The Cycle | November 08, 2012
>>> i know it has a catchy ring to it, i know you have used it before myself, and i know i will probably use it again, but i really don't like the term "facecle cliff." . it's misleading. the idea which you have already heard hundreds of times this year is the country will face a sudden traumatic crisis on january 1st unless democrats and republicans in washington come together and strike some kind of a grand bargain on taxes, spending, and the deficit. but that is not a good way to understand what we're facing here. the reality is that the cliff is really more of a slope. a gradual slope. it works like this. if nothing happens between now and the end of the year, then on january 1st the bush tax cuts expire, the alternative minimum tax reaches further down the ladder and the payroll tax rates reve revert. this is the critical point. this will not all happen at once. it's not like john and jane taxpayer will wake up on january 1st and be socked with a bill for $3,000. only the payroll tax hike goes into effect right away. it willing months before taxpayers are hit with a higher amt, ditto for the scary spending kuts you're hearing about. why is the gradual nature of the fiscal slope so important? because it means there is time after january 1st for congress and the white house to reach a deal, lots of time. and in one hugely important area, president obama and democrats can get a much, much better deal if they wait until after january 1st . this has to do with the bush tax cuts . actually, just a part of the bush tax cuts . those would affect the top 2% of income earners. obama was just re-elected on a platform of ending them on income over $250,000. he campaigned on this and he won, but already republicans from house speaker john boehner on down are saying what every single republican in congress has said for 22 years now, absolutely under no circumstance will we vote for any deal that raises income tax rates on the wealthy. this is not on exaggeration. there was a republican civil war over this issue in 1990 when george bush sr . broke that dumb read my lip pledge. ever since then the gop position has been unanimous, absolute, and impossible to break. the gradual fiscal slope gives obama and democrats something they haven't had that often, leverage. all they have to do to get rid of the bush tax cuts on the rich is nothing. sit on their hands between now and january 1st and they will go away, and then there will be time, plenty of time, for obama and the new more liberal senate to set the terms for a truly balanced deal with republicans. one that extends the bush rates for the middle class , spares millions of americans from the amt and averts the worths of the spending cuts and, wait for it, actually includes a modest tax hike on income over a quarter of a million dollars. for all the republicans out there, yes, entitlements could probably be part of that deal, too. if the bush tax cuts for the rich are ever going to disappear, this is how it has to happen. i don't know if obama and democrats will have the will and the courage to see this through, pressure to fold is going to be enormous over the next two months, but we can lessen that pressure a bit if we stop cranking up the fear about a fiscal cliff that is not a cliff at all.