In globalisation, it is free for all carnival!Rangarajan Committee recommends average global prices for domestic gas!US fiscal deal doesn't solve the massive deficit problem!
Scam inflicted government has succeeded t o divert the national attention thanks to reform generation uprising against rape culture.Chidambaram has proved his ability to push reform drive to next generation. But the scams threaten to resurface once again as senior IAS officer Ashok Khemka has termed Haryana's decision to set up a panel to probe his orders to cancel mutation of a land deal between Robert Vadra and real estate corporate DLF as a "cover up to the gargantuan land scams", and sought relevant file notings from the state government.Four days after the high-level panel submitted its inquiry report into the cancellation of mutation of 3.5 acre of land in Gurgaon, Khemka stood his ground on his findings in the controversial deal.
Indian Holocaust My Father`s Life and Time, Chapter: Nine Hundred Forty Four
Palash Biswas
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Scam inflicted government has succeeded t o divert the national attention thanks to rform generation uprising against rape culture.Chidambaram has proved his ability to push reform drive to next generation. But the scams threaten to resurface once again as senior IAS officer Ashok Khemka has termed Haryana's decision to set up a panel to probe his orders to cancel mutation of a land deal between Robert Vadra and real estate corporate DLF as a "cover up to the gargantuan land scams", and sought relevant file notings from the state government.Four days after the high-level panel submitted its inquiry report into the cancellation of mutation of 3.5 acre of land in Gurgaon, Khemka stood his ground on his findings in the controversial deal.Meanwhile, the hindutva face of next prime minister faces yet another setback as Narendra Modi loses Lokayukta battle, SC upholds Governor Kamla Beniwal's choice Justice R A Mehta.The consumer culture is showcased with skin exposure as Trinamool member Mir Tahir Ali showers money on skimpily-dressed dancing girls!In globalisation, it is free for all carnival!
Rangarajan Committee recommends average global prices for domestic gas!
Government has imposed around five per cent cut in the Rs 1.93 lakh crore defence budget this year in view of economic slowdown.
The Ministry of Finance recently conveyed to the Defence Ministry that there would be a cut of around Rs 10,000 crore in the Rs 1.93 lakh crore allocated for the defence sector, Ministry officials said here.
After the cut in budget, several key acquisition plans of the three forces including the procurement of 126 combat aircraft for the IAF are expected to be pushed for the next fiscal, they said.
Defence Minister A K Antony had given indications in this regard recently when he said that the Ministry would be struggling to get even the allocated amount.
"I am struggling to get the budgetary amount," he had said when asked if he was hopeful of getting the additional Rs 40,000 crore sought by his ministry for modernisation of the three services.
In view of the cost-cutting measures, defence forces have been asked by the ministry to concentrate on prioritising their procurements.
Under the Rs 1.93 lakh crore budget, Rs 1,13,829 crore is for revenue expenditure including salaries and pensions and Rs 79,579 crore was allocated for modernising the armed forces by acquiring new assets.
A last-minute deal in Congress to avoid the economy-shaking ``fiscal cliff'' sent world stocks climbing on Wednesday but doesn't solve the problem of the massive US deficit, meaning other battles on deep spending cuts and the federal debt limit loom in the coming weeks and months.
The Dow Jones industrial average surged 200 points as US markets opened.
A smiling President Barack Obama said he would sign the law ``that raises taxes on the wealthiest 2 percent of Americans while preventing tax hikes that could have sent the economy back into recession.'' Then he left for Hawaii to resume his holiday break.
The deal that squeezed through a sharply divided Congress just hours before most financial markets reopened from the New Year's holiday keeps income taxes from rising on the middle class and the poor, but it puts off major decisions on more than $100 billion in defense and domestic spending cuts.
Congress also will have to act as early as February on raising the $16.4 trillion federal borrowing limit, which will allow the country to pay its bills. ``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,'' Obama said.
That means more potential drama ahead for those who have marveled at the inability of US leaders to address chronic deficit spending, especially Europeans, who have faced plenty of debt problems of their own. Obama warned that he will ``not have another debate with this Congress'' on the debt ceiling. Of course, the makeup of Congress changes on Thursday, when dozens of new members are seated.
If the fiscal deal had not been reached by then, the new Congress would have had to start over, and Americans would have faced automatic spending cuts and tax increases of more than $500 billion in 2013 alone. The fiscal cliff, with its Jan. 1 deadline, was put in place in 2011 as motivation for the Obama administration and Congress to find ways to reduce the deficit, which now averages about $1 trillion a year.
Economists had warned that the sudden combination of taxes and spending could have swung the country back into recession. Some have said even this limited fiscal deal with hurt economic growth this year.
The deal to avert that scenario, and put in place the first significant tax increase in two decades, passed a final hurdle when the House of Representatives passed it late Tuesday, despite loud protests from conservative Republicans who hate the idea of raising taxes at all. They wanted to see more spending cuts in the agreement. ``I'm embarrassed for this generation. Future generations deserve better,'' said one Republican opponent, Rep. Louie Gohmert.
The deal put off the issue of spending cuts, stopping $24 billion in spending cuts set to take effect over the next two months.
Moments after the vote, Obama strode into the White House briefing room and claimed a victory, though it was Vice President Joe Biden, a decades-long veteran of the Senate, who was called to the negotiating table to work with Senate Republican Leader Mitch McConnell to get the deal through the Senate in the early hours of the new year.
President Obama and Vice President Joe Biden arrive to make a statement regarding the passage of the fiscal cliff bill Tuesday in the Brady Press Briefing Room at the White House in Washington. / AP
Past its own New Year’s deadline, a weary Congress sent President Obama legislation to avoid a national “fiscal cliff” of middle-class tax increases and spending cuts late Tuesday night.
The bill’s passage on a 257-167 vote in the House sealed a hard-won political triumph for the president less than two months after he secured re-election while calling for higher taxes on the wealthy.
Moments after the vote, Obama strode into the White House briefing room and declared, “Thanks to the votes of Republicans and Democrats in Congress I will sign a law that raises taxes on the wealthiest 2 percent of Americans while presenting tax hikes that could have sent the economy back into recession.”
He spoke with Vice President Joe Biden at his side, a recognition of the former senator’s role as the lead Democratic negotiator in final compromise talks with Senate Republican Leader Mitch McConnell of Kentucky. Obama said that the ‘fiscal cliff’ deal follows the principle that the nation’s deficit needs to be cut in a balanced way.
In addition to neutralizing middle-class tax increases and spending cuts taking effect with the new year, the legislation will raise tax rates on incomes over $400,000 for individuals and $450,000 for couples. That was higher than the thresholds of $200,000 and $250,000 that Obama campaigned for.
