hold America hostage.”

“We should not allow this to become or be thought of as a legitimate budget strategy,” Krugman warned. “This is hostage taking, this is walking into a room and saying, ‘I’ve got a bomb, give me what I want or I’ll blow up this room.’ This has never happened before and should not be allowed to happen.”

“This is much scarier that the fiscal cliff because we don’t know what it does,” he continued. “What we do know is that U.S. government debt is the global safe asset. It is what every financial transaction relies on as the ultimate, this is what value consists of — and better than gold, better than anything. U.S. Treasury bills are the thing. If they are called into question, nobody knows what happens.”

Noonan, however, insisted that the president “should be sitting down and talking with those who would attempt to move forward on spending.”

“I consider it unusual that this president can never make a deal with those folks,” she opined.

“This is not something you negotiate over,” Krugman shot back. “You do not negotiate with hostage takers. That’s the White House position. They’re right about that. You just don’t negotiate on this. You can negotiate on the sequester, you can negotiate on taxes, but not on someone who is threatening to blow up the world economy if he doesn’t get his way.”

“My goodness,” Noonan replied. “That appeared to be the White House position on the fiscal cliff just a month or two ago. Why can nothing ever be worked out? We do have a president, we do have legislative leaders, we do — it should be noted — have a spending crisis in America. It is not an eccentric thing to worry about the amount of spending that America does.”

“You don’t do it this way,” Krugman disagreed. “This is a doomsday, this is really saying, ‘I will blow up world unless you give me what I want.’ And you don’t negotiate on that.”

http://www.rawstory.com/rs/2013/01/13/krugman-schools-noonan-dont-negotiate-with-republicans-who-want-to-blow-up-the-world/

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Ezra Klein “Today’s Republican Party thinks the key problem America faces is out-of-control entitlement spending. But cutting entitlement spending is unpopular and the GOP’s coalition relies heavily on seniors. And so they don’t want to propose entitlement cuts. If possible, they’d even like to attack President Obama for proposing entitlement cuts. But they also want to see entitlements cut and will refuse to solve the fiscal cliff or raise the debt ceiling unless there are entitlement cuts.

You can see why these negotiations aren’t going well.”

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/30/the-republican-party-in-one-tweet/

 

 

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With the fiscal cliff rapidly approaching, President Obama was unflinching in his tax stance on Friday, threatening to use his leverage to force Republicans into an unenviable position if they fail to agree to a deal in time.

After a White House meeting with congressional leaders, Obama held a news conference to issue a tough ultimatum to Congress: reach a deal now or block my middle class tax cut in the new year.

“So if we don’t see an agreement between the two leaders in the Senate,” the president said, “I expect a bill to go on the floor — and I’ve asked Senator Reid to do this — put a bill on the floor that makes sure that taxes on middle class families don’t go up, that unemployment insurance is still available for 2 million people and lays the groundwork then for additional deficit reduction and economic growth steps.”

http://tpmdc.talkingpointsmemo.com/2012/12/obama-ultimatum-taxes.php?ref=fpa

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Ezra Klein “Here`s what happens if we go over the cliff. You get more than $5 trillion in tax increases off the bat. And now, here`s what happens if we pass the sainted Simpson-Bowles plan. You`ve heard the Simpson-Bowles, the big bipartisan debt commission plan. They have $2.6 trillion in tax increases. President Obama`s latest offer to John Boehner has $1.2 trillion in taxes. That is half as much, less than half than, in fact, as Simpson-Bowles, and less than a quarter of what is in — simply going over the fiscal cliff.

Now, I think the tax increases in Obama`s offer are too little. But still, they are what they are. And it`s something to remember as we reach the edge and you hear a lot of complaints about the tax side of Obama`s offer.

What he`s asking for in terms of tax increases is not that radical, it is way less than if we don`t reach a deal.”

http://www.msnbc.msn.com/id/50306206/ns/msnbc-rachel_maddow_show/#.UN7kEKzhfTo

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Ezra Klein “Democrats do want to raise taxes on families making more than $250,000. You sometimes hear Democrats say they just want to “restore the Clinton-era rates” for these folks, but that’s misleading. In addition to letting the Bush tax cuts expire, the White House wants to add about $700 billion in further tax increases on these taxpayers. And that’s in addition to the high-income taxes passed in the health-care law. Under Obama’s plan, taxes on the richest Americans would be much higher than under the Clinton tax code.

So yes, Democrats want to raise some taxes. But so do Republicans. They want to let the payroll tax cut and the various stimulus tax credits (notably the expansion of the Earned Income Tax Credit and the Child Tax Credit) expire. Those are the tax cuts that primarily help poor and middle-class Americans. In fact, 87.8 percent of the payroll tax cut’s benefits go to taxpayers making less than $200,000 and 99.9 percent of the stimulus tax credits’ benefits go to taxpayers making less than $200,000.

And those tax cuts help many, many Americans. Pretty much everyone who works benefits from the payroll tax cut. Pretty much everyone who works in a low-wage job benefits from the stimulus credits. Whereas the tax cuts for income over $250,000 help about 4 percent of taxpayers, these cuts and credits help almost every taxpayer. Letting them expire will thus raise taxes on many, many more people than letting the high-income Bush tax cuts expire.

(It’s worth noting here that support for the payroll tax cut isn’t universal among congressional Democrats. Some worry that it appears to undermine Social Security’s finances, even though the law says that the revenue removed from Social Security will be replaced by revenue from the general fund. These Democrats would happily sign onto a replacement for the payroll tax cut, but Republicans haven’t been open to that, either.)

Republicans argue that these policies weren’t really tax cuts, that they were temporary stimulus measures designed to be tax cuts. And it’s true that their primary purpose was stimulus. But the Bush tax cuts were also designed to be temporary and they were sold as stimulus once the 2001 recession began. “By ensuring that Americans have more to spend, to save, and to invest, this legislation is adding fuel to an economic recovery,” President Bush said in 2003, upon signing the second set of his tax cuts.”

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/27/hey-america-republicans-want-to-raise-your-taxes/

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Suzy Khimm “President Obama’s concessions to Republicans on taxes and Social Security have grabbed the headlines, but there’s another big area where the White House has shifted considerably in the GOP’s direction: direct stimulus to revive the short-term economy.

In his original offer, Obama asked for $425 billion in stimulus through jobs measures and tax extenders, according to the Committee for a Responsible Federal Budget, including $50 billion in infrastructure spending and other stimulus measures; mass mortgage refinancing to boost the housing market; $30 billion in unemployment extension; a $115 billion extension of the payroll tax holiday; and the extension of a host of business tax breaks known as extenders.

The stimulus measures are intended to counteract the impact of a fiscal cliff that would put major austerity into effect immediately. But they’re also meant to counter the fiscal tightening in a fiscal cliff deal, which both Democrats and Republicans have agreed should  promote major austerity in the longer term through deficit reduction.

Republicans, however, have argued that more explicit stimulus right now isn’t the answer: House Speaker John Boehner included no explicit stimulus measures in his original offer and has only proposed to extend a handful of business tax breaks since then. It’s clearly been a point of contention in the negotiations as Obama’s stimulus proposal has progressively shrunk over time: In his third offer, reported Monday, Obama dropped his ask from $425 billion to $175 billion in stimulus, as my colleague Dylan’s chart shows below, keeping the federal extension of unemployment insurance, infrastructure spending and some business tax breaks, but abandoning the extension of the payroll tax holiday, among other major measures.”

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/21/the-incredible-shrinking-stimulus/

Posted December 22, 2012 by tmusicfan in Politics, Quote of the Day

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