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Taxing Solutions

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The election is over.  The Sunday morning gab shows suddenly found a purpose, interviewing serious Senators and other concerned about the work that the new (and first old!) Congress will face – particularly the “Fiscal Cliff”.  A tremendous amount of movement on the Republican side shows that tax increases, particularly coming as reform in the deductions allowable, is definitely on the table.

Grover Norquist now knows what it’s like to be in a position where you can’t deliver the votes.  Must be a shocker.

The question remains, however, as to how much of the roughly $1.1 Trillion deficit will be tackled in year 2013, and how much will be spun out into the future.  No one expects the gap to close overnight, but instead are looking for serious progress towards balance.  More to the point, they want to assure markets that it won’t grow from here.  How much can they raise get us down the path right away?  Here is a short guide to some of the ways to look at it.

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Infrastructure & Payback

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As the water from Hurricane Sandy receded, tens of thousands of homes remained without power for weeks.  New York Governor Cuomo was livid – “The utility system we have was designed for a different time and for a different place,” Cuomo told a news conference. “It is a 1950s system.”  The ConEd grid is, of course, managed entirely by private money, but it is a highly regulated utility.  You can bet that the hammer will fall on them as they are forced to rebuild a completely new system in areas where the old one was more or less washed away.

Down the coast in Washington there is a different focus, one that highlights how a developed nation can have such a terrible problem with antiquated infrastructure.  There, the talk is about how to avoid a “Fiscal Cliff”, a political problem focusing and complicating a very real problem with excessive deficits built not around long-term investment but merely keeping the government running.

The divide between the two is bigger than the 3 hours 25 minutes it takes the Amtrack Acela to cover the distance.  It is the gap between the reality that infrastructure investment has an incredible immediate impact on the economy, pays for itself in the long term – but remains neglected as too expensive.

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While Europe Burns

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It’s been a long time since I wrote about Europe.  How many ways can a humble blogger say, “Nothing has really changed”?  Nothing has.  Currency union has turned into a straightjacket of austerity and the European Union is plunging into a deep recession.  The only true news has been a day of protest across Europe, fueled in part by the now 25% unemployment rate in Spain and other nations.  It has become a full meltdown.

But so far, no banks have failed.  Isn’t that wonderful?

There are several potential problems for the US as this continues, but the most important is its effect on our trade.  Yet, for all the trouble in Europe, it may not affect us at all.  Can Europe burn while the US stands by?  The short answer is sure, why not.  Here’s why:

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Fiscal Cliff

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The phrase is often credited to Ben Bernanke, but variations of it have been around for decades.  The “Fiscal Cliff” that went largely unmentioned during the campaign now dominates the talk out of Washington.  It is probably the most important thing that will happen in the next Congress, and it will certainly set the tone for the end of the Obama administration.  Yet almost no one has taken the time to explain what’s at stake in plain language.

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Soup’s On!

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After a big feast, the bones of whatever animal was consumed can be gathered and boiled down for soup.  Elections are a feast of sorts, if you prefer blather to meat, and it’s customary to make some kind of broth from the whole experience.

Why bother?  Those of us who are “into it” love to analyze trends and learn whatever we can along the way.  The next election will be shaped by these lessons more than anything else.  And if we’ve learned one thing in this deeply divided America, it’s that election season is pretty much forever.

Ready?

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