Counterparties: Resolution without reconciliation
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The fiscal cliff deal is here — at least in the Senate.
The President confirmed in an afternoon appearance that a deal was â€ścloseâ€ť, but offered no specifics and blasted Congress for their procrastinating ways. Itâ€™s not even clear that the latest deal would have the support to be put to a vote in the House, let alone pass.
Depending on which baseline is used, the deal includes between $600 billion and $800 billion in debt reduction, Ezra Klein tweeted; Sam Stein and Ryan Grim report that this will come â€śalmost entirely through revenue hikes.â€ť Â But as Justin Wolfers tweeted, any last-minute deal that doesnâ€™t include raising the debt ceiling pretty much guarantees another round of panicked negotiations.
The latest deal raises income taxes for families who earn more than $450,000 per year or individuals who earn more than $400,000. Taxes on inheritances larger than $10 million for families or $5 million for individuals would increase to 40% from 35%.
Left unaddressed is the â€śsequesterâ€ť, which would result in painful automatic spending cuts. Gone also are cuts to social security, through â€śchained CPIâ€ť, which Republicans abandoned on Sunday. Still, Joshua Green judges the whole thing a winner for the GOP, not least because â€śRepublicans would hold onto their greatest point of leverageâ€ť — their ability to hold the country hostage over debt-ceiling negotiations.
Paul Krugman isnâ€™t happy that this deal wonâ€™t raise the debt ceiling. Matt Yglesias thinks the last-minute haggling is pointless, with Congress already having missed its chance at a â€śgrand bargainâ€ť. The Dallas Fed wonders if â€śthe real question today is whether we have entered an era of permanently greater polarization in Congress and permanently higher fiscal policy uncertaintyâ€ť.
If US does go over the fiscal cliff, Matt Oâ€™Brien details exactly how your taxes will rise. â€śEven in a best-case scenario, 2013 will be a year of tax increases for allâ€ť, he writes, thanks to payroll taxes going back up. Those payroll tax increases pushed one analyst to halve his growth projection for the first quarter to just 1%. — Ryan McCarthy and Ben Walsh
On to todayâ€™s links:
Why statistics don’t tell the full story of income inequality – Chris Dillow
Stop obsessing about taxes – Aswath Damodaran
Why isn’t the 30-year mortgages rate 2.6%? – NY Fed
Rortybomb’s awesome 2012 round-up of econo-geek links – Mike Konczal