But remarkably, in a party that swore off tax increases two decades ago, dozens of Republicans supported the bill at both ends of the Capitol.
The Senate approved the measure on a vote of 89-8 less than 24 hours earlier, and in the interim, rebellious House conservatives demanded a vote to add significant spending cuts to the measure. But in the end they retreated.
Supporters of the bill in both parties expressed regret that it was narrowly drawn, and fell far short of a sweeping plan that combined tax changes and spending cuts to reduce federal deficits. That proved to be a step too far in the two months since Obama called congressional leaders to the White House for a post-election stab at compromise.
APThe lights of the U.S. Capitol remain lit into the night as the House continues to work on the "fiscal cliff" legislation proposed by the Senate, in Washington on Tuesday.
U.S. ‘fiscal cliff’ deal passage ends standoff
NEW YORK TIMES NEWS SERVICEEnding a climactic fiscal showdown in the final hours of the 112th Congress, the House late on Tuesday passed and sent to President Barack Obama legislation to avert big income tax increases on most Americans and prevent large cuts in spending for the Pentagon and other government programs.
The measure, brought to the House floor less than 24 hours after its passage in the Senate, was approved 257-167, with 85 Republicans joining 172 Democrats in voting to allow income taxes to rise for the first time in two decades, in this case for the highest-earning Americans. “The one thing that I think, hopefully, the new year will focus on,” Mr. Obama said, “is seeing if we can put a package like this together with a little bit less drama, a little less brinkmanship, and not scare the heck out of folks quite as much.’’
FISCAL FIGHT
In approving the measure after days of legislative intrigue, Congress concluded its final and most pitched fight over fiscal policy, the culmination of two years of battles over taxes, the federal debt, spending and what to do to slow the growth in popular social programs.The decision by Republican leaders to allow the vote came despite widespread scorn among House Republicans for the bill, passed overwhelmingly by the Senate in the early hours of New Year’s Day.
They were unhappy that it did not include significant spending cuts in health and other social programs, which they say are essential to any long-term solution to the nation's debt.
Democrats, while hardly placated by the compromise, celebrated Mr. Obama’s nominal victory,
Many Republicans in their remarks characterized the measure, which allows taxes to go up on household income over $400,000 for individuals and $450,000 for couples but makes permanent tax cuts for income below that level, as a victory of sorts.
Republicans hope to fight for more spending cuts in the upcoming debt-ceiling vote.
In a letter to Haryana Chief Secretary P K Chaudhery on Monday, Khemka, who had as Director General of Consolidation of Holdings, cancelled the mutation of land deal between businessman Robert Vadra and real estate giant DLF, wrote that his orders under Sec 42 of East-Punjab Holdings (Consolidation and Prevention of Fragmentation) Act, 1948, were "quasi- judicial and final."
Currently, MD of Haryana Seeds Development Corporation, Khemka has also sought a copy of the government order constituting the inquiry committee, its terms of reference and relevant file noting pages constituting the panel.
On being contacted, Khemka said the committee is a "sham to justify possible action against me as a cover to the gargantuan land scams".
"All this kind of humiliation and mental torture is to break me down psychologically," he claimed, adding that "vested interests" in the government have "pre-judged" the matter.
He said he is surprised that the affected individual or the corporate house is "not ostensibly aggrieved."
In his letter Khemka said, "the remedy for the affected party is to challenge the order by way of filing a writ petition in the high court".
Khemka has cited a case in which the Punjab and Haryana High Court had on September 6 last year directed the Hooda government to compile all orders of the DG consolidation, where precious panchayat lands were transferred to influential realtor companies.
"One of my orders pertaining to Chirsi village (Faridabad district) is also under challenge," he wrote.
The probe panel had submitted its report to the state Chief Secretary on December 28.
Congress President Sonia Gandhi's son-in-law Vadra had sold 3.53 acre of land at Shikohpur village in Gurgaon district to DLF.
As DG Consolidation, Khemka had on October 15, last year set aside the mutation on the grounds that the assistant consolidation officer who had sanctioned it was not authorised to do so.
Chaudhery, meanwhile, said he was "examining" the probe panel's report.
In a setback to Narendra Modi, the Supreme Court today upheld the appointment of Justice (retd) R A Mehta as state Lokayukta by Governor Kamla Beniwal, saying it was done in consultation with the Chief Justice of the High Court.A bench of justices B S Chauhan and F M Ibrahim Kalifulla dismissed the Gujarat government's plea that the appointment was illegal as it was done without consulting it.
Watch video: SC setback for Narendra Modi
The bench said that the Governor is bound to act under the advice of the Council of Ministers, but the appointment of Justice Mehta is right as it was done in consultation with the Chief Justice of the Gujarat High Court.
The apex court said that Justice Mehta can go ahead with his work as Lokayukta.
The Governor had on August 25, 2011 appointed Justice Mehta to the post of Lokayukta, which had been lying vacant for the last eight years.
The Gujarat government had moved the apex court against the January 18, 2012 order of the Gujarat High Court upholding the Governor's decision.
The High Court's verdict had been delivered by Justice V M Sahai after a division bench gave a split decision on the legitimacy of the Governor's action in appointing Justice Mehta, a retired judge of the Gujarat High Court, as Lokayukta.
The division bench of the High Court had given the split verdict on the appointment issue on October 11, 2011.
While Justice Akil Kureshi had upheld the decision of the Governor, Justice Sonia Gokani had quashed the warrant of appointment terming it to be unconstitutional.
Challenging the High Court's order in the Supreme Court, the state government had contended that the personal discretion exercised by the Governor in unilaterally issuing the warrant of appointment of Lokayukta was "unwarranted".
Bhangar (West Bengal) A controversy has broken out after skimpily-dressed dancing girls performed at a Trinamool Congress foundation day function at Bhangar in South 24 Parganas district with TMC leader Mir Tahir Ali allegedly showering money on them.
Police stopped the function after midnight last night.
Organised at a stone's throw from the Bhangar police station, the function saw TMC leader and 24-Parganas Zilla Parishad member Mir Tahir Ali climb onto the stage and allegedly threw wads of currency notes at the direction of the dancing girls.
The Trinamool Congress termed it as an 'isolated' incident and said strict action will be taken against any party worker involved.
TMC MP Derek O' Brien said, "Thousands of events marked Trinamool's 16th birthday yesterday and one of these events from these 300 events was an abhorrent incident involving ladies dancing, it was an isolated incident, the strictest action will be taken against any party worker involved".
