The Washington Post has written about the serious political and economic risk that's coming on January 1st of next year if the American government doesn't do something about it -- their article is called Recession imminent if 'fiscal cliff' on tax hikes, budget cuts not averted, CBO says. I love the Washington Post's headlines. They're so rarely insane and hyperbolic. Meanwhile, the rest of the media is calling it Taxmageddon.
In its report Wednesday, the CBO warned that the nation would be plunged into a significant recession during the first half of next year if Congress fails to avert nearly $500 billion in tax hikes and spending cuts set to hit in January.
The massive round of New Year’s belt-tightening — known as the “fiscal cliff” or “Taxmageddon” — would disrupt recent economic progress, push the unemployment rateback up to 9.1 percent by the end of 2013 and produce economic conditions “that will probably be considered a recession,” the nonpartisan CBO said.
This issue was brought up in the comments of this blog, a couple weeks ago. Commenter 12Centuries responded to my post, Barack Obama's Tax Calculator:
Well this is actually not true. It’s propaganda from a campaign site, and people assume there will be zero bias? The analysis is ignoring many factors. On January 1, (called Taxmageddon in the media, google it) taxes are scheduled to go up for 114 million middle class families by an average of $1,600 when a number of tax cuts expire.
A typical middle class family of four would see its taxes rise by $2,200 on those factors alone.
In addition, EVERY one of the existing income tax brackets will be ratcheted up, starting with the lowest 10% bracket, which will be hiked to 15%. The 25% bracket will jump to 28%; the 28% bracket will go to 31%; the 33% bracket will be replaced by a 36% bracket and the 35% bracket will soar to 39.6%.
On top of all that, the tax calculator on Obama’s website doesn’t take into account a single drop of the new healthcare taxes, as the administration doesn’t consider them to be taxes, although the Supreme Court does, and you’ll still have to pay for them on your tax return.
THAT is accurate. Don’t believe the hype.
Now, that commenter was wrong. It's not hype or propaganda for a tax calculator which compares two tax plans to present the results based on the assumption that those tax plans are instituted. She or he did, however, correctly point out that the media is calling it Taxmageddon, and that it will be very bad if it happens.
Personally, I think the responsible thing for the Obama administration to do is to let it happen -- unless Congress is willing to let them pass a sane tax policy. The economic policies that the Republican party treat as dogma have been proven, for decades, to not work. It's better for the American people to suffer the short-term problem of their refusal to create a sane spending plan than to cave to their demands, and institute policies that would help sustain the long-term decline of America as a country of significance.