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Home Publications Blogs Beat the Press Washington Post Continues Effort to Pressure Obama to Cut Budget Deal Before End of Year

Washington Post Continues Effort to Pressure Obama to Cut Budget Deal Before End of Year

Monday, 05 November 2012 04:45

The Washington Post has repeatedly used its news section (e.g here and here) to hype fears about the budget dispute that it likes to call the "fiscal cliff." (Since the actual impact of waiting until after the end of the year to reach a deal is minor, most objective commentators would not use the term "cliff" to refer to the deadline.) If the consequences of waiting until after the end of the year to make a deal, when the politics shift to President Obama's favor, can be portrayed as sufficiently dire then the Post presumably hopes that it can force a deal that will be closer to the Republicans' terms.

It was pushing this line again today with a piece warning of a disaster if Congress does not pass a fix to the alternative minimum tax by the end of the year. The issue is that the tax was not adjusted for inflation for 2012 so many middle income households would be subject to the alternative minimum tax who were not intended to be hit by it.

The piece does its best to overstate the dire consequences for waiting after the end of the year. Most importantly it gives the number of people affected and then gives the average tax additional liability telling us in the second paragraph:

"Unless Congress acts by the end of the year, more than 26 million households will for the first time face the AMT, which threatens to tack $3,700, on average, onto taxpayers’ bills for the current tax year."

In fact most of these 26 million households would face very limited tax increases, but some taxpayers may find themselves with a substantial increase in liabilities. The piece also warns that if Congress waits until after the end of the year to resolve the issue then refunds could be delayed by a month or two. It then informs readers that many taxpayers use refunds to pay essential bills like gas and electric bills and will risk having service disconnected if they have to wait longer for their refunds. Of course the refunds will go almost exclusively to families with incomes of more than $75,000 a year. It is not likely that many people in this income category are facing the cutoff of utilities.

The piece also raises the risk that many taxpayers may be subject to penalties for failing to withhold based on their higher liability. It would be a very simple matter for Congress to include a provision in any measure passed in January that exempted taxpayers from such penalties.

This is the sort of piece that makes it clear that Post would like to see the budget dispute resolved on conditions favorable to the Republicans. It doesn't belong in the news section of a serious newspaper. 

Comments (4)Add Comment
written by Bart, November 05, 2012 6:17
"The issue is that the [AMT] was not adjusted for inflation for 2012..."

I thought that there has been little or no inflation.
Robert Samuelson's Disconnect
written by Robert Salzberg, November 05, 2012 6:40
The title of Robert Samuelson's piece, The Disconnect of 2012, is apply named primarily because it applies to the media in general and Mr. Samuelson's piece in particular.

The housing bubble that caused Americans to borrow too much and construction companies to build too much and banks to lend too much and giddy homeowners to spend too much was the primary cause of our current malaise but is not mentioned in Samuelson's piece.

Likewise, the resulting lack of Demand and massive unemployment that naturally results from a huge hole in Demand is not mentioned in Samuelson's piece.

Because of Samuelson's disconnect from the causes of the Great Recession, his analysis and prescriptions have little connection to reality.

Americans are way smarter than Samuelson and the media give them credit for.

First and foremost, the overwhelming majority of Americans support a national health care plan which is the largest driver of our deficits.

The overwhelming majority of Americans also know that unemployment is the biggest problem facing America.

America can literally borrow money for 20 years with a negative effective interest rate. A massive FDR style jobs program is the obvious solution.
the economy
written by mel in oregon, November 05, 2012 6:12
americans aren't smart. who told you they are? if they were smart we would never have had nixon, reagan & gw bush. we wouldn't have a congress that has consistently moved to the far right in the last 30-40 years. we wouldn't have allowed glass-steagall to be repealed. if we had an effective senate & house of reps, scalia, roberts, thomas & alito would never have been confirmed on the high court. the problem isn't necessarily the 1&#xzv;vhk or 1/10 of 1%. it's that around 150 million people in this country are suffering from a terrible economy, & that many millions of people around the globe are suffering from our neo liberal policies.
False Premises & Taxation
written by Potomac Oracle, November 06, 2012 8:49
Someone needs to explain to Americans the reality of our monetary system.

it begins with the fact that the U.S. is monetarily autonomous. That is it issues its own fiat currency. As such it never faces the issue of insolvency, unless political decision makers are unwilling to allow the Treasury to pay obligations denominated in dollars, i.e., refuse to raise the debt ceiling. Doing so in no way means there is no ability to pay.

As the sole issuer of the dollar, the Federal Government is never dependent upon tax and borrowing revenue per se to pay its bills. Tax and borrowing policy tools manage inflation. That revenue per se is not used to fund expenditures.

Since 1971, when Nixon closed the gold window, tax policy tools serve to skew income distribution, market prices and entry, force acceptance of the otherwise worthless paper dollar as a medium of exchange, and measure the cost of Federal programs. Not to pay our bills.

All Government expenditures, Congressional Appropriations, are funded through the Treasury's General Account Fund no matter what the level of tax revenue.

The take away from this real world of Treasury operations is that income and payroll tax revenue should not be portrayed as the source of funding for Government's expenditures. Why would a government issuing all of the currency it needs by fiat depend upon revenue per se to spend? It wouldn't. It simply creates, today, electronic (computer generated) credits and debits in checking and savings accounts. The record keeping system for income and expenditures is not also a payment system. They are separate operations. The operations guys at the Federal Reserve have no clue as to how much revenue the Treasury/IRS collects, they don't need to know.

Finally, tax and borrowing policy should be managed as countercyclical tools managing inflation, not permanent levies constraining spending in an economy with stagnant income growth..

Today, there should be a three to six year suspension of F.I. C. A. with significant reductions in tax rates to spur demand. In a more rational economic policy environment, the Tax Code would be repealed in its entirety, with the exception of the individual and corporate income tax. Replacing the code with a national adjustable and refundable consumption tax.

The premise that income tax revenue per se pays for government expenditures is false. Economists and financial experts need to understand that modern money management is no longer bound by gold standard rubrics.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.