"Please do not portray this as something endorsed by Trinamool. For Trinamool, cultural sensibilities and gender sensibilities are absolutely paramount. Please be reassured it is not endorsed by anyone from Trinamool Congress....we will find out who were the people indulging in the crass display of gender insensitivity," he said.
The incident, which went viral on TV channels, was condemned by various sections of society, including political parties and the women's commission. They expressed their displeasure at the 'vulgar' political culture.
National Commission for Women chairperson Mamta Sharma said, "It is shameful that they are celebrating this way. We need a change of mindset among all political parties".
Eminent educationist Sunanda Sanyal said, "The future of young boys and girls will get destroyed if this political culture remains prevalent in West Bengal".
TMC suspends leaders, activists involved in foundation day erotic dance
Kolkata: The Trinamool Congress on Wednesday condemned and suspended the leaders and activists who were caught on camera heckling and throwing money at hired women dancers at one of its founding day celebrations.
TMC leader and spokesman Derek O'Brien said that a disciplinary committee may even consider sacking the persons involved from the party.
"One of the celebration events obviously went wrong. We condemn what happened. We need to find out who these people are, whether TMC workers or others. What happened last night was condemnable," O'Brien said.
"The TMC does not approve such events. We will get to the bottom of this. We will take appropriate action. There is absolutely zero tolerance on such matters. We have sent a team on the ground to find out," he added.
He also said there was no need for West Bengal Chief Minister and party president Mamata Banerjee to offer an apology for some of its party workers taking part in function in which women dancers were hired to perform an alleged erotic dance.
District-level TMC leaders and activists were caught on television throwing money on the hired women dancers during the function on Tuesday, leaving the party leadership embarassed.
The function was organised by Trinamool Congress district level leaders in Bhangore, near Kolkata. Trinamool zila parishad member Meer Taheer Ali is widely believed to have arranged the women dancers for the celebrations that took place right opposite the local police station.
O'Brien said there was no need for the media to play the dual role of both judge and executioner in the matter. A television channel described O'Brien's reaction as .
O'Brien reiterated that a statement on the incident has been issued in which it was also stated that the party had organized several commemorative programmes across the state to mark Trinamool Congress’ 15th foundation day.
The recording of the programme was also aired on local television channels.
The controversy comes at a time when the entire nation witnessed muted New year celebrations as a mark of respect for the 23-year-old Delhi student who died 13 days after she was brutally gang-raped and tortured by six men in a moving bus.
The controversy is likely to embarrass Banerjee,particularly at a time when security of women is high on the government’s agenda and clamour for stringent laws to deal with crimes against women is growing louder.
Defence Ministry staff, DRI constable among 5 arrested for molestation
New Delhi Five persons, including a Defence Ministry staff and a constable of Directorate of Revenue Intelligence, were arrested for allegedly molesting a woman and trying to forcibly take her in their car on Sunday, police said today.
All the five persons involved in the case were arrested after a complaint filed by Roshni Devi, who alleged that her daughter-in-law was molested by the group at her hut in Bawana in northwest Delhi.
The five persons have been identified as Mahender (26), Sunil Dahiya (25), Rajneesh (28), Gopal (28) and Basant (31).
While Gopal is a multi-task staff in the Defence Ministry, Basant is a head constable in DRI.
Devi alleged that on Sunday the five men came in a car and entered into their hut when she along with her daughter-in-law was busy cooking dinner.
"They molested Reena and tried to abduct her at which Roshni Devi resisted and shouted. People gathered and overpowered them. All the five men have been arrested," a senior police official said, quoting the complainant.
SC to hear PIL seeking suspension of MPs and MLAs chargesheeted for crime against women
The Supreme Court today agreed to hear a PIL filed by a former woman IAS officer seeking directions to the government to ensure safety of women and for conduct of fast-track court proceedings in all rape cases.
A bench headed by Chief Justice Altamas Kabir will hear tomorrow the PIL which also sought suspension of MPs and MLAs in case a charge sheet is filed against them for crime against women.
In her PIL, retired IAS officer Promilla Shanker has pleaded with the court to direct the government to set up fast-track courts in all states for expeditious trial of rape
cases.
She also submitted that cases of rape and crime against women and children be investigated by lady police officials and trial be conducted by lady judges.
Meanwhile, another bench comprising justices P Sathasivam and Ranjan Gogoi issued notices to the Centre and all the states and sought their response on another PIL by advocate Mukesh Kumar seeking safety measures for women.
Kumar, in his PIL, demanded creation of women police stations in every town to investigate complaints of rape and sexual assault against women.
It also sought steps for implementation of UN convention on elimination of all forms of discrimination against women.
The court asked the Centre and the states to file their responses in four weeks.
The PILs come in the backdrop of the nation-wide outrage over December 16 brutal gangrape and assault of a 23-year-old woman in Delhi, who died in a Singapore hospital on December 29.
The Prime Minister-appointed Rangarajan Committee has suggested mandating a price of domestically produced natural gas at an average of international hub prices and cost of imported LNG instead of present mechanism of market discovery.The panel in its report made public today suggested first taking an average of the US, Europe and Japanese hub or market price and then averaging it out with the netback price of imported liquefied natural gas (LNG) to give sale price of domestically produced gas.
Industry sources, however, raised doubts saying acceptance of the recommendations would lead to overriding of the signed contracts. Currently, Production Sharing Contracts (PSC) provide for gas being sold at an arms-length price discovered through market bids invited from potential users.
Acceptance of the recommendation would mean government mandating a price of gas and ending the last of the remaining freedoms available, they said.
The government has already taken over the task of fixing users curbing marketing freedom guaranteed in PSC.
Sources also questioned how a market price in the US or Europe which is a function demand and supply in that region, could be applied to a hugely fuel deficit nation like India.
The US has low gas prices because of abundant fuel with the advant of shale gas while demand in Europe and Japan, unlike India, has fallen.
The panel headed by C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, said the PSC provides for arm's length pricing and prior Government approval of the formula or basis for gas pricing, subject to policy on natural gas pricing.
"Since no market-determined arm's length price currently obtains domestically and nor is this likely to happen for several more years, a policy on pricing of natural gas has been proposed," it said.
The Committee recommended deriving one price from "the volume-weighted net-back price to producers at (LNG) exporting country well-head for Indian imports for the trailing 12 months."
Simultaneously, the volume-weighted price of US's Henry Hub, UK's NBP and Japan Custom Cleared prices for the trailing 12 months be calculated.
"The arm's length price thus computed as the average of the two price estimates would apply equally to all sectors, regardless of their prioritisation for supply under the Gas Utilisation Policy," it said.
Industry sources said no LNG exporting country ever declares its netback or producer price and it would be extremely difficult to determine that.
