Economist: Go over "fiscal cliff" if it means a better deal

Congress should go over the so-called "fiscal cliff" at the start of next year if it means they can reach a better deal for reversing the impacts of the "cliff" and achieving long-term financial stability, Moody's Analytics chief economist Mark Zandi told Congress today.

"I would not come up with a deal unless it's a really good deal before the end of the year," Zandi told members of the Joint Economic Committee in a hearing today. "I would take it into next year if that means a better deal."

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Go over "fiscal cliff" if it means a better deal, Zandi says

The "fiscal cliff" refers to a series of tax increases and spending cuts slated to kick in at the start of the new year unless Congress acts. Among other things, it includes the expiration of the Bush-era tax cuts, the expiration of the payroll tax holiday Mr. Obama enacted, and around $1.2 trillion in cuts across the board to both defense and non-defense programs. If Washington never addressed the "cliff," it would significantly reduce the deficit but also send the nation into another recession, Zandi and other economists agree.

Zandi said he thinks Congress could extend negotiations into as far as February.

"You've got to nail this down," Zandi stressed today. "Uncertainty is killing us. It's hurting business investment... It hasn't affected hiring and layoff decisions yet, but it will. If we get into next year and we get into February, and we haven't nailed this down, the economy will begin -- and investors will bail and the economy will begin to struggle."

Congress not only needs to avert the "cliff," the economist said, but also address the nation's long-term fiscal sustainability by modifying entitlement programs like Social Security and Medicare, and it must extend the debt limit.

"I don't think you can break this apart," Zandi said. "Nailing down the tax code, nailing down spending cuts, nailing down the debt ceiling, nailing down long-term fiscal sustainability... that is a good deal, and that is the only deal that I think works."

Zandi added he is "skeptical" that it can get done before the end of the year, but he added, "I think it can be done by early next year before it can do significant damage."

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[factcheckit]

So what if the cuts expire...the libs already know the average family has an extra 6-800.00$ per month laying around for extra health care premiums, effecting americans with real jobs and not government,exempt unions or welfare receipients . If they have that much then they gotta have another couple of hundred for the tax increases. So stop whining and just pony up the extra thousand dollars per much average taxpaying american.

[sjc_1]

Reagan started running deficits to put the country in debt so that we would have to eliminate Social Security and Medicare. This is just a continuation of that program.

[Silly_liberals]

If there is a hole in the bathtub, adding more water is not a solution. You have to fix the hole, then add water.
Without addressing the issues that drain the taxpayer funds, raising taxes, no matter how high, will not solve the debt problem.
Democrats would rather tax and spend then address the issues that create the debt. "Just add more water and everything will be fine, ignore the the elephant."

[jschm2681]

iam- oBAMA spending cuts include savings from the wars already winding down. It is phony. He asked for 2 x as many tax increase as before and unspecified future cuts. THose will not happen. SS and Medicare will go bankrupt unless fixed. We are at revenue levels of 2005 a good year, but Obama spends a trillion more than those levels. We have a spending problem. They need to be fixed. Obama's obsession on the rich which will bring in 82 billion a year, 8 days worth of spending, just shows he hates the rich.

[stopkillingourwilderness]

great - slash defense and corporate welfare by 75% and 100% respectively, and we are done. pretending that the poor, disabled and unemployed are the reason this country is where it is shows a stunning lack of understanding about how america works and what will make it stronger.

[wesleym58]

Besides Mr. Zandi's opinion that it might be better to go over the cliff, and then work out a more comprehensive deal; other economists have posed the same argument. Most say, that the real problem for the economy won't occur until year end February 2013. That by this time if both sides are still in disagreement then the physical effects of the measures, the law itself, of sequestration will occur. Still a deal beforehand if possible, at least Republicans and Democrats are in agreement on a tax cut for the middle class and a tax hike for the upper two percent isn't asking to much. All else can be tolerated up until a full package for tax increases to deal with the deficit and debt and spending cuts for federal programs, entitlements, have been bilaterally worked out. www.globalbabbler.com

[WYATTBUCHANAN]

Mark Zandi is one of the most savvy and astute economist on the American scene and his work at Moody's and been sound and productive. His advice in this matter is solid. A trip over the edge will wake up the "tax now and we will talk changes later" mentality being put out by the Whitehouse. It is time to quit kicking the can down the road. If the Whitehouse does not want to bargain on cutting spending then hold out until they are willing.

[sjc_1]

The spending that needs to be cut is at the Pentagon, with the rich and corporations getting tax breaks. Social Security and Medicare are funded through the payroll tax, they do not cause deficits.

