Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature currently requires accessing the site using the built-in Safari browser.
How about a little government economic stimulus? That may sound incongruous considering the budget deficit and the push from Republicans to cut government spending. But President Obamas first offer to avoid going over the "fiscal cliff" holds out the hope of at least some stimulus. This would include extending the 2 percentage point Social Security payroll tax cut, boosting a tax incentive to businesses, establishing a $50 billion bank for long-term infrastructure projects, and extending unemployment benefits.
The total bill: about $255 billion out of the federal government's pocket an amount the GOP would likely say needs to be offset by spending cuts elsewhere. The argument in favor of such stimulus? The tax measures, at least, could minimize the drag on the economy from Mr. Obama's proposed tax increases on the wealthy. The increases in the top two income tax brackets would put a drag on consumption, so I think, from the Obama point of view, the spending or tax cuts are designed to offset that drag to consumption, says Michael Brown, an economist at Wells Fargo Securities in Charlotte, N.C.
But to some budget experts, Obamas list seems more like an opening round of negotiations, where he has asked for a lot more than he will get. It looks to me like these are bargaining chips, says Pete Davis of Davis Capital Ideas, which advises Wall Street firms. Even most Democrats had given up on the prospect of getting the payroll tax cut extended. Mr. Davis considers the odds of most of the stimulus proposals passing Congress very low.
What's needed most, say others, is just buckling down and negotiating an end to the fiscal cliff. Cancelling the fiscal cliff is economic stimulus, says Stan Collender, a budget expert and partner at Qorvis Communications in Washington. If Obama's stimulus were passed, however, here is a look at the impact the four elements might have.
SOCIAL SECURITY PAYROLL TAX CUT
December is historically a strong month for markets. The S&P 500 has risen 16 times in the past 20 years during the month. But the market hasn't been operating under normal circumstances since November 7 when a day after the U.S. election, investors' focus shifted squarely to the looming "fiscal cliff." Investors are increasingly nervous about the ability of lawmakers to undo the $600 billion in tax increases and spending cuts that are set to begin in January; those changes, if they go into effect, could send the U.S. economy into a recession. A string of economic indicators next week, which includes a key reading of the manufacturing sector on Monday, culminates with the November jobs report on Friday.
But the impact of those economic reports could be muted. Distortions in the data caused by Superstorm Sandy are discounted. The spotlight will be more firmly on signs from Washington that politicians can settle their differences on how to avoid the fiscal cliff. "We have a week with a lot of economic data, and obviously most of the economic data is going to reflect the effects of Sandy, and that might be a little bit negative for the market next week, but most of that is already expected - the main focus remains the fiscal cliff," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
Concerns about the cliff sent the S&P 500 <.SPX> into a two-week decline after the elections, dropping as much as 5.3 percent, only to rally back nearly 4 percent as the initial tone of talks offered hope that a compromise could be reached and investors snapped up stocks that were viewed as undervalued. On Wednesday, the S&P 500 gained more than 20 points from its intraday low after House Speaker John Boehner said he was optimistic that a budget deal to avoid big spending cuts and tax hikes could be worked out. The next day, more pessimistic comments from Boehner, an Ohio Republican, briefly wiped out the day's gains in stocks.
On Friday, the sharp divide between the Democrats and the Republicans on taxes and spending was evident in comments from President Barack Obama, who favors raising taxes on the wealthy, and Boehner, the top Republican in Congress, who said Obama's plan was the wrong approach and declared that the talks had reached a stalemate. "It's unusual to end up with one variable in this industry, it's unusual to have a single bullet that is the causal factor effect, and you are sitting here for the next maybe two weeks or more, on that kind of condition," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago. "And that is what is grabbing the markets."
BE CONTRARY AND MAKE MERRY
US President Barack Obama has warned of a "Scrooge Christmas" if tax breaks are not renewed for working families in a deal to avert a so-called fiscal cliff. Mr Obama made the remarks as he tried to win public support for his plan on a visit to a toy-maker in Pennsylvania. But Republican House Speaker John Boehner said talks with the White House had gone "almost nowhere". He said President Obama's plan to raise $1.6tn (£1tn) of revenue over 10 years was not a "serious proposal". Planned tax rises and spending cuts due to take effect on 1 January could send the US back into recession, economists warn.
