Tag: taxes

Cross posted from The Stars Hollow Gazette

In his speech to Republican Party official in Charlotte, NC, Gov. Bobby Jindal said that

“the GOP must stop being the party of stupid.” The problem there is that actions, including Gov. Jindal’s, just reinforce how stupid the GOP is, especially when it comes to the economy.

Bad news for Jindal: Florida, Texas rely heavily on property and biz taxes

by Tyler Bridges, The Lens

As he seeks to eliminate the state’s income tax, Gov. Bobby Jindal has cast a covetous eye both west and east. The tax systems in Florida and Texas should serve as a model for Louisiana’s, the governor believes.

Neither state has an income tax, he notes, and both have reputations as hospitable to business investment.

But to make Louisiana look more like Florida and Texas, Jindal’s plan would have to include two significant elements that he dislikes: taxes on business and higher property taxes. [..]

“Most states have a three-legged stool for raising revenue,” said Jim Richardson, a Louisiana State University economist who co-chaired PAR’s tax study. “Texas and Florida have two legs – sales and property – since they don’t have an income tax.” Under the Jindal plan, “Louisiana would have a one-and-a-half-legged stool – sales taxes and some local property taxes.” [..]

In an interview with MSNBC’s Rachel Maddow, Nobel Prize winning economist, Paul Krugman said it would raise the taxes on every tax dollar the poor make going against “the Republican argument that high marginal tax rates discourage work“.

“In our system, the highest marginal tax rates — the biggest disincentives to work in our system — are not for the rich. They are for lower-income workers who are in that range where if you earn a little bit more you start to lose benefits, you start to lose Medicaid, you lose housing subsidies,” the Nobel Prize-winning economist said. “This is going to raise taxes precisely on the people who actually have the biggest disincentives to work. So it’s actually, even from that old supply-side incentive thing, this is going in the wrong direction.”

In his Monday New York Times column, Prof. Krugman called the Republicans “Makers, Takers, Fakers”

Like the new acknowledgment that the perception of being the party of the rich is a problem, this represents a departure for the G.O.P. – but in the opposite direction. In the past, Republicans would justify tax cuts for the rich either by claiming that they would pay for themselves or by claiming that they could make up for lost revenue by cutting wasteful spending. But what we’re seeing now is open, explicit reverse Robin Hoodism: taking from ordinary families and giving to the rich. That is, even as Republicans look for a way to sound more sympathetic and less extreme, their actual policies are taking another sharp right turn.

Despite the lessons of the 2012 election, the Republicans, in states that are not checked by Democrats, are pushing tax policies that punish the poor and the middle class and benefit the wealthy.

Cross posted from The Stars Hollow Gazette

Seriously, you can’t make this stuff up.

Dave Camp Bank Tax Bill Would Punish Obama-Friendly CEOs

by Zach Carter and Ryan Grim, The Huffington Poat

WASHINGTON — House Ways and Means Committee Chairman Dave Camp (R-Mich.) is considering legislation that would significantly increase taxes for the nation’s largest banks while providing tax breaks to struggling homeowners. [..]

The bill would significantly strengthen the Volcker Rule, which bans banks from speculating in securities markets with taxpayer money. The Volcker Rule’s implementation has been delayed as bank lobbyists have flooded regulatory agencies in Washington, pillorying the ban with loopholes. Hefty tax burdens for proprietary trading would reduce bank incentives to engage in the risky activity.

Camp’s legislation also would permanently establish a homeowner aid plan advocated by former Rep. Brad Miller (D-N.C.), who retired this month. When banks grant homeowners mortgage relief, the IRS considers the debt-reduction taxable income. As a result, struggling homeowners can face an unmanageable tax burden. A $50,000 debt reduction can spark an $18,000 tax bill — money that borrowers struggling to avoid foreclosure simply do not have. Miller successfully lobbied to include a one-year fix on the tax policy in the fiscal cliff deal. Camp’s legislation would permanently end the tax policy.

Steve Benen at The Maddow Blog aptly notes that “hell hath no fury like a House Ways and Means committee chairman scorned” but points out Camp’s “big deal” won’t impress the bank lobby:

Camp sent an angry letter to the Business Roundtable a month ago, and now Republicans are saying if there must be new revenue, it should be “on their backs.”

How big a deal is Camp’s bill? I think it’s safe to say the bank lobby won’t be impressed.

