Debating the Fiscal Cliff Agreement

For John, BLUF:  Two smart guys debate the Fiscal Cliff vote that kicked the can down the road to February.

How Good is the Fiscal Agreement?

BECKER:  Nobel Prize winning economist Gary Becker.

I am not optimistic that the reforms discussed in this piece or other reforms will be enacted in the near future.  The President and both sides in Congress have inflexible positions.  Nor has the media been of much help in arousing the public since it has concentrated on how to raise taxes on the so-called rich rather than on tax and spending reforms.  Still, in trying to change the discussion, it is important to show how to reform the tax code, and the many reasonable ways to cut federal spending.

POSNER:  Economist and Federal Appeals Court Judge Richard Posner.

The terms of the deal that averted the fall off the fiscal cliff were reasonable, given the deal’s temporary character.  The term that has received the most attention was a modest increase in income tax rates for people in the top seven-tenths of one percent of earners.  The significance of this “tax increase” was that it broke the taboo against raising taxes, though actually it wasn’t a tax increase; on January 1 all federal income tax rates were going to increase unless there was a deal, and the deal allowed the increase to go into effect for just that top seven-tenths of 1 percent.  Actually the deal did raise taxes (though this has received little attention), by increasing the tax rate on dividends, and on capital gains, of the very high earners and by limiting deductions for taxpayers in the top 2 percent.  Estate taxes were also raised slightly, and Medicare surcharges allowed to go into effect.

There is more at both links.

Regards  —  Cliff