"The proposed policy would provide for estimation of an unbiased arm's length price based on an average of two prices, which can be interpreted as alternative estimates of an arm's length price for the Indian producer," the Rangarajan panel said.
The suggested formula will apply to pricing decisions made in future, and can be reviewed after five years when the possibility of pricing based on direct gas-on-gas competition may be assessed, it added.
On the future exploration contracts, it said the existing PSC allows the contractor to recover his cost, before giving the government its share in the contractor's revenues, in case there is commercial discovery leading to production.
"Under this system, a close scrutiny of costs becomes critical for the Government since there is incentive for contractors to book as costs expenses that do not reflect the true economic cost to the contractor (eg through transfer pricing)," it said. "This is perceived by contractors as interference in commercial decision-making, whereas the government and CAG view it as legitimate and necessary."
Stating that cost recovery is at the root of the problems experienced, it proposed to dispense with it, in favour of sharing of the overall revenues of the contractor, without setting off any costs.
"The share will be determined through a competitive bid process for future PSCs," the report said. "The bids will be made in a bid matrix, in which the bidder will offer different percentage revenue shares for different levels of production and price levels."
This will ensure that as the contractor earns more, government gets progressively higher revenue, and will also safeguard government interest in case of a windfall arising from a price surge or a surprise geological find.
The committee has also recommended that an extended tax holiday of 10 years, as against 7 years already available for all blocks, be granted for blocks having a substantial portion involving drilling offshore at a depth of more than 1,500 metres, since cost of a single well can be as high as USD 150 million.
Further, the committee has recommended extending the timeframe for exploration in future PSCs for frontier, deep-water (offshore, at more than 400 m depth) and ultra-deep-water (offshore, at more than 1,500 m depth) blocks from eight years currently, to ten years.
Diesel deregulation: Need to look into dimensions of issue says FM
Finance Minister P Chidambaram today said that government will have to look into various dimensions of the issue before taking any decision on deregulating diesel prices.
"The government has to take into account several dimensions of issue before decision can be taken," he said, when asked about the possibility of deregulating diesel prices.
The issues concerning diesel are not unidimensional, the Minister said, adding while some argue for deregulation, the others say that it would fuel inflation.
"On one column (of a newspaper) you will say, deregulate diesel price and on another column you will say inflation (will rise). These are not unidimensional issues, you cannot approach a issue from one dimension," he said.
Overall inflation in November stood at 7.24 per cent, much above the Reserve Bank's comfort level of 5-6 per cent.
The government had in 2010 taken an "in-principle" decision to deregulate diesel prices, but could not implement it because of political pressure. The decision was based on the recommendations made by Kirit Parikh committee.
Price of diesel, which currently costs Rs 47.15 per litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre.
The government has promised a cash support of Rs 30,000 crore to the oil marketing companies to cover a part of the Rs 85,586 crore revenue loss on fuel sales during April- September.
CJI promises swift justice for crimes against women
Inaugurating a fast track court that will try the accused in the case of gangrape-cum-murder of a Delhi girl, Chief Justice of India Altamas Kabir today cautioned against lynch-mob mentality and promised swift justice in cases of sexual offences against women.
“It is good to know that after this rather tragic incident of 16 December, people have started raising their voices against certain crimes against society, against crime against women. But the immediate reaction of people has been that don’t put these persons to trial, hand them over to us, we will deal with them, hang them.
AFP
“Now these kinds of sentiments, which are emotional, are rather dangerous sentiments. But these emotions will continue until the matter comes to us and we deal with them expeditiously,” Justice Altamas Kabir said inaugurating the first of the five fast track courts that will hear cases of sexual offences against women.
The FTC, inaugurated by the CJI in Saket court complex in South Delhi in the presence of Delhi High Court Chief Justice D Murugesan, will conduct the trial of the accused in the gangrape of a Delhi girl who also suffered a brutal assault that led to her death in a Singapore hospital last week.
Justice Kabir said, “Let us not lose sight of the fact that a person is presumed innocent until proven guilty. Let us balance things. Let us not get carried away. Provide justice in a fair but swift manner so that faith of people is once again restored that the judiciary is there behind the common man. These kinds of crimes, which have been on an upswing, will be taken care of.”
Stressing that December 16 incident of gangrape of the 23-year-old student was not an isolated incident and such crimes are happening everywhere, Justice Kabir said to address such crimes one has to understand what a woman goes through in such cases.
Addressing the judicial officers, he said, “Such crimes are not against the body of a woman but her soul.”
“The incident of December 16 is not an isolated incident. such matters are happening everyday. Even on that day itself, while the headline showed this particular case, on the third or fourth page of a newspaper, there was a little article of about six lines or eight lines that a ten-year old Delhi girl was gangraped and then set on fire,” he said stressing upon the need for fast-tracking all such cases of sexual offences.
“That did not capture the attention of people. This case did. Why is it that certain cases catch the attention? These are all equally reprehensible. Imagine a six-month-old baby being raped. It’s a small item in the newspaper and then it is taken away,” he said.
Promising swift justice, the CJI said, “I on my part will try my level best that the part of the case on administration side is taken care of and the things are done expeditiously in a fashion where the things can be brought to the court as expeditiously as possible.”
He also said “one has to understand the trauma a woman goes through, and this has been repeatedly said in our judgements, when she is forced against her will.
“It is not a crime against body but the soul itself. If the soul of the woman has to be saved one has to understand the psychology,” he said.
Justice Kabir also said, “The Fast Track Court, particularly for trying offences against women, is not only necessary but also welcome and the government has also woken up to this and has immediately agreed that there should be Fast Track court to try these kind of cases on a priority basis.”
While reiterating that all crimes are condemnable, the CJI said “crimes particularly against women, children, disabled persons need our immediate attention so that the perpetrators of these kind of crimes are brought to justice as quickly as possible, as swiftly as possible so that the message is sent to all and sundry that these matters are going to be dealt with seriously.”
The CJI also pointed that such incidents also happen because people do not follow or do what is needed to be done.
“Take a simple case, this particular incident happened in a moving bus which roamed for three hours in Delhi while this was being done inside. Nobody knew what was happening inside. This particular bus had tinted windows and curtains.
“If the directives which had been given by the Supreme Court to remove tinted glass or the film or curtains from the windows of the vehicles were followed, may be this would have been noticed by the people. The public is not totally insensitive. If the public had been able to see such kind of incident happening, it could have been stopped but it was not visible.”
“Sometimes we fail in our duties. When something bad happens, it is then that we start waking up,” he said.