   Camp’s new bill would harvest government revenues from complex financial transactions involving derivatives, some of which figured prominently in the 2008 banking collapse. Although the 2010 financial reform legislation would curb some excesses in the derivatives market, the legislation isn’t yet fully implemented, and leaves much of the market unregulated. Financial reform advocates have urged new taxes on derivatives to deter excessive risk-taking by big banks. […]

   Camp’s bill would establish a new tax regime for derivatives, requiring banks to declare the fair market value of the products at the end of each year. Any increase in value would be considered corporate income, subject to taxation. It’s a more aggressive tax treatment than Wall Street enjoys for either derivatives or for trading in more traditional securities. […]

   The bill would significantly strengthen the Volcker Rule, which bans banks from speculating in securities markets with taxpayer money. The Volcker Rule’s implementation has been delayed as bank lobbyists have flooded regulatory agencies in Washington, pillorying the ban with loopholes. Hefty tax burdens for proprietary trading would reduce bank incentives to engage in the risky activity.

How serious is Camp about this? It’s hard to say at this point, though I suspect it’s mostly about posturing and political chest-thumping. Camp wants to send a message that he’s displeased and see this as a vehicle. Even if the committee chair got serious about this, I imagine other Republicans would intervene to stop its progress.

Benen thinks that in the aftermath of Pres. Obama’s reelection the business community see him as “a leader who is going nowhere” but “is reaching out to them.” At the same time they view the Republicans as untrustworthy and increasingly reckless.

But seriously, folks, the Republicans are threatening to tax the banks and help stressed homeowners as a “payback” for supporting Pres. Obama. Oh, please, let them.

ROTFLMAO

Cross posted from The Stars Hollow Gazette

New York Times economics columnist, Prof. Paul Krugman posted a graph from Center on Budget and Policy Priorities in a post to his blog indicating the deficit problem has mostly been solved:

The Center on Budget and Policy Priorities has a graph:

Click on image to enlarge

The vertical axis measures the projected ratio of federal debt to GDP. The blue line at the top represents the projected path of that ratio as of early 2011 – that is, before recent agreements on spending cuts and tax increases. This projection showed a rising path for debt as far as the eye could see.

And just about all budget discussion in Washington and the news media is laid out as if that were still the case. But a lot has happened since then. The orange line shows the effects of those spending cuts and tax hikes: As long as the economy recovers, which is an assumption built into all these projections, the debt ratio will more or less stabilize soon.

Prof. Krugman noted that the CBPP advocates for another $1.4 trillion in revenue or spending cuts over the next decade. While there are still problems the debt/deficit is not as bad as is being presented by politicians and the traditional media. So while we everyone was loosing sleep about falling off cliffs, the cliff was a bad dream. Now the government and the media need to wake up and start talking about jobs.

Cross posted from The Stars Hollow Gazette

Last night (Jan. 1) the House of Representatives voted to make permanent the Bush/Obama tax cuts on all but the top 1% of tax payers and increasing taxes on on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut. With the bill set to be signed by Pres. Barack Obama, Congress and the White House move to the next manufactured crisis that this bill set up, the draconian sequester cuts to defense and non-defense spending and the debt ceiling, also a manufactured “crisis.” The bill did hold off those draconian cuts for two months, just in time for spending to hit the debt ceiling.

Pres. Obama made it clear in his address after the passage of the “Fiscal Cliff” bill, that he would not allow the debt ceiling to be used as a bargaining chip in negotiations over spending.

“I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed. We can’t not pay bills that we’ve already incurred.”

“If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic – far worse than the impact of a fiscal cliff.”

This bill was not the best deal as this article on the behind the scenes Senate dealings by Ryan Grym at Huffington Post tells it:

The White House sent Reid a list of suggested concessions as his staff debated what to send back to McConnell. Reid looked over the concessions the administration wanted to offer, crumpled up the paper and tossed it into his fireplace. The gesture was first reported by Politico and confirmed to HuffPost by sources with knowledge of it, who noted that Reid frequently keeps his fire going and is fond of feeding a variety of proposals to it.

Reid’s staff then called McConnell’s office with a simple message: Our last offer stands. There will be no further concessions. McConnell took to the Senate floor, complaining that he had no “dance partner” in Reid, and called Vice President Joe Biden, a man he assumed would be more willing to give. McConnell was right.

