Are republicans willing to let the economy fail to win an election?

Need more info, which I expect you can provide.

I do not understand the Gang of Six proposals, though I have read them, well enough to understand what their result will be. Can you give a quick and simple summary? Because I am so dim on economics that I read those proposals and couldn't find the new revenues there, particularly ones that would ask sacrifices of the richest among us. I'm not saying I'm right not to have seen them; I'm saying I'm too dumb to understand the plan.

 

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I'm not sure the exact details, but essentially there would be 4 components to the tax changes:

(1) The current 5 or 6 rates would be compressed into 3, with the top tax rate actually being lower than now - somewhere in the 25-29% instead of 34%.

(2) A bunch of tax loopholes would be closed - this is a mix of things that I'm not sure about, but probably most relevant to business. I think this is where the corporate jet issue and things like that come into play.

(3) A lot of deductions would be limited - this is where the wealthy really lose out. Right now, many pay well below their marginal tax rate because so many things get excluded. For example, if you own five $1 million homes, you get interest deductions on all of them. There are various versions of the Gang of Six (nothing finalized), but an example would be limiting the mortgage deduction to 1 house, only up to $500k. This wouldn't affect the middle class, but would affect the wealthy. In addition, because of the lower rates, the relative value of the deductions would be lower for the wealthy in general - now, instead of saving $0.34 on every dollar of interest you pay, a wealthy person would only save $0.29 or whatever, depending on the final rates.

(4) The AMT, which sort of really badly addressed #3 above before, would be eliminated. Right now, we do an annual AMT tax fix that costs $50-$100 billion or so every year - since it's constantly a one-year fix, it's a hidden tax cut that we pass annually but never shows up in the budget. This would be eliminated, increasing net revenues.

So the idea is that a lot the savings come by getting the wealthy to pay a higher effective tax rate, even though the stated tax rate goes down, and by permanently resolving the AMT. Most economists on both sides of the aisle have advocated this for a long time even if trying to be revenue-neutral. Basically, more deductions just means that you shrink your tax base, and you're artificially selecting the winners and losers - and giving creative people the ability to avoid paying their share of taxes. Those that happen to not get those deductions end up covering more of the total tax bill. This is also something talked about for corporations too - it's all about broadening the base of revenues being taxed so you can tax it at a lower rate.

From what I've seen, the Gang of Six was to generate about $4 trillion in savings, with about $1-$1.5 trillion of that from net increased tax revenue. I'm not sure how much of the spending cut savings are incorporated in the Reid plan already, so that might change some of that dynamic.

On a side note, if the two sides can't agree, I actually like the defense trigger a lot - more so than a tax trigger. Defense spending is arguably even harder to cut than is raising taxes. So anything that forces defense cuts is a good thing. That would still let Obama raise tax revenue with the threat of the Bush tax cuts veto, giving us both defense cuts and additional revenues.

 

Besides sound economics, the reason it has some appeal on both sides is that it lets everyone make a positive claim to their base. GOPers can say they lowered marginal tax rates. Dems can say they increased total revenues.

 

Thanks for the explanation. I am persuaded to support this deal. I'll be interested to see where the two parties fall on it.

 

Don't need to be an economics genius to understand that what the Tea Party has done over the last few weeks has to put it mildly, been absolutely ****ing r****ded.

 

So far, it looks like the Senate is mostly on board with the debt deal - or at least, enough people from both parties. In the House, both sides seem really upset. For me, anything both the progressives and the tea partiers are unhappy with, strikes me as probably a reasonable middle ground idea - but I know that's probably not the common opinion. Though middle ground is relative to where each party was 48 hours ago, not relative to the grand spectrum of things.

At this point, it doesn't seem clear whether Pelosi/Boehner are going to be able to corral enough people or not. This may be one of those things where it fails once, the markets crash, and then they are able to pass it a 2nd time. But they'd better be voting tomorrow if that's how it plays out.

The Gang of Six proposal will be a whole separate fight in a few months.

 

I don't think defense cuts are really an equitable substitute for revenue increase, so I'm very reluctantly behind the new compromise. It is conditional that the Democrats do make the stand that Major talked about earlier in the thread.

 

Boehner's ppt deck explaining plan to house gop.

Note, link opens pdf:

http://www.speaker.gov/UploadedFiles/3-7-31-11-Debt-Framework-Boehner.pdf