The political economy of rape
NARENDAR PANI
The skewed sex ratio, also a fall out of rural economic trends, has led to more crimes against women. — PTI
A link needs to be drawn between rising crimes against women and the crisis in agriculture.
January 2, 2013:
As the tears over the brutal rape and murder of a young woman in Delhi dry up, the attention of the nation cannot but remain on the rapidly deteriorating gender relations in the country. Much of this attention will be on the male mindset and what should be done to change it. And there is no doubt that there is an urgent need to sensitise the Indian man to the rights of women.
But it will be a pity if this debate leaves out the larger context within which this crisis has occurred, including the contribution of the political economy of the last two decades.
The link between political economy and gender relations may appear tenuous, but that is only because we haven’t paid sufficient attention to what the prevailing relationship between economics and politics is doing to our society.
Politicians of a variety of hues have seen their task as essentially one of first generating rapid growth and then using these resources to gather political support through vote-gathering welfare schemes. And this divide between the economic and the political has been widened by the economics of liberalisation concentrating on urban centres and the rural areas being the main recipients of political patronage.
FARM CRISIS
This compact is now showing signs of strain at several points. The economic slowdown has reduced the resources available for patronage. The growth of cities and urban poverty has made it difficult for politicians to restrict their patronage to the villages. And, of great significance to gender relations, the reliance on patronage has fundamentally altered the social and economic fabric of rural India.One of the corollaries of patronage politics in rural India has been the decline of agriculture. With the government shifting its attention from public investment in agriculture to rural welfare, agriculture became that much less profitable. The share of agriculture declined from around a third of GDP in 1991 to around a sixth of GDP today.
Just as agriculture was declining the management of patronage emerged as a major alternative career option. A farmer who could become a cog in the political wheel often found that role much more lucrative than agriculture. This was particularly true when they were innovative enough to find ways to cut themselves a slice of the patronage cake. Even when they could not do so directly they could find other ways to leverage their power to identify the beneficiaries of patronage.
The impact of the decline of agriculture on rural society cannot be measured in economic terms alone. As the French were fond of pointing out in WTO negotiations, agriculture is multifunctional.
It is the basis of rural social and cultural life, with several festivals that are celebrated even in our cities being based on the agricultural cycle. The decline of agriculture then also means the withering away of several traditional practices, including those related to gender.
Those familiar with the extreme inequities of the rural patriarchal family system will instinctively believe that this is a good thing. But the assumption that there can be nothing worse than the traditional agriculture-based patriarchal system may require more careful scrutiny. For all the inequities of the earlier system, it at least had an economic role for women.
Women workers play a significant role in agriculture, taking care of critical operations. The decline of agriculture reduces this economic role.
The system of political patronage that replaces agriculture has a much smaller role for women. Women do not usually play a prominent role in the violence of rural political confrontations. Even in situations where there are reservations for women in panchayat bodies, they are typically occupied by the relatively older married women in political families, and not unmarried women.
SEX RATIOS
Over the last two decades this bias against women, especially single women, has been converted into demographic trends. With the use of available technology child sex ratios are being dramatically distorted.The effects of the movement from agriculture to patronage have seen the heartland of the Green Revolution in Punjab and Haryana becoming the centre of a region with rapidly declining child-sex ratios. And this skewed population is coming back to haunt the men of these regions.
A twenty-year-old young man born after liberalisation in these regions has very little scope for meaningful association with women.
The chances of relating to them at agricultural work are now much less. And with a demographic pattern of just seven or eight women for every ten men, the competition for meaningful interaction with single young women gets that much more intense.
With the old agriculture based value system — with all its inequities — no longer available, this competition takes on a Darwinian survival-of-the-fittest form.
If in the old system a young woman accompanied by her husband was seen as being out of bounds, in the social Darwinism that has emerged they are targets of jealous rage. And any relationship between a man and a woman that is outside the control of the local power structure, whether it is marriage within the same gothra or a couple at a pub, is seen as justification for violence.
It is tempting in the midst of the collapse of gender relations to blame the government of the day, Bollywood films, and the like.
But we need to ask ourselves if these failures are only the symptoms of a more widespread and chronic disease.
(The author is Professor, National Institute of Advanced Studies, Bangalore. blfeedback@thehindu.co.in)
http://www.thehindubusinessline.com/opinion/columns/narendar-pani/the-political-economy-of-rape/article4265740.ece?homepage=true
Fiscal troubles remain
HIMANSHU JAINJanuary 1, 2013:
“Fiscal cliff” was an impending event that has been averted for now. It had the potential of tripping over the financial markets in what has otherwise been a phenomenal year. The analogy that comes to mind is that of the Y2K way back in 2000. However, unlike the Y2K that passed out without a whimper, the effects of the “fiscal cliff” may have proven to be far-reaching.
MIDNIGHT HOUR
In August 2011 when the financial markets were on a boil, the US Senate increased the debt ceiling, which avoided any impeding threat of the US government falling back on its liabilities and interest payments. However, during the discussions, both sides concurred that this mounting Federal debt was unsustainable and hence had to be brought under control. But because of the deep ideological differences between the Republicans and Democrats, the two parties were not able to arrive at an understanding on how to reduce the US fiscal deficit. It was then decided that failing to reach an agreement by December 31, 2012 would lead to automatic, across-the-board spending cuts and increase in taxes due to the expiration of the Tax Relief Act of 2010. It was projected by the Congressional Budget Office that a sharp cut in the government spending may result in the US economy entering into a mild recession in the next fiscal.Some of the highlights of the deal stuck at the midnight hour includes tax increases for individuals earning more than $400,000, both on income and capital gain/dividend, increase in real estate tax for estates for estates of $10 million per couple, extension of unemployment benefits and a two-month sequester to decide on the $1.2-trillion spending cuts (over the next 10 years) during which time 50 per cent of the cuts would come from defence and 50 per cent from non-defence programmes.
CRUCIAL PERIOD
However, the slugfest has not yet ended. The details of the spending cut are yet to be worked out; the next two months are going to be very important not just for the US but for the entire world, as any wrong move would mean a sharp shrinkage in the credit/money supply. This could lead to a bout of deflation in asset markets and the real economy.Under the current fiat monetary set-up, it is the loan operation conducted by the banks i.e. banks giving loans to people, corporates and governments, is what creates the money supply. In essence, when someone approaches the bank for getting a loan then under the prevailing system, the banks create credit out of thin air and lend it to the borrower which is simultaneously deposited in the bank account. The loans constitute an asset on the banks’ balance sheet and the deposits an equivalent liability. So, in other words, any loan taken by an individual, corporate or government increases the money supply and any loan paid back or defaulted reduces the money supply.