Perhaps the most important concession he wrangled from the administration, which Reid had been unwilling to make, was a two-month extension of the sequester, automatic cuts to defense spending and domestic programs that were supposed to be triggered Jan. 1. Reid wanted much more, worried that the two-month period will simply set up another colossal showdown that will also rope in the debt ceiling and funding for the government. “The deal itself is OK, but sets up Democrats for [a] worse fight and strengthens Republicans’ hand for what they really want: cuts,” said a Democratic source close to Reid. “Biden gave away the store on timeline. Two months and we’re back at this and in worse shape.”

President Barack Obama has vowed not to negotiate over the debt ceiling, but Democrats in the Senate are worried that they’ve now lost their leverage. “Everyone knew taxes would be raised on high earners,” said the Democratic source. “So with that out of the way, what do we bargain with?”

All they had to do was let the tax cuts end and pass new tax bill that included extension of unemployment benefits, ended unconstitutional the debt ceiling nonsense and added some stimulus to really create jobs, since we all know that tax cuts don’t. But no, Pres. Obama had to have this done and kept backing away from his so-called “line in the sand.”

If anyone believes at this point that Obama stand up to the threats of a government shut down by Republicans refusing to raise the debt ceiling without serious concessions on Medicare and Social Security, consider these three reasons to doubt from Jon Walker at FDL Action

1) Failure to stick to previous lines in the sand – In past negotiations Obama has failed to stick to his previous lines in the sand. Obama did not stick to his demand that the Bush tax cuts end for income over $250,000. Similarly despite saying he would not play games with the debt ceiling, Obama seemed to treat it as just another bargain chip when trying to get a deal with John Boehner.

2) Dismissing unilateral action – The Obama administration has dismissed unilateral action to address the debt ceiling. Doing something like invoking the 14th amendment would probably be the easiest way to defuse the fight, but the administration has declared that “not an option.” Even if the Obama team didn’t think it was a legally viable solution by completely removing the threat it has weakened its bargaining position.

3) Allowing the creation of a new super cliff in two months – When WP Joe Biden took over the negotiations from Sen. Harry Reid the major concession he made was to have only a two month delay of the sequestration cuts instead of a one year delay.

Meanwhile the “irrational exuberance” of Wall St’s feral children over the tax deal abounds with the markets closing on a high. Let’s see what happens in two months when we sit on the edge of another cliff.

Cross posted from The Stars Hollow Gazette

Last night the House of Representatives voted to make permanent the Bush/Obama tax cuts on all but the top 1% of tax payers and increasing taxes on on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut. With the bill set to be signed by Pres. Barack Obama, Congress and the White House move to the next manufactured crisis that this bill set up, the draconian sequester cuts to defense and non-defense spending and the debt ceiling, also a manufactured “crisis.” The bill did hold off those draconian cuts for two months, just in time for spending to hit the debt ceiling.

Pres. Obama made it clear in his address after the passage of the “Fiscal Cliff” bill, that he would not allow the debt ceiling to be used as a bargaining chip in negotiations over spending.

“I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed. We can’t not pay bills that we’ve already incurred.”

“If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic – far worse than the impact of a fiscal cliff.”

This bill was not the best deal as this article on the behind the scenes Senate dealings by Ryan Grym at Huffington Post tells it:

The White House sent Reid a list of suggested concessions as his staff debated what to send back to McConnell. Reid looked over the concessions the administration wanted to offer, crumpled up the paper and tossed it into his fireplace. The gesture was first reported by Politico and confirmed to HuffPost by sources with knowledge of it, who noted that Reid frequently keeps his fire going and is fond of feeding a variety of proposals to it.

Reid’s staff then called McConnell’s office with a simple message: Our last offer stands. There will be no further concessions. McConnell took to the Senate floor, complaining that he had no “dance partner” in Reid, and called Vice President Joe Biden, a man he assumed would be more willing to give. McConnell was right.

Perhaps the most important concession he wrangled from the administration, which Reid had been unwilling to make, was a two-month extension of the sequester, automatic cuts to defense spending and domestic programs that were supposed to be triggered Jan. 1. Reid wanted much more, worried that the two-month period will simply set up another colossal showdown that will also rope in the debt ceiling and funding for the government. “The deal itself is OK, but sets up Democrats for [a] worse fight and strengthens Republicans’ hand for what they really want: cuts,” said a Democratic source close to Reid. “Biden gave away the store on timeline. Two months and we’re back at this and in worse shape.”

President Barack Obama has vowed not to negotiate over the debt ceiling, but Democrats in the Senate are worried that they’ve now lost their leverage. “Everyone knew taxes would be raised on high earners,” said the Democratic source. “So with that out of the way, what do we bargain with?”

