NEW YORK, Feb 17 (Reuters) – Peter Orszag, former
budget director for the Obama Administration and now vice
chairman of global banking for Citigroup, sees a “trifecta” of
mega financial woes coming toward the end of the year that are
unlikely to be tackled by Congress before election day.
Speaking at the Executives’ Club of Chicago on Wednesday,
Orszag said he sees this moment as a collision between
dysfunctional national politics and the ongoing economic
malaise. It is “a rare moment in economic history — a tectonic
plate shift,” he says.
I prefer to call what he identifies as the trifecta as a
triple-strength witch’s brew: The expiration of Bush-era income
and estate-tax cuts and $1.2 trillion in automatic budget cuts
triggered by the debt-limit compromise passed last year.
If the Bush-era tax cuts expire — a move endorsed by the
proposed White House 2013 budget proposal — then millions may
find themselves in higher tax brackets. Estate taxes would also
revert from a $5 million exemption and 35-percent rate to 55
percent with a $1 million exemption.
There’s more bad news if Congress remains at loggerheads:
The $1.2 trillion in triggered cuts would impact everyone from
the Pentagon to Medicare recipients, although specific program
parings haven’t been identified. It may put the brakes on a U.S.
economy still lumbering along in recovery mode.