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joining me is a richard wolf he's an economist and professor emeritus at my
alma mater the university of massachusetts professor wolf we're
hearing so much instantly the day after president obama was reelected the
conversation turned to this fiscal clip
that we are told is is coming let's walk through first of all what is meant by
fiscal cliff and it is it really a clip
well they probably are
but let me lead back to your listener and explain what it is
uh... illegal act about a year
uh... there was a standoff between all of our and the republican
uh... in the house representatives
about doing to him
dealing with the deficit
and raising anne their debt limit allowing the government to borrow more
which is now i have to do all the time because of the economic crisis worry in
haircut revenue to the government
and that therefore work it always union-leader borrowing money if it's
going to keep up with spending we've kind of have to go to try to offset the
crying
so they can reach an agreement
beget try
until finally they did what our political uh... gridlock leadership
opened up
bakke the proverbial candomble role
they rescission agreement
that if they were not people over the next twelve and half month or so
that is all around the house at the end of this year if they were unable to calm
just saw sort of agreement
about how to reduce the government's deficit
either by raising taxes or by cutting government spending or some combination
of the ball or
if they could not agree
them able agree last year
better or about it
that apac increases despondent automatic that of spending cuts will go in look
back
and the pinnacle player
recruiter as to what will happen
literally on the thirty first of december of this
the president of the week
evidence cannot work out a deal
what will happen in only quo automatic
uh... being spent get increases in fact it will go into a backpack with jayden
worry one and that will happen severely negative outback
on the economy cases were clip
okay now let's go through piece by piece first of all these tax cuts which would
be allowed to expire now
presumably bs expirations would not be retroactive in other words at the end of
this year people will have four and a half hour three-and-a-half months during
which to file their taxes for twenty twelve however those rates are set
correct in other words the tax increases would apply to the twenty thirteen tax
year which would not even be filed until twenty fourteen am i i'm i close on that
yes but you've got to be careful here
on
purple all
income taxes go back up that is if they do not continue
deepak
public administration
which you part of what the is all about
opm that and that your withholding for example on your weekly paycheck would go
up immediately in january
to reflect it back
that you would now be having to pay a higher rate of taxes that you did
during two thousand and twelve
so it would be an immediate impact that way
also part of the clinton feel i have to do wimpy cart in the payroll
that obama got through
of this year so that we're paying all people who have to pay their total
security
uh... pour a can of biblical only every week
remodeling
a that also would go up because it's been reduced this year quite
substantially for one it nor really hits
so you have the lowest help for the income tax
and
at warwick alegria social security
are intended clip
appallingly clip before that it on
increases go into effect
from the point of view of what would have been them the least negative or
maybe most positive effect
on the economy as a whole what is your analysis of what type of deal could be
struck that would be given what's possible the ideal scenario
that that's the kind of difficult question eight answers
what republicans
and a lot of the democrats agree
that the deficit has to be brought back
let me put aside for
from all the whether that's realistic
or necessary but they all agree
but that's what happens has to happen
they're only disagreement
is on exactly how to get that done
that is what com indication of tax increases and government spending cuts
will accomplish that goal
that said
is seven virtually sir
that whatever they agree
or whatever kind of cool if we go over
the impact on our economy will be negative
because of what the government spends it that's going to be ka
that means there's less government
and through the economy by it
goods and services but that's what it means that the government expenditures
are cut
and thats mean all kinds of people with ought they would get a check from the
government
workers
businesses with will be disappointed
and that his appointment will run a five who would be a common
number two
who had raised taxes get ready and buy a ever how much
that will also be negative
because of the government takes more taxes out of the pockets
of people
and businesses that's less than a couple of to spend it
which means it's less than you must
that they're provided by their spending to the economy
salt no matter how you look at
effect on the economic
situation in the united states which isn't going to begin with
is going to be naked
you have to believe you've got a deficit is sold a
that you really to improve the conditions of the deficit
even at the cost of that
negative feedback
on the economy
so vax what they are all of them
read to two
you get to the second part of your question what would be it all together
arabella to do and interest
either decide
that has it big problem back
and hot back reasoning work
the file
it is solving jurors in a depressed economy
and let's remember we have another depressed economy that has been the
unable to get out aerobics dole over others since the order of two thousand
and seven eighths over five years now
is very hard white
already the people say food negatively impact
economy at such a time
so they ought to put the deficit question aside
we can return to dealing with the deficit
when our economy is once again
on a steady upward growth path
which is what we call for and the way to do that
is to have the government not to raise taxes
and not cut spending
if anything do the opposite took a gamble would be let stimulate the
economy and grow our way
prices
rather than reduce the deficit but at the cost of giving a negative jolt tumor
already hobbled economic system
fine
suppose you take seriously deficit but these days it should be caught
about the negative impact on the economy
of going over the cliff
or any other kinds of
uh... agreements that the republican two democrats alike to you
but she
and the answer is actually quite simple
rubbish
and the reason attack
which is the file
people are not going to change their spending habits
if you jack
aunt acs is a little bit that but it means to be rich
they haven't got that one of those
the top one two five percent of the united states fully phyllis description
baylon
so much fun
share of income
uh... over the last thirty years that anything that before
saying that didn't significantly is not the nation engaged
the apartments they live in the cockpit are the vacations they take
the full day by the clothing they wear or anything else
so you could get the money out of their ends because it's basically city
doing nothing in there bank accounts get out of their hands
the victims of the government which will spend it
in a way that will stimulate the economy precisely what the rich are not doing
and then you would be able to lower the deficit it
but the government would be taxing bridget wouldn't have to borrow and
here's the final irony
when the government taxes the rich
it's actually making an arrangement to move money out of the hands of the rich
that is no different from what the government ballpark
to pay for a deficit that seems to be able to government bach
uh... understating which that it would otherwise packs so you can reduce the
deficit government doesn't have to borrow
the rich rock
appetite borrowing from there
is what we've been doing the last five years
delay
did deal with that
tual late going over the negative impact of the court
does most able to play
and moved on the backs
said tragic irony is that neither republicans nor the democrats
dared to discuss let alone series consider that option
not because of the best for our economy
but because the people they would have to pass
other work
advance both of the parties in all of their elections and so we're stocked in
the city weijin we now face
where you can answer what was going to be my next question which is our all tax
cuts equally stimulative so now that we've covered that
we can say we've been speaking with a columnist and professor emeritus from
the university of massachusetts richard wolf we will see what happens in the
next six weeks and of course we'll check back in in with you thank you so much
very welcome
okay we'll take a break we'll be back with plenty more after this