All they had to do was let the tax cuts end and pass new tax bill that included extension of unemployment benefits, ended unconstitutional the debt ceiling nonsense and added some stimulus to really create jobs, since we all know that tax cuts don’t. But no, Pres. Obama had to have this done and kept backing away from his so-called “line in the sand.”

If anyone believes at this point that Obama stand up to the threats of a government shut down by Republicans refusing to raise the debt ceiling without serious concessions on Medicare and Social Security, consider these three reasons to doubt from Jon Walker at FDL Action

1) Failure to stick to previous lines in the sand – In past negotiations Obama has failed to stick to his previous lines in the sand. Obama did not stick to his demand that the Bush tax cuts end for income over $250,000. Similarly despite saying he would not play games with the debt ceiling, Obama seemed to treat it as just another bargain chip when trying to get a deal with John Boehner.

2) Dismissing unilateral action – The Obama administration has dismissed unilateral action to address the debt ceiling. Doing something like invoking the 14th amendment would probably be the easiest way to defuse the fight, but the administration has declared that “not an option.” Even if the Obama team didn’t think it was a legally viable solution by completely removing the threat it has weakened its bargaining position.

3) Allowing the creation of a new super cliff in two months – When WP Joe Biden took over the negotiations from Sen. Harry Reid the major concession he made was to have only a two month delay of the sequestration cuts instead of a one year delay.

Meanwhile the “irrational exuberance” of Wall St’s feral children over the tax deal abounds with the markets closing on a high. Let’s see what happens in two months when we sit on the edge of another cliff.

Up Date 16:33 EDT: Republican Senators have taken Social Security off the table as part of the negotiations for the “fiscal cliff.”

Cross posted from The Stars Hollow Gazette

With the deadline for the expiration of Bush Tax cuts and austere spending cuts, the Senate negotiations have reached a stalemate. At the last minute, the Republicans demanded significant cuts to Social Security benefits. House Majority Leader Harry Reid (D-NV), who was described as  “shocked and disappointed” and this may well be the “poison pill” that ends the charade of “fiscal cliff” talks.

The development came after a long weekend of negotiations during which the two sides had been making progress.

The aide said Democrats had shown flexibility on the major sticking points involving taxes. They had not ruled out maintaining the tax on inherited estates at the current low rate, as Republicans prefer. And they had been open to a deal that would allow taxes to rise on many fewer wealthy households than President Obama had proposed. Republicans were seeking tax increases only on income higher than $400,000 or $500,000 a year, while Obama wanted to set the threshold at $250,000 a year.

But Obama was pressing for $30 billion in new spending to keep unemployment benefits flowing to the long-term unemployed, and he wanted to postpone roughly $100 billion in automatic spending cuts set to hit agency budgets next months. In exchange for those items, Senate Minority Leader Mitch McConnell (R-Ky.) insisted Sunday that Democrats put cuts to Social Security benefits on the table, noting that Obama had offered to do so as part of the big deficit-reduction package he had been negotiating with House Speaker John A. Boehner (R-Ohio.)

Republicans declined to comment on the new offer, but noted that Obama endorsed the adjustment, known as chained CPI, again Sunday, in an interview on NBC’s Meet the Press.

President Obama suggested that he was open to the highly unpopular proposal to cut increases to Social Security by linking it to the “chained CPI” in the context of a larger deal.

The other “monkey wrench” that McConnell threw into the mix was estate taxes which are scheduled to increase to the Clinton level of 55% on estates over one million dollars. The estate tax currently exempts the first $5 million of inheritance and taxes the remainder at 35 percent, which the Republicans want to keep. Pres. Obama wants to make it less generous, reducing the exemption to $3.5 million and taxing the remainder at a 45 percent rate. This tax only affects an extremely small number of people.

Under the Republican proposal, 3,800 people would pay the estate tax year, also near an average of $3.3 million. The GOP proposal would raise $182 billion for federal tax coffers over the next 10 years.

Under Obama’s proposal, 6,500 people would pay the estate tax next year, with an average payment estimated at about $3 million. The president’s proposal would raise $284 billion in tax revenue over the next 10 years.

No action by Congress would send the estate tax back to what it was in the 1990s – with a $1 million exemption and 55 rate percent for the remaining share. That would affect more than 40 million Americans.

Senate Minority Leader Mitch McConnell (R-SC) has reached out to Vice President Joe Biden to break the impasse.

