Make Your Move

Is the Fiscal Deal a Solution?

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The recent deal on the fiscal cliff provides some relief, but you can still expect to see a slowing economy later in 2013.

The President and the Congress managed to encompass all scenarios with the Fiscal Cliff Deal that was reached on Wednesday January 2.  Taxes were raised significantly; slight cuts were agreed upon; and the “can was kicked down the road” for two months on more talks on spending cuts.

There will be one dollar in cuts for every forty-one dollars in tax increase.  That is a terrible idea, but it is one we will have to live with - for now.  Today’s fiscal deal in Washington can be undone to some degree by a future Congress (such as the one being seated now). 

There are three good things to come out of the discussions. One, the increased taxes will be applicable to households making $450,000 as opposed to the originally proposed $250,000.  In addition, the dividends and capital gains tax increases are gentler than would have occurred without the bipartisan agreement.

Lastly, the dreaded Alternative Minimum Tax annual problem looks to have been successfully handled, saving a potential 20 million households from a sharply higher tax bill on 2012 income.  The AMT should not be an issue in the coming years because of the pending legislation. 

The most asked question today has been whether the Deal changes our outlook for 2013.  No, it does not. Consumer problems are coming, and those problems will slow the entire economy down in 2013.

 

Discuss this Blog Entry 1

on Jan 11, 2013

The "fiscal cliff" is a snow flake compared to the avalanche of our entitlement spending. While I'm glad we managed to only raise taxes on those "evil rich people", we're all going to continue to pay more out of our pockets, and our companies' pockets, through the PPACA, increased regulation (of everything), horrible "investments" in wind and ethanol, etc etc. Our "leaders" are not even willing to produce a basic budget for all of the increased - ahem- "revenue" they so badly need. So, the fiscal cliff has come and gone - we can all look forward to the upcoming long drawn out debt ceiling battle.

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Brian Beaulieu

Brian Beaulieu has been an economist with ITR Economics since 1982 and its CEO since 1987. He is also Chief Economist for Vistage International and TEC, global organizations comprised of over 13,000...

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One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and...
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