Morning Joe | November 15, 2012
>>> if there was one thing that everybody understood was a big difference between myself and mr. romney, it was when it comes to how we reduce our deficit, i argued for a balanced responsible approach, and part of that included making sure that the wealthiest americans pay a little bit more. i think every voter out there understood that that was an important debate, and the majority of voters agreed with me. by the way, more voters agreed with me on this issue than voted for me. so we've got a clear majority of the american people who recognize if we're going to be serious about deficit reduction, we've got to do it in a balanced way.
>> the president speaking yesterday at the white house . welcome back to " morning joe ." 6:48 in the morning as the sun comes up there in washington. steve is back with us now with his charts to explain that fiscal cliff and what might happen if we actually do end up going off it. a combination of tax increases and deep spending cuts. why don't you walk us through it.
>> it's a little bit of the perfect storm , as you said. a bunch of stuff happens at the end of the year, and it's one of these unusual situations that if congress doesn't do something, this happens, as opposed to if they do do something, something happens. impacts on both sides of the ledger. first on the tax side, you've got the bush tax cuts expiring. $195 billion. these are figures for the government's fiscal year, which is nine more months to go. now, of that $195 billion, $150 billion comes from the middle class . $45 billion comes from those folks in the top 2% who obama wants to raise their taxes anyway. the next item, as you may remember, is a 2% payroll tax credit that people got as part of an anti-recession measure a couple years ago. that also expires, $116 billion coming out of consumers' pockets. you have the alternative minimum tax which is this complex tax calculation that is hitting more and more of the middle class and each couple years congress has to do a patch to make it work. and then finally, you have this little catch-all of tax extenders, includes special tax breaks for nascar, track builders and all kinds of stuff. the point is that you have an enormous amount of tax revenue kicking in that affects consumers in a negative way. now, the spending side also happens because you remember that we had the sequestration debate. and so unless, again, congress does something, you've got a mix of defense cuts, $35 billion, and nondefense cuts including a bunch of medicare stuff also kicking in at the end of the year, cutting spending dramatically. you've got the extended unemployment insurance where people that have been out of work longer than 99 weeks kicking in. and then a doc fix which is an obscure part of medicare where every year they pretend they're going to cut payments and then they don't. you've got a big drag from spending. now, the combined impact on the deficit is actually pretty dramatic if it actually goes into effect. you can see here that the deficit has actually been going down slightly already simply by tax revenues going up and by the agreement that obama and the republicans got last year to hold down spending. but the cliff would send it in a dramatically downward direction. and of course, we all want to cut the deficit. but a reduction of this much this fast would have a pretty negative effect on the economy.
>> and that's what we've heard from wall street , even during the campaign. they'd say, we cannot afford to have this fiscal cliff . we can't afford to go off. and i think most people agree, even if it's a short-term fix, we won't get to that point.
>> we hopefully won't get to that point. if we get to that point, though, this is what people are worried about, which is the idea that we would actually go back in recession. so the congressional budget office essentially is saying the economy would be negative for the first half of next year if we actually go over this cliff and stay over the cliff . let me just say one last thing. nobody expects us to go over the cliff and stay over the cliff and actually have this recession happen. but the fact of going over the cliff and even approaching the cliff is going to send the stock market into turmoil.
>> it already is.
>> it's already heading straight down since the election was over and people started saying "fiscal cliff ." you get into the end of the year, and nobody knows what congress is going to do, you're going to see enormous volatility in the markets.
>> give us a time line . does it happen in a single day? does it play out over the period of five, six months over the year? what happens in terms of a time line ?
>> in terms of it taking effect?
>> it starts january 1. to your point, the actual economic impact is very gradual because this is spread out over nine months, all these numbers i showed you. we're not going to just plunge into a recession. but the market may plunge into its own kind of recession for fear out of what this all means.
>> the timing is, it's already started. so let me ask you, you are the grand pooh-bah of all things fair. you put your charts up. what's your recommendation, sir?
>> look, you need a balanced approach of both revenues and spending.
>> specifically, what would you do?
>> i would do something like -- the president's proposed $1.6 trillion of new revenue. boehner had agreed to $800 billion. it's not hard to find $1.2 trillion as a kind of middle ground to that. then you want to have $4 trillion of total deficit reduction, so that leaves $2.8 trillion of spending reductions that have to happen. here's what people miss. we can avoid going over the cliff with the stroke of a pen. they can just extend all this stuff and kick the can down the road. the real question is are we going to have a big deal ? are we going to agree on the major spending restraints that we need as well as the tax stuff in order to actually get the deficit under control? and i think the betting on that is less than 50%. i think we have a great shot at it. but it's going to be really, really hard.
>> is that the view from wall street , too? they're not totally confident that this is going to happen?
>> what you see in the stock market at the moment is that wall street is not totally confident. that's for sure.
>> all right. steve, thanks so much.
>>> coming up, independent senator-elect of maine, angus king joins the conversation. he's announced he will caucus with the democrats. we'll ask him about it when we come back. hi, i