Cross posted from The Stars Hollow Gazette

Barack Obama’s presidential legacy will most likely be that he was the Great Prevaricator. His plan has always been to protect the 1% and sell out the rest of us. So far he succeeded quite nicely, with just a few minor bumps in the road that were possibly preplanned.

Two important points that Jane Hamsher and Jon Walker at FDL Action makes about Barack Obama, that even Marcos Moulitsas gets wrong, is:

1st, Ms. Hamshire writes that Pres. Obama did not capitulate on Social Security cuts and we should stop pretending that he did:

Everywhere you look, the media narrative is that President Obama is “capitulating” to Republicans by agreeing to cuts in Social Security benefits.

And I have to ask, where is this collective political amnesia coming from?

Obama has made a deliberate and concerted effort to cut Social Security benefits since the time he took office.  FDL reported on February 12, 2009 that the White House was meeting behind closed doors to consider ways to cut Social Security benefits, and that the framework they were using was the Diamond-Orszag plan, which was co-authored by OMB Director Peter Orszag when he was at the Brookings Institute.

The birth of the now-ubiquitous “catfood” meme came on February 18, 2009 with this FDL headline:

   Hedge Fund Billionaire Pete Peterson Key Speaker At Obama “Fiscal Responsibility Summit,” Will Tell Us All Why Little Old Ladies Must Eat Cat Food

[..]

The administration backed off its immediate plans for reforming Social Security. The New York Times reported that they were “running into opposition from his party’s left” who are “vehement in opposing any reductions in scheduled benefits for future retirees.” But NYT columnist David Brooks reported that shortly after the summit, “four senior members of the administration” called him to say that Obama “is extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security.” [..]

In January of 2010, a bill sponsored by committed Social Security slashers Judd Gregg and Kent Conrad which would have created an official commission to make recommendations about the nation’s deficit was defeated by the Senate on a bipartisan vote – 22 Democrats and 24 Republicans voted no.

After the Senate defeat, on February 18, President Obama issued an executive order creating what subsequently became known as the “Catfood Commission” anyway. [..]

The composition of the Commission was conveniently stacked with 14 of the 18 members committed deficit hawks looking to start balancing the federal budget on the backs of old people.

And who supplied the staff to the commission? Why, Pete Peterson.

Are we to believe that the President was blissfully ignorant of the agendas of the people he appointed to this commission, created with the goal of bypassing Congressional process? [..]

The President has been very forthcoming about the fact that cutting Social Security benefits is something he wants to do.  When he said during the debate that he didn’t differ from Mitt Romney on entitlement reform, he meant it.   It’s time for people to remove the rose-colored glasses and stop projecting their own feelings on to the man.  It’s time to take him at his word.

This is what he has always wanted. Ignore it if you choose but the facts and Obama’s actions and words bear it out.

2nd, John Walker points out that Pres. Obama lied about not raising taxes on the middle class. By using the chained CPI, a lower measure of inflation, no only are SS benefits cut, it winds up being it would end up being a significant tax increase on the middle class by causing tax brackets to raise more slowly. While the tax increase would be very small at first, over the next decade it would mean the middle class will pay ten of billions more in taxes. John calls this the “Lie of the Year”

For five years Obama repeatedly and unequivocal promised not the raise taxes by one penny on anyone making less than $250,000. He did so in ads, campaign stops, emails, and interviews. There is probably no other single policy proposal that was more central to both of Obama’s presidential campaigns. Millions likely voted for Obama based on this firm promise.

Yet even before Obama’s second term begins, he has rushed to break this campaign promise. [..]

Obama was not forced by some extraordinary unforeseen event to accept this tax increase. Obama include this middle class tax increase in his counter offer. Obama didn’t need to do this, he chose to do it.

Right after Obama was re-elected, based on a promise not to raise taxes on the middle class, his first major action was to push for a middle class tax increase. This is a pathological level of dishonesty. The only thing more disturbing is the weak shoulder-shrugging response by most of the media to such a profound act of deception.

So whether the Bush tax cuts expire on Dec 31 or the rate of inflation is calculated by the chained CPI, middle class taxes are going up and SS recipients will be eating cat food.

There are those of us who knew this all along but everyone was focused  on the prospects of a Democratic resurgence that would govern from the left. They were blinded by the bright shiny object that was this man who gave a great speech and had an attractive family. But he came from the roots of Chicago Democratic politics and had an agenda that really wasn’t so hidden. He just lied and everyone believed him even though the facts were right in front of them that Pres. Obama is a right wing, corporatist, Republican and has been flat out lying to us all.