'Lump of coal'
On Friday, Mr Obama toured the Rodon Group manufacturing facility, where parts for the children's toy K'nex are made. The Democratic president said it was the type of company that depended on middle-class customers to buy its goods, adding it would be hurt if ordinary Americans faced a tax rise. In a speech at the factory, Mr Obama said both parties would have to "get out of our comfort zones" in order to negotiate a deal on the fiscal cliff, and pledged he would be willing to do the same. He said that if Congress did not extend soon-to-expire tax breaks for the middle-class, it would be like receiving a "lump of coal" at Christmas. "That's a Scrooge Christmas," Mr Obama added.
Tax cuts passed during the presidency of George W Bush are due to expire under the fiscal cliff. Mr Obama favours extending the break for households earning below $250,000. But he wants taxes to rise for those on income above that sum. Mr Boehner said that asking the top 2% of US taxpayers to pay more would deal a "crippling blow" to a fragile economy. He also criticised as inadequate spending cuts that were proposed on Thursday by the Obama administration. Treasury Secretary Timothy Geithner put forward a plan to congressional leaders that would raise $1.6 trillion in higher taxes over a decade. The proposal also envisages spending more money to help the unemployed and struggling homeowners. And it called for savings of as much as $400bn from Medicare and other benefit programmes over 10 years.
Mr Boehner told reporters on Friday: "There's a stalemate. Let's not kid ourselves. Right now, we're almost nowhere." Some Republicans have said they would consider increased tax revenue as part of a deal to avoid the fiscal cliff. But the White House believes that simply ending tax deductions would not address the yawning budget deficit. White House press secretary Jay Carney has indicated Mr Obama would not support any deal that did not increase tax rates on the wealthiest. The fiscal cliff would suck about $600bn (£347bn) out of the economy. The measures were partly put in place within a 2011 deal to curb the yawning US budget deficit.
BBC News - Obama warns of 'Scrooge Christmas' without fiscal deal
All of you people out there who say that going over the so called fiscal cliff will result in higher unemployment answer this question for me please.
If you believe that cutting taxes does not decrease unemployment then why would raising taxes increase it?
Just wondering.
All of you people out there who say that going over the so called fiscal cliff will result in higher unemployment answer this question for me please.
If you believe that cutting taxes does not decrease unemployment then why would raising taxes increase it?
Just wondering.
There's more to the fiscal cliff than just tax hikes, the spending cuts will certainly throw a lot of government employees and contractors out of work so it will contribute to unemployment. But the tax hikes themselves do not contribute since the rich do not directly create jobs anyway.
All of you people out there who say that going over the so called fiscal cliff will result in higher unemployment answer this question for me please.
If you believe that cutting taxes does not decrease unemployment then why would raising taxes increase it?
Just wondering.
All of you people out there who say that going over the so called fiscal cliff will result in higher unemployment answer this question for me please.
If you believe that cutting taxes does not decrease unemployment then why would raising taxes increase it?
Just wondering.
IMHO we will in-fact go over the fiscal cliff, and it will be a very good thing...long term. It will be the best deal that both sides could get. It will balance the revenue increase to the Clinton era tax rates, with the spending cuts to defense and entitlements that must be made to save SS & Medicare.
The fiscal cliff is just a whiny scare tactic by the wealthy that they tried to use in 1993. Its the right medicine for long term fiscal health. Now we just need them to work out the details.
hint: we don't need to keep as many bases in europe, or for that matter around the world. Just imagine spending that money here in the US.
All of you people out there who say that going over the so called fiscal cliff will result in higher unemployment answer this question for me please.
If you believe that cutting taxes does not decrease unemployment then why would raising taxes increase it?
Just wondering.
All of you people out there who say that going over the so called fiscal cliff will result in higher unemployment answer this question for me please.
If you believe that cutting taxes does not decrease unemployment then why would raising taxes increase it?
Just wondering.
All of you people out there who say that going over the so called fiscal cliff will result in higher unemployment answer this question for me please.
If you believe that cutting taxes does not decrease unemployment then why would raising taxes increase it?
Just wondering.
It would seem to me if people running businesses are paying more in taxes they would have less money for expansion and hiring and they might have to start letting people go which if it happens would increase unemployment.