The financial crisis of 2008 began with the deleveraging of the financial and consumer sector of the economy, a process that still continues. This would have resulted in a prolonged reduction in money supply, with its deflationary consequences. However, this scenario was averted due to the coordinated actions of the Federal Reserve and US government. The US government, and governments the world over, increased their fiscal deficits. The reduction in the credit/money supply on account of the financial and consumer sector was offset by the increase in credit due to the higher fiscal deficits. Just so that this trillion dollar deficit spending doesn’t overwhelm the system, the Federal Reserve brought out its various versions of QE.
The process of deleveraging in the consumer and financial sector still continues and thus any sharp and sudden cut in the credit off take of US government has the potential to bring to an abrupt end the uneasy calm brought about since 2008.
Let history not repeat itself. The gradual recovery following the deep economic slumber of 1931 was brought to an abrupt end by the sudden cut in government deficits in 1937. So as the drama unfolds over the next couple of months, the world awaits if the New Year would bring about a financial dawn or dusk.
(The author is an independent financial consultant at Random Chalice Investment Research.)
http://www.thehindubusinessline.com/opinion/columns/fiscal-troubles-remain/article4262406.ece
Chidambaram to hold pre-Budget talks with India Inc on Jan 16
K. R. SRIVATS
The HinduA file photo of Union Finance Minister, P. Chidambaram.
NEW DELHI, JAN 2:
Finance Minister P. Chidambaram will hold pre-Budget consultations with India Inc on January 16.
The customary pre-Budget consultations will begin today with the first round to be held with the representatives of agriculture sector. Chidambaram is slated to meet trade union leaders on Thursday.
The pre-Budget meetings are crucial as it would help the Finance Minister decide on the suitable fiscal policy changes to be announced during Budget 2013-14.
This year's meetings are being held in the backdrop of a slowdown in economic growth. The Indian economy is expected to grow between 5.5-6 per cent this fiscal.
The sharp jump in current account deficit during the second quarter of this fiscal is also an issue of concern for policymakers.
srivats.kr@thehindu.co.in
http://www.thehindubusinessline.com/industry-and-economy/economy/chidambaram-to-hold-prebudget-talks-with-india-inc-on-jan-16/article4264438.ece?homepage=true&ref=wl_home
Fiscal cliff winners and losers
By John Helton, CNNJanuary 2, 2013 -- Updated 1653 GMT (0053 HKT)
Avlon, Hoover discuss Biden & McConnell
Washington (CNN) -- Congress went beyond the edge of the fiscal cliff to get a deal done in back-to-back, late-night sessions to avert a financial crisis, or at least to put it off for a couple months. Here are winners and losers in the deal:Winners
Vice President Joe Biden: This might not have been the "Big f***ing deal" that he proclaimed the passage of Obamacare to be, but it was a pretty big deal. Biden used his years of experience cutting deals in the Senate to work out a compromise with Senate Minority Leader Mitch McConnell. He used the same playbook in the first extension of the Bush-era tax cuts in 2010 and the debt ceiling fight in 2011, walking through the proposal with progressives in the Senate and then the House to bring them in line.
Then he went and got a sandwich.
Biden hasn't ruled out a run for the White House when Obama's second term is up and his role in this deal makes a President Biden believable.
Senate Minority Leader Mitch McConnell: He found the "dance partner" he was looking for in Biden and skillfully worked behind the scenes with the vice president to broker a deal that got overwhelming Republican support in the Senate.
It's too early to tell whether McConnell will pay the price with hard-line conservatives at home in Kentucky who have already shown that they can oust Senate incumbents who anger them by working with Democrats. No real Republican opponent has emerged in his re-election race in 2014 but they mobilized two years ago to elect Rand Paul to the Senate over McConnell's hand-picked candidate.Obama thanks Biden for 'great work'Focus needs to be on avoiding downgrades
Psaki: Fiscal cliff 'package is good'President Barack Obama: White House insiders say he learned lessons in his first term and would be a tougher negotiator in his second. He didn't get the big deal that he set out for and some progressives think that he gave too much away, but getting Republican votes to raise taxes on the wealthy is significant. And he did pick Biden to be his vice president.
The wealthy: Despite higher taxes, it could have been a lot worse.
The unemployed: Another year of benefits for those actively looking for work.
Losers
The employed: The two-year payroll tax holiday is over, so take-home pay will go down -- around $2,000 less a year for the average wage earner as the rate went from 4.2% to 6.2%. But ending the tax holiday will add about $120 billion to federal coffers.
House Speaker John Boehner: He had to pull his "Plan B" back from the floor when it became clear that he didn't have the Republican votes for passage and then had to sit back and watch McConnell make a deal with Biden. On Tuesday, he was reduced to dodging microphones and listening to conservative members vent about the deal that was forced on them. While weakened, Boehner's standing appears safe, though. Really, who would want this job?
House Republicans: Could their reputation get any worse? First, they publicly threaten the deal passed by the Senate to up the anxiety for the nation on New Year's Day. And then they cave when the votes to add spending cuts to that proposal never materialized. Finally, they tell Superstorm Sandy victims waiting for more help from Washington to wait longer -- pushing back a vote on an aid package.
A grand bargain: Have you seen anything that makes you think these guys get a long-term deal done to address the real crisis on the debt ceiling a few more weeks down the road?
The can: That poor sucker gets a couple more dents and a few more scuffs as it gets kicked down the road again.
http://edition.cnn.com/2013/01/02/politics/cliff-winners-and-losers/
The White House
Office of the Press Secretary
For Immediate Release
January 01, 2013
Fact Sheet: The Tax Agreement: A Victory for Middle-Class Families and the Economy
At this make or break moment for the middle class, the President achieved a bipartisan solution that keeps income taxes low for the middle class and grows the economy. For the first time in 20 years, Congress will have acted on a bipartisan basis to vote for significant new revenue. This means millionaires and billionaires will pay their fair share to reduce the deficit through a combination of permanent tax rate increases and reduced tax benefits. And this agreement ensures that we can continue to make investments in education, clean energy, and manufacturing that create jobs and strengthen the middle class.In 2011, the President cut spending. In 2012, he kept his promise of asking the wealthiest 2 percent of Americans to pay more while protecting 98 percent of families and 97 percent of small businesses from any income tax increase—raising $620 billion in revenue. As we move forward to address our ongoing fiscal challenges, both spending cuts and continuing to ask the wealthy to do a little more will be part of a balanced approach. It is critical for our economy and future generations that we reduce the deficit. We cannot keep racking up this debt on our kids. And the President looks forward to working with Republicans to reduce the deficit in a balanced and bipartisan way.