Cross posted from The Stars Hollow Gazette

As anyone watching the news knows by now that the major topic of discussion is the coming expiration of the Bush/Obama Tax cuts and the mythical “fiscal cliff”. President Obama has said that he will not extend them again and that any budget agreement from congress that does not raise taxes on income over $250,000 will be vetoed. So far, he’s sticking with that story. Over the weekend Treasury Secretary Timothy Geithner was dispatched to the Sunday talk show rounds to pitch the budget proposal while the president took to the road and social media to sell it to the public. Needless to say the Republicans roundly rejected the proposal with House Speaker John Boehner calling it a “La-La-Land offer.” That’s a real adult response.

Former policy analyst to Presidents Ronald Reagan and George H. W. Bush, Bruce Bartlett, who lost all his conservative credibility when he made the case that the Bush/Cheney administration agenda didn’t make any sense, joined the discussion of the Grover Norquist‘s tax pledge for Republicans and the pro’s and con’s of increased taxes. Gov. Dannel Malloy, Democrat of Connecticut; Veronique de Rugy, senior research fellow at the Mercatus Center at George Mason University; Elizabeth Pearson, fellow at The Roosevelt Institute; and Dedrick Muhammad, senior economic director at the NAACP join host Chris Hayes and Mr. Bartlet to discuss the “story of the week”: the tax battle

Cross posted from The Stars Hollow Gazette

President Obama will open deficit reduction talks on Friday with a call for a $1.6 trillion tax hike on corporations and the wealthiest Americans over the next 10 years. Obama and House Speaker John Boehner are sitting down to avert the so-called “fiscal cliff” of expiring tax cuts and automatic spending reductions set to take effect at the end of the year. We’re joined by Guardian columnist Glenn Greenwald, who says the protection of “entitlement” programs will depend on action from Obama’s progressive supporters. “The question is: Will the Democratic Party, and specifically the progressive and liberal component of the Democratic Party, change its behavior from cheerleader, from blindly supportive, partisan apparatchiks … into some kind of a force where they actually fulfill their duties as citizens, which is to hold political leaders accountable?” Greenwald asks.

Transcript can be read here

They don’t call it the “cliff” for nothing. It’s the fiscal spot where a nation’s representatives can gather and cry doom. It’s the place – if Washington is to be believed – where, with a single leap into the Abyss of Sequestration, those representatives can end it all for the rest of us.

In the wake of President Obama’s electoral victory, that cliff (if you’ll excuse a mixed metaphor or two) is about to step front and center. The only problem: the odds are no one will leap, and remarkably little of note will actually happen. But since the headlines are about to scream “crisis,” what you need to understand American politics in the coming weeks of the lame-duck Congress is a little guide to reality, some Cliff Notes for Washington.

As a start, relax. Don’t let the headlines get to you. There’s little reason for anyone to lose sleep over the much-hyped fiscal cliff. In fact, if you were choosing an image based on the coming fiscal dust-up, it probably wouldn’t be a cliff but an obstacle course – a series of federal spending cuts and tax increases all scheduled to take effect as 2013 begins. And it’s true that, if all those budget cuts and tax increases were to go into effect at the same time, an already weak recovery would probably sink into a double-dip recession.

But ignore the sound and fury. While prophecy is usually a perilous occupation, in this case it’s pretty easy to predict how lawmakers will deal with nearly every challenge on the president’s and Congress’s end-of-year obstacle course. The upshot? The U.S. economy isn’t headed over a cliff any time soon.

A peek at the obstacles ahead makes that clear. [..]

Among all the spending and tax changes in the queue, and all the hype around the cliff, the great unknown is whether it’s finally farewell to the Bush tax cuts for the wealthy. And that’s no perilous cliff. Letting those high-end tax cuts expire would amount to a blink-and-you-miss-it 0.003% contraction in the U.S. economy, according to Moody’s, and it would raise tens of billions of dollars in desperately-needed tax revenue next year. That’s no small thing when you consider that federal revenue has fallen to its lowest point in more than half a century. Ending these tax cuts for the wealthy would bring in cash to reduce deficits or increase funding for cash-starved priorities like higher education.

It’s impossible to say how Congress will come down on this final issue, though we do know how lawmakers will arrive at their decision. At least Congress is consistent. On this, as on all other matters in the fiscal obstacle course, it’s not the economy.

It’s the politics, stupid.