Monthly Archives: November 2012

Senator Bob Corker (R-TN) presented his own budget plan in an opinion column in the November 26 Washington Post.

Three cheers (gross) for Senator Corker.  His plan is balanced, in that it includes both spending reduction and revenue increases, and therefore takes on the most recalcitrant members of the two political extremes in Washington. Two boos (gross) for the specific content of his plan, and for how he proposes to make it happen. So one cheer (net), and a hope that others follow along and, in the fullness of time, achieve three cheers (net) and make a solution happen.

Here is the scorecard:

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The automatic tax increases and spending cuts that will be triggered on January 1, 2013, known as the “fiscal cliff,” are widely recognized to be bad policy.

The fiscal cliff would be bad for the overall economy.  The hit on the economy would be too large and too abrupt.  Numerous economic forecasters of all stripes predict that it would send the economy back into recession.  Given the pre-existing threats to the U.S. economy from global fiscal and financial crises, our own extreme housing overhang and our not-yet-fully-functioning financial system, a plunge over the cliff is far too risky.

The fiscal cliff is also poor budget policy; it would needlessly worsen the efficiency of the federal government.  The large across-the-board spending cut in the fiscal cliff is the wrong way to reduce agency budgets.  It cuts the highest priorities just as much as the others, and it does not allow shifting funds to restructure programs in a fundamental way.

***Click “Read More” to see the top business executives who endorse CED’s 4-step framework to avoid the fiscal cliff***

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Per expectations, we have passed the election with no progress on avoiding the year-end “fiscal cliff.”  And also per expectations, several technical issues are proving important.  This note will provide some background on two of them.

 The Alternative Minimum Tax

The alternative minimum tax (AMT) under the individual income tax has been a bit player in the movie version of “The Incredible Fiscal Cliff.”  But those who read the 1,000 page novel (in the original German) know it as a powerful, threatening character.  For this reason, the AMT is beginning to get more attention in the specialist press.

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National economies today are interdependent, as almost everyone understands.  That should be good news, in that strong economies can buck up the weak.  But it is bad news when most economies are weak.

And unfortunately today, the weakness of some economies extends beyond the obvious.  It includes failures of governance — specifically, failures to address critical problems.  This makes the situation of the United States — and of every other country — all the more dangerous.

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