It’s Time for an Answer to our Growing Debt

It is past time for a long term solution that stops America’s debt from growing as a percent of GDP. Both sides are offering options that do this, providing ample possibilities for rational people to reach a compromise. We will see if such people have been elected.

The foundation for a deal is there. Now both sides have to come together in the spirit of principled compromise to truly address the country’s long-term finances. For this budget conference, failure should not be an option.

via Every Budget Put the Debt on a Downward Path and This One Should Too | Committee for a Responsible Federal Budget.

Political Parties Playing “Chicken” with American’s Well Being

 

There are many reasons why we must prevent going off the cliff. Some continue to argue the poor will do better under the cliff scenario than any other. That’s not true and here are some arguments for why the poor will do better under plans such as Simpson-Bowles and Domenici-Rivlin.

Simpson-Bowles and Domenici-Rivlin plans reduce rates, but raise substantial net revenue in a more progressive way than under the fiscal cliff. Going over the fiscal cliff increases tax rates and cuts tax credits, which according to Tax Policy Center, will reduce the aftertax income of the bottom quintile by almost 4 percent, and the second quintile by over 4 percent.

The fiscal cliff does not address Social Security, which would lead to beneficiaries receiving a benefit cut of 25 percent in 2033 if no action is taken. This must be prevented and both the Simpson-Bowles and Domenici-Rivlin plans do that with a combination of new revenue and new minimum benefits which protect and in some cases enhance benefits for low-income beneficiaries.

Corporations making “Cliff” decisions

Corporations are being impacted by the delay in getting a debt deal completed.  The WSJ reported today that the uncertainty is driving some corporation to delay investments.  “We’ve pulled back on our capital planning for 2013,” Ellen Kullman, chairman and CEO of chemical maker DuPont , said in comments to the conference in New York on Tuesday. “We can’t in good conscience put that money into the ground and create new plant sites or make improvements to our existing plants if we don’t think the return is going to be there soon enough, so we’re taking a wait and see attitude,” she added.

CNN Money is reporting that other companies are speeding up their payout of dividends, as some speculate dividend receipts will be taxed in 2013.  “Wal-Mart (WMTFortune 500) became one of the largest companies to take action recently. The world’s top retailer said last week that it planned to pay its fourth-quarter dividend in late 2012, rather than early 2013.”

 

Can Lower Corporate Taxes and Infrastructure Save the Economy

Fareed Zakaria in his Time article How Lower Corporate Taxes and Infrastructure Can Save the Economy suggest they can indeed.  Borrowing low corporate tax rates, investment incentives, and a shift to a territorial tax system from Fed-Ex‘s Fred Smith, Zakaria adds government investment in infrastructure improvement to his economic plan.

Right now, because of tax and other policies, Smith notes, “if you have a dollar to invest, you are better off investing that dollar someplace other than the United States.”

Great ideas, but they must come with a long-term plan to address the US’s looming debt problem. We can’t fix it immediately without a terrible shock to a weak economy. At the same time, the problem becomes harder to correct every day.  Meanwhile, Congress continues to play politics while the clock is ticking and the cliff looms closer and closer.

 

Read more: http://www.time.com/time/magazine/article/0,9171,2119336,00.html#ixzz20yvewHPv

Gartner Predicts 2012 IT Spending Growth Slows

Gartner’s newest IT spending forecast shows the march to digitalization slowing — on pace to reach $3.628 trillion in 2012 and $3.786 trillion in 2013. That is only an estimated 3 percent and 4.4 percent increase compared to the the $3.523 trillion spent last year in 2011, which was 7.9 percent growth compared to 2010.

via Gartner says 2012 IT spending will surpass $3.6 trillion worldwide.

CRFB’s Review of Whitehouse’s Latest Plan for the Debt

SO, YOU WANT TO PAY FOR A $70 BILLION SPENDING INCREASE WITH A $200 BILLION TAX CUT?

CRFB believes that lawmakers should enact a comprehensive debt reduction package that puts debt on a downward path as a share of the economy. That package, if large enough, could include a repeal of the sequester at the end of the year and a retention of the tax cuts set to expire at year’s end. In fact, any smart plan would avert the fiscal cliff and enact trillions of alternative savings more gradually.