[kiki418]

Even if a 'deal' were reached today, the 'damage' has already been done to small retailers - the general consumer group (middle class) is being very cautious of spending for Christmas in the event that their taxes go up - so it's too late now to save Christmas for the small business! Therefore, we should go over the so called cliff to make sure the upper 2% are included in the tax rate hike. They have had a long time to benefit from the added savings at the expense of driving down wages and dragging down the economy. Times up for them! The GOP needs to get over it and Norquist needs to crawl back in his hole and disappear. The next best time for moving this country forward will be in 2014 - get rid of the hold-ups in the House of Representatives.

[REDBEAR57]

When are these Bozos going to stop referring to Medicare and Social Security as "entitlements"? I have been PAYING INTO these programs all my working life (around 40 years), and I have always worked!!!

These are not entitlements - they are benefits I have already paid for. To take them away or modify them now is the same as paying for an insurance policy, then the insurer decides to reduce the amount of the claim when it is time to pay. I say BULLSPIT on that!!!

[Francine911]

do the cliff - time to jump. time for rest of country to stop subsidizing a few "elite" states...

NEW YORK (CNNMoney)
Democrats are expected to fight hard to preserve the tax deduction for state and local taxes, despite its more than $80 billion cost to the federal budget, during the fiscal cliff negotiations. A look at the states that benefit most from the deduction makes it clear why.
Seven of the eight states where taxpayers make the greatest use of the deduction are deep blue on the political maps. They include California, the most populous state, and Illinois, where President Obama calls home.

The states -- which also include New York, New Jersey, Pennsylvania, Massachusetts and Maryland -- have among the highest state and local taxes, including property taxes that pay for running municipal government and school systems. They also have among the highest median incomes in the nation.
No other tax break is as geographically concentrated. Nearly 90% of the state and local tax deductions filed by the nation's taxpayers are from those seven high-wage, high-tax blue states, according to figures from the nonpartisan Tax Policy Center.
Because there is no cap on the deduction, most dollars of the tax benefit it provides flow through to nation's top wage earners. But it's also an important break for many middle-income taxpayers in those states, who are looking for a little help to deal with the high cost of living in those states.
So while Democrats are eager to raise taxes on the wealthy, they are likely to fight to protect this deduction. Between them those seven states will have 12 Democratic senators in the upcoming Congress.
"Eliminating this deduction would make the tax code a lot more progressive," said Joe Henchman, vice president for state projects for the Tax Foundation, a think tank that tracks taxes and tax legislation. "But it'll be a lot of blue state senators who will fight very hard to prevent that from happening."
Related: How to raise taxes on the rich

Nicholas Johnson, vice president for state fiscal policy at the Center on Budget and Policy Priorities, said a limit on the deduction is more likely than eliminating it. That way, the break could be protected for middle-income taxpayers.
Johnson and Henchman agree any limit or repeal of the deduction would put tremendous pressure on the states to roll back their own income and property taxes. That's one reason that states have fought so hard to maintain the deduction in past tax reform efforts.
Related: Fiscal battle over mortgage deduction
"They considered it in 1986 as part of the big tax reform then, and New York and some other high income jurisdictions fought very hard to take it off the table," said Henchman. "They made the case to fellow states that all of us benefit from this deduction."

[MichaelMoriarty]

Without the deduction for state and local taxes, you could have a situation where a person was taxed more than 100% of their income. And let us keep in mind that these states that have high state and local tax rates are also states that provide more in Federal taxes than they take in Federal subsidies, largely because they pay for their own programs (unlike red states which have a tendency to not prepare for anything and then beg the rest of the country for hand outs for the obvious outcome of their bad policy choices, namely not raising enough revenues to pay for their needs).

A more reasonable target would be replacing the Foreign Tax Credit with a deduction. It is a bit insane that we only allow taxpayers to deduct what they have paid for education and police in their own communities from their income, but we allow those who choose to pay for those things in China to take the taxes they pay overseas one for one from the taxes they pay here in the US.

[skyp2]

Well Mr Zandi, you want to talk entitlements, I say congress first, let's start w/their entitlements, lets cut their pensions, they now left on an extended vac, so I don't believe they s/b getting paid with the situation the way it is, these idiots have more gall than a pig, time to INCLUDE THEM in the entitlement cuts, pension cuts, healthcare cuts, no more exemptions, they need to live by the same rules they set up for us!!!!!!1

[Silly_liberals]

The issues that harm the American people rarely have an impact on our elected lords. When making laws or addressing issues, they make sure they are exempt from the very decisions they make. That is by design.
I agree with you on their pensions, but I also do not thin we should have to foot the bill for their housing and automobiles either with the exception of the president and vice president.

[OldProfessor]

This is consistent with the package Obama has put on the table. Lock in the tax cut for the 98% before Jan. 1, and everything else is negotiable. That is what essentially what Obama has said.