Permanently extends the middle-class tax cuts and also extends credits for working families, with additional measures to protect families and promote economic growth.
Permanent extension of the middle class tax cuts: This will provide certainty for 114 million households including lower tax rates, an expanded Child Tax Credit, and marriage penalty relief—steps that together will prevent the typical family of four from seeing a $2,200 tax increase next year. In addition, it includes a permanent Alternative Minimum Tax (AMT) fix.
Most progressive income tax code in decades: By raising income tax rates on the wealthiest and keeping taxes low for the middle class, the agreement will ensure we have the most progressive income tax code in decades.
Extension of Emergency Unemployment Insurance benefits for 2 million people: The agreement will prevent 2 million people from losing UI benefits in January by extending emergency unemployment insurance benefits for one year.
Extension of tax cuts for 25 million working families and students: The deal extends President Obama’s expansions of the Child Tax Credit, Earned Income Tax Credit, and the President’s new American Opportunity Tax Credit, which helps families pay for college. The President fought hard to extend these credits, overcoming Republican insistence that income taxes go up by an average of $1,000 for 25 million working families and students. The agreement would extend them for five years.
Extension of renewable energy incentives, the R&E tax credit and other business incentives: The agreement extends tax relief for businesses through the end of next year. This means extending the Production Tax Credit, a key incentive for renewable energy that many Republicans had been trying to end, as well as the Research & Experimentation tax credit. In addition, the agreement extends 50 percent bonus depreciation, a cost-effective temporary measure to support investment and growth. All of these would be extended through the end of 2013.
Fixes the SGR (“doc fix”) with no cuts to the Affordable Care Act or to beneficiaries: The agreement avoids a 27 percent cut to reimbursements for doctors seeing Medicare patients for 2013 by fixing the sustainable growth rate formula through the end of next year (the “doc fix”). The President stood firm against Republican proposals to pay for this fix with cuts to the Affordable Care Act or the beneficiaries.
Postpones the sequester for two months, paid for with $1 of revenue for every $1 of spending, with the spending balanced between defense and domestic: The agreement saves $24 billion, half in revenue and half from spending cuts which are divided equally between defense and nondefense, in order to delay the sequester for two months. This will give Congress time to work on a balanced plan to end the sequester permanently through a combination of additional revenue and spending cuts in a balanced manner.
Restores the 39.6 percent rate for high-income households, as in the 1990s: The top rate would return to 39.6 percent for singles with incomes above $400,000 and married couples with incomes above $450,000.
Capital gains rates for high-income households return to Clinton-era levels: The capital gains rate would return to what it was under President Clinton, 20 percent. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to singles above $400,000 and couples above $450,000.
Reduced tax benefits for households making over $250,000 (for singles) and $300,000 (for couples): The agreement reinstates the Clinton-era limits on high-income tax benefits, the phaseout of itemized deductions (“Pease”) and the Personal Exemption Phaseout (“PEP”), for couples with incomes over $300,000 and singles with incomes over $250,000. These two provisions reduce tax benefits for high-income households. This sets the stage for future balanced approaches to deficit reduction, which could include additional revenue through tax reforms that reduce tax benefits for Americans making over $250,000.
Raises tax rates on the wealthiest estates: The agreement raises the tax rate on the wealthiest estates – worth upwards of $5 million per person – from 35 percent to 40 percent, in contrast to Republican proposals to continue the current estate tax levels.
The agreement’s $620 billion in revenue is 85 percent of the amount raised by the Senate-passed bill, if that bill had been enacted and made permanent: The agreement locks in $620 billion in high-income revenue over the next ten years. In contrast, the bill passed by Democrats in the Senate achieved approximately $70 billion through one-year provisions; these same provisions could have raised a total of $715 billion over ten years if Congress acted again to extend it permanently. However, the Senate bill itself locked in only one year’s worth of savings so would have required additional extensions to achieve those savings.
Strengthens our recovery next year by cutting taxes for the middle-class: The independent, non-partisan Congressional Budget Office (CBO) estimated that allowing the full effect of the “fiscal cliff” would cause our economy to enter a recession and actually shrink next year primarily as a result of higher taxes on the middle class and across-the-board spending cuts. The final agreement prevents taxes from rising on the middle class and delays the across-the-board “sequester.”
Temporary measures to support consumer spending and business investment: Extending unemployment insurance is one of the more effective ways to encourage consumer spending. And bonus depreciation will give companies incentives to invest.
Provides greater economic certainty for families and businesses: The agreement will make it easier for families and businesses to plan and will help our economy grow.
Cuts the deficit and reduces the debt as a share of the economy over the next five years: Since April last year, the President has signed into law 1.7 trillion in deficit reduction, including $700 billion in spending cuts from enacted appropriations bills in 2011 and 2012, and $1 trillion in the Budget Control Act. This tax agreement not only further reduces the deficit, but raises $620 in new revenue from high-income households. Together with a strengthening economy these steps will bring down the deficit as a share of the economy over the next five years.
Establishes a foundation for additional balanced, pro-growth deficit reduction through tax and entitlement reform: The agreement leaves substantial scope for reducing tax expenditures for high-income households, reforming corporate taxes to broaden the base and cut the rate to make America more competitive, and to take further steps to reform entitlements.
http://www.whitehouse.gov/the-press-office/2013/01/01/fact-sheet-tax-agreement-victory-middle-class-families-and-economy
Bipartisan House Backs Tax Deal Vote as Next Fight Looms
By Richard Rubin, Roxana Tiron & James Rowley - Jan 2, 2013 9:43 PM GMT+0530- Facebook Share
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How Does the Fiscal Cliff Deal Change Your Taxes?The fiscal bill passed by Congress solves an immediate dilemma, averting income-tax increases for most Americans while taxing top-earners more, yet leaves unanswered a longer-term question of taming the federal debt.
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President Barack Obama arrives to deliver a statement at the White House on Jan. 1, 2013. Photographer: Brendan Hoffman/Pool via Bloomberg
The House of Representatives passed legislation averting income tax increases for most U.S. workers after Republicans abandoned their effort to attach spending cuts that would have been rejected by the Senate.
Bloomberg's David Ingles looks at how markets reacted to news that the U.S. House of Representatives passed the budget bill.
