Fiscal cliff deal done

The US deal will raise taxes and delay harsh spending cuts by two months. Debt ceiling battle now looms. NZ$ rises on news

1st Jan 13, 4:20pm by David Chaston

Updated: The US House of Representatives has passed the Senate fiscal cliff compromise, so the immediate US crisis is over for now (where 'now' is a very short time into 2013).

Earlier story follows:

Furious last-minute negotiations between the White House and the US Senate Republican leadership on Monday secured a tentative agreement to allow tax rates to rise on affluent Americans.

But the measure was not going to pass in time for Congress to meet its December 31 deadline for averting automatic tax increases and spending cuts deemed a threat to the economy.

Of those spending cuts, half would come from defense and half from non-defense areas.

US taxpayers with incomes above US$400,000 ($US450,00 for couples) will see their Federal income tax rest rise from 35% to 39.5%.

Observers said the tax change part of the deal is the realtively easy part: the spending cut part will be much more difficult politically.

Complicating negotiations will be the looming debt ceiling limit being reached.

The NY Times said "This deal is a weak brew that remains far too generous to the rich and fails to bring in enough revenue to deal with the nation’s deep need for public investments."

Despite this, markets generally reacted positively. The Dow rose 1.3%, the S&P500 rose 1.7% in final trade before the New Year holiday break.

Oil prices rose about 1%. Gold was pretty much unchanged.

The NZ dollar rose to US$0.827.

The benchmark volatility index which had risen sharply to almost 23, fell after it became clear a partial deal would be reached and finished the day at 18.02 back where it was on Christmas Eve.

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9 Comments

by ngakonui gold | 1st Jan 13, 5:35pm 1357014933

Ifeel a film from Hollywood is on the way.

Morgan Freeman will play Barack Obama with Vanessa Williams playing his wife.

Gene Hackman will play Joe Biden and Bruce Willis will play John Boehner.

Iwill play a grizzly old ex marine ,a divorcee and father of one who is seduced by Hillary Clinton and Nancy Pelosi who will be played by Scarlet Johannsen and Jennifer Garner.

The plot will be that there is a rumour that this fiscal cliff is a load of rubbish and that the USA will carry on regardless of no agreement.

Iwill be brought in to investigate this theory.

I am awaiting the script as i put pen to paper

by Henry_Tull | 1st Jan 13, 7:05pm 1357020347

So is this a caper or a heist movie? Who is the mob guy? http://www.dailyscript.com/scripts/Get+Shorty.txt Chili flips through the script a moment... CHILI You know how to write one of these? BO CATLETT There's nothin' to know. You have an idea, you write down what you wanna say. Then you get somebody to add in the commas and shit where they belong, if you aren't positive yourself. Maybe fix up the spelling where you have some tricky words... although I've seen scripts where I know words weren't spelled right and there was hardly any commas in it at all. So I don't think it's too important. Anyway, you come to the last page you write in 'Fade out' and that's the end, you're done. CHILI That's all there is to it, huh? BO CATLETT That's all. Chili sits forward, stabs out his cigarette, exhales into Bo Catlett's face... CHILI Then what do I need you for?

by Henry_Tull | 3rd Jan 13, 1:10pm 1357171837

NG, its been done before already:

http://www.vanityfair.com/hollywood/2013/01/making-of-blues-brothers-bu…

The pitch was simple: “John Belushi, Dan Aykroyd, Blues Brothers, how about it?”

by speckles | 2nd Jan 13, 9:49am 1357073356

Easy to spend, deals with Wall street, the military, health sector and oil...the four big players.

by Julz | 3rd Jan 13, 4:36pm 1357184198

Why so hung up on the service the rich get in return for their tax? Clearly they are paying for the less fortunate not for themselves, who else should help keep those in poverty fed and off the street?

If you have to think in terms of personal benefit try this

The rich have a bigger environmental impact they are paying for
The rich are keeping the poor content enough through tax for welfare that the mob don't murder them and take what they need
The rich are paying the police to protect their wealth rather than having to hire their own personal guards as they did in the old days

by Julz | 3rd Jan 13, 5:34pm 1357187645

Well fist of all I consider myself to be closer to the rich camp just so you know my comments are not self serving.

You're arguments would make sense if there were jobs available that could pay for housing and living costs in the area you live. The reality however is that there is a very limited number of jobs like these and if you are lucky enough to have one I don't see why you should resent paying a higher amount of tax.

Very few people are entrepreneurial enough to create a job for themselves and the minimum wage jobs that are readily availble can only be lived on if you are able to live rent free with family or friends which is not an option for most folk.

There is no point in yelling at the poor to get a job if we have created a society where there are none. To add insult to injury very often the rich have made their money by outsourcing to China the very jobs that the poor might have been able to do.

by Julz | 3rd Jan 13, 11:12pm 1357207977

Interesting read, I like the idea of a self reinforcing cycle where less benefits forces more into the currently overpaid trade jobs which lowers prices and improves work ethics via more competition.

The problem I see though is that with so much of or labour requirements exported there simply isn't enough demand to increase net employment. If someone currently on benefits starts welding for you at a better price you simply stop hiring the current chap who is now himself out of work.

For the cycle to become self reinforcing we need job creation and removing benefits isn't going to bring labour costs down enough or lower the NZD dollar which would be required to reverse the decline in our export sector.

Personally I think assets like land should be taxed and income tax should be reduced. This would require foreign investors to contribute, it would prevent tax evasion, it would tax those sitting on assets but contributing very little and it would encourage hard work by lowering wage tax.

by Julz | 4th Jan 13, 9:33am 1357245183

Apart from wanting to murder and dismember me for my mental deficiency in suggesting an asset tax like a land tax you haven’t really offered any good reasons why it's a bad idea.

It's the best way to redistribute wealth, force foreign investors to contribute and encourage business. As soon as it's introduced asset prices would fall to reflect the cost of holding them which would reduce the outlay and startup costs for new businesses. Wage costs will come down since income tax can be reduced which will encourage more hiring at more affordable rates. Current business owners and people who are asset rich and income poor like yourself would be the hardest hit so some compensation would be needed initially. In the long run though there would be significant benefits to the country.

Do you think it's right that the income generating assets continue to accumulate into the hands of wealthy families with no asset tax or inheritance tax? What contribution does the child of rich parents make when they inherit 10 rental properties, remove the capital from them so they run at a "loss", put the capital into the mortgage on their mansion so they live rent free and then live of the tax free capital gain when they cash them up?

I don't know any other country that is crazy enough to not tax assets in some form, stamp duty on house purchases and inheritance taxes are normal else where in the world.

by Nic the NZer | 4th Jan 13, 10:24am 1357248271

And the moral of the story is? All those lazy good for nothing politicians, lawyers, doctors and property agents who are not working their ass off for the bank, and for peanuts yep, they are the idiots.