There's a deal to be made that softens the fiscal cliff medicine. Fiscal cliff, fiscal abyss or fiscal three-card Monte? - GreenTraderTax Blog http://www.greencompany.com/blog/index.php?postid=170
And this will give rise to more buying of the used equipment and items. Instead of paying $500 each (on the low side) for washer and dryer, folks will start buying $100 each type of deals and that too for cash. Best of both the world. Get laundry done at home for cheap and not pay any taxes for a retail purchase of the machines. I do not know what studies have been done on consumption based taxations but I am sure that this methods transfers the main burden of taxes on the lower and middle class. Currently it is the upper 10% class that pays the majority of taxes and that is because they own 80%+ of the assets and value created in the GDP (or similar type of logic).
I said what I think the solution is: treat it like a public utility. We'll do what Churchill said we do though: try everything else first. It's the only way to wear down the opposition. It'll take a few years.
You don't see inflation in consumer prices, as defined by the government index. Many prices - gold, financial assets, houses, commodities, education, healthcare - have increased significantly over the years. Printing more currency or issuing unbacked credit money does not bring more real wealth into existence. All it does is transfer wealth and resources to those with first access to money (generally banks and financial companies, wealthy individuals, leveraged speculators, and the government itself), taken from those who lack such access.
Except savings and productive investment, i.e. capital accumulation - not 'consumption' - are what drives economic growth. Our system now is so fucked up beyond all description that these basic relationships become obscured. Massive income and wealth disparities are in large part a result of government policies to "sustain consumption" or "boost growth," i.e. perpetual deficits and monetary inflation. My favorite anecdote is that Sheldon Adelson's wealth fell by something like 96% in the 2008 crash; the '1%' would be a hell of a lot poorer today if government hadn't stepped in to rescue them, as it always does.
Cutting Defense and cutting Social Security are too different animals. Both are created out of your money, but you're not entitled to defense money, whereas you are to Social Security Trust money. Besides, you don't just cut Defense spending, you transfer the money from Defense to investment in infrastructure. So instead of pouring money down a rat hole you invest it and receive a return on your investment. When the government spends on infrastructure via private contractors the money is not pulled out of the economy but is put into the economy were it circulates and produces jobs and revenue. When the money is spent killing Iraqis, it goes poof in a foreign country to the tune of 6 million per each Iraqi killed, plus a few more million for each new terrorist created. You're right about the U.S. economy not being strong enough to handle a hit from tax increases and austerity. That's why no one in the administration is suggesting austerity. Those austerity suggestions are coming from the nut wing of the Republican party. Furthermore, no one in the administration is advocating for tax increases in general. What's been proposed is a highly focused, very modest increase for the top 2 percent of income earners which would take those taxpayers back to the rate they paid during the Clinton administration. Most economists believe such a focused increase will have no significant negative impact on the economy but a significant deficit reduction impact. The republicans too are falling into line with this same concept, but to get around the idiotic Grover Norquist pledge these morons signed they are now supporting closing tax loop holes to achieve essentially the same thing. The country could benefit the most if the entire Republican party would go poof, just like those dead Iraqis did. And if they keep trying to cut Social Security, Medicare, and Medicaid -- the three most popular government programs-- that's exactly what will happen to them.
You should have stopped half way through this post. You were making sense in the beginning. The proposed increase in upper income taxes will add only a tiny amount to deficit reduction, and that is assuming there are no effects from such a big increase, plus it assumes the democrats will actually follow thorugh on commitments to cut spending. Neither of these are likely to pan out, so any increased revenue will just get wasted, like the money obama has already borrowed and wasted. Medicare and to a lesser extent Social Security are in deep financial trouble. Obama's plan is to deny it, since it will happen in someone else's term. Great leadership and honesty.
The revenue increase projected from a tax increase of a few percent. it's about 4%, if I recall correctly, to bring the rate back to the Clinton era rate for the upper two percent of payers is approximately 3/4 of a Trillion dollars. Not huge, but not insignificant either. Most likely a very similar amount could be raised through closing of loop holes, and that may be the way it is agreed to in the end. That way no one has to technically go back on their pledge to Norquist, even though the outcome, in terms of revenue, is the same. Democrats don't like the later approach as much because closing loop holes annoys the constituents the loop holes were put in to placate in the first place. When you say "...any increased revenue will just get wasted, like the money obama has already borrowed and wasted." That of course could be true. As none of us can look with accuracy into the future, nor into "what ifs" in the past. I will say that some quite bright and capable economists believe that, so far, the stimulus and TARP money spent has prevented a depression with all of the loss of revenue and hardship that represents. They would generally think, as do I, that the money spent was, in the main, well spent. I respect your views on that, because they are not coming from the other side of the moon like those of some of your compatriots. I am in agreement with you regarding Medicare/Medicaid and Social Security. Both are in trouble, especially medicare/medicaid. It is critically important, however, for all citizens to understand that Social Security is fundamentally very sound so long as the actuaries recommendations are followed. Social Security's problem comes from the Trust having loaned to the Treasury via bonds and the money needed to pay off those bonds having to be borrowed. This will result in the bonds being paid with significantly deflated dollars, in effect lowering the real yield on the bonds and making the investment by the Trust less sound than was originally projected. The logical way to decrease this risk is to allow the Trust to diversify by investing in both U.S. and Sovereign bonds of other nations with better credit ratings than the U.S. But that is very unlikely to be allowed to happen because the Social Security administration is a huge, built in purchaser of Treasuries. This same reason also affords some protection from privatization, which is a good thing. So, being so wedded to the Treasury, in the case of Social Security. is somewhat of a mixed bag. Most of the Social Security remedies being knocked about involve various schemes that will have the effect of reducing the rate at which the Trust's bonds need to be redeemed. I am opposed to these remedies, as they cheat U.S. citizens. Social Security did not cause the U.S. fiscal problem, medicare/medicaid, and defense spending did. Social Security should not be used to fix this problem.
What you don't like about my last paragraph in particular, I suspect, is that I have pointed out that cutting entitlement programs is a political liability, and you are probably in favor of cutting them, politics be damned. I don't think that cutting them is the right thing to do, because that just recreates the problems these programs were intended to address. Instead, I believe there is only one reasonable way to fix medicare/medicaid and that is to bring the cost of care, and hence the cost of medicare/medicaid, down to the level of that in other industrialized nations. That will step on the toes of some of the politicians constituents, naturally, but it's either that or go on denying folks access to a reasonable level of care. There is no way to achieve that without health care sectors of the economy experiencing a profit margin decrease. But there will still be ample profit margin, as in all other industrialized nations. Reasonable access to health care isn't optional, like deciding whether to pay the steep price to go to a football game this weekend, it is an essential component of a modern civilized nation.
Bottomline is to cut defense, reduce cost of medicare and medicaid, bring back Clinton era taxes for superrich, impose some higher tarrifs on China and few major others, reduce spending and mainly the size of the government reduce foreign aid to nonsense back stabbing nations all these are possible without drastic change in the standards of living of common average American household.