A Fiscal Cliff Deal is Near
Posted at 8 a.m. on Dec. 18, 2012
Ezra Klein reports on the ever-narrowing gap between President Obama and House Speaker John Boehner (R-OH) as they work to resolve the “fiscal cliff.”
“Boehner offered to let tax rates rise for income over $1 million. The White House wanted to let tax rates rise for income over $250,000. The compromise will likely be somewhere in between. More revenue will come from limiting deductions, likely using some variant of the White House’s oft-proposed, oft-rejected idea for limiting itemized deductions to 28 percent.”
“On the spending side, the Democrats’ headline concession will be accepting chained-CPI, which is to say, accepting a cut to Social Security benefits. Beyond that, the negotiators will agree to targets for spending cuts.”
“On stimulus, unemployment insurance will be extended, as will the refundable tax credits. Some amount of infrastructure spending is likely. Perversely, the payroll tax cut, one of the most stimulative policies in the fiscal cliff, will likely be allowed to lapse.”
“As for the debt ceiling, that will likely be lifted for a year, at least.”
Paul Krugman explains why implementing chained CPI for Social Security is not great policy, but is better than raising the Medicare eligibility age.