Jan. 2 (Bloomberg) -- Stephen Stanley, chief economist at Pierpont Securities LLC, talks about the U.S. budget accord and outlook for the economy. He speaks with Tom Keene, Sara Eisen, Scarlet Fu and Josh Barro on Bloomberg Television's "Surveillance." (Source: Bloomberg)
Jan. 2 (Bloomberg) -- U.S. Representative Peter Welch, a Vermont Democrat, talks about House passage of a U.S. budget accord that averted income tax increases for more than 99 percent of households. Welch speaks with Betty Liu on Bloomberg Television’s "In the Loop." (Source: Bloomberg)
Jan. 2 (Bloomberg) -- Christopher Harvey, director of investment strategy with Weeden & Co., talks about investment strategy following the accord to avert the so-called fiscal cliff. He speaks with Betty Liu, Julie Hyman and Dominic Chu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
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“The deficit needs to be reduced in a way that’s balanced,” Obama said at the White House. He said he wants top earners and corporations to pay even more and that Congress must raise the debt ceiling. “Everyone pays their fair share. Everyone does their part,” he said. Brendan Hoffman/Pool via Bloomberg
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Republicans have immediately turned to their next battle -- counting on the need to raise the nation’s $16.4 trillion debt ceiling to try to force President Barack Obama to accept cuts in entitlement programs such as Medicare. Congress must act as early as mid-February to prevent a default and the dispute may reprise a similar 2011 episode that led to a downgrade of the U.S. credit rating.
“Without meaningful reform of entitlements, real spending controls, and a fairer, cleaner tax code, our debt will continue to grow, and our economy will continue to stumble,” House Speaker John Boehner said in a statement after the vote.
Related:
- Congress Budget Pact Would Crimp Not Crush U.S. Growth
- Congress Deal Averting Tax Increase Curbs Risk to States
- Biden Became McConnell's Dance Partner for Fiscal Talks
The deal that cleared the House and Senate yesterday falls short of any “grand bargain” on fixing the debt that some leaders had hoped to achieve. Former Senator Alan Simpson, a Wyoming Republican, and Erskine Bowles, a chief of staff to former President Bill Clinton, co-chairmen of Obama’s deficit commission that proposed a $4 trillion solution of tax increases and spending cuts, today called the legislation “truly a missed opportunity.
Spending Cuts
The U.S. House passed a bill undoing income tax increases for more than 99 percent of households, giving a victory to Obama even as Republicans vowed to fight him in coming weeks for spending cuts in exchange for raising the debt ceiling.The 257-167 vote just after 11 p.m. yesterday capped a tension-filled final push as Republicans balked at a bipartisan Senate bill. Boehner ordered a vote even though 151 of 236 Republicans, including Majority Leader Eric Cantor, ultimately voted no. Obama said he’d sign it into law.
Fiscal Cliff Videos:
- Fiscal Cliff Averted, But Here's What Comes Next
- How Does the Fiscal Cliff Deal Change Your Taxes?
- Barro: Republicans 'Completely Hapless' After Vote
The final days of drama surrounding the so-called fiscal cliff of scheduled tax increases and spending cuts illustrated the partisan struggle that has made U.S. budget policy unpredictable and prone to crises as deadlines approach. Obama wielded the leverage he gained in his Nov. 6 re-election. Still, he fell short of reaching with Republicans a larger deficit- reduction grand bargain.
Market Reaction
U.S. stocks extended the biggest two-day rally in 13 months and commodities surged after the bill’s passage. The Standard & Poor’s Index advanced 2.1 percent at 10:23 a.m. in New Yorkand is up 3.8 percent in two sessions. Copper gained almost 4 percent and oil rose almost 2 percent. Treasury 10-year yields climbed eight basis points.The largest economic impact of the budget accord will come from ending a two-percentage-point payroll tax cut, a move that will shrink paychecks for U.S. workers immediately even as most income tax cuts that expired Dec. 31 are being extended permanently.
Payroll Tax
The payroll tax cut’s lapse will pull more than $100 billion out of the economy in 2013 and is the primary reason why 77.1 percent of U.S. households will face higher taxes this year, according to the nonpartisan Tax Policy Center in Washington.The Republican-controlled House yesterday almost unraveled a bipartisan agreement brokered over the waning days of 2012 by Vice President Joe Biden and Mitch McConnell of Kentucky, the Senate Republican leader. The Senate passed that bill 89-8 in the first hours of Jan. 1. In last night’s House vote, 85 Republicans and 172 Democrats voted for the measure, while 16 Democrats and 151 Republicans opposed it.
Compared with continuing 2012 policies, the agreement would increase taxes by $620 billion over the next decade, according to the White House. The federal budget will be $4 trillion bigger than projected had all the scheduled tax boosts been retained.
Republicans claimed a victory because the bill ends the temporary nature of most of the tax cuts that President George W. Bush campaigned on in 2000 and were scheduled to lapse at the end of 2010 and then again in 2012.
‘Making Permanent’
“We’re making permanent tax policies Republicans originally crafted,” said Representative Dave Camp, a Michigan Republican and the chairman of the tax-writing Ways and Means Committee.In addition to tax increases on top earners, the bill extends expanded unemployment benefitsand continues refundable tax credits for low-income families and college students. It would also delay by two months automatic cuts scheduled to start this month, offsetting the $24 billion cost with a blend of additional revenue and spending reductions, half of which would come from defense.
“It’s unbelievable that what you see in there is more spending as opposed to less spending,” said Representative Rob Woodall, a Georgia Republican, about the Senate-passed bill.
Boehner put the bipartisan Senate compromise to an up-or- down vote last night after it became clear that he couldn’t add spending cuts with Republican votes alone, especially with fewer than two days before the new Congress is sworn in.
House Republicans
Yesterday’s episode demonstrated again the fractiousness of House Republicans, who passed bills in 2012 that would extend the expiring tax cuts for all income levels and replace the automatic spending cuts with other policies.They eventually ceded control of the fiscal-cliff debate to the administration and the Senate. Boehner couldn’t reach an agreement with Obama, and he couldn’t get House Republicans to back a plan that set the threshold for tax increases at $1 million in income.
Instead, at the last minute, he was forced to accept a deal that contained few of the Republican priorities he could have gotten by accepting what Obama was offering on Dec. 17.
Boehner’s Confidence
Boehner’s recent difficulty in getting his members to follow his recommendations “all rolls off his back” because “he feels pretty confident about his leadership, about the strength of his leadership,” said Florida Republican Rich Nugent, a first-year House member.Boehner isn’t “looking over his back and worried about it, at least he doesn’t exhibit that to us,” Nugent said.
Nor should Boehner be worried about challenges to his speakership, said Nugent, a former sheriff.
“Having been a chief executive, there’s always people who agree and disagree with your leadership,” he said.
The bill would reinstate tax cuts that expired Dec. 31 on taxable income of individuals up to $400,000 and of married couples of up to $450,000, leaving those top earners with a marginal tax rate of 39.6 percent, up from 35 percent last year.
Those same households would pay higher tax rates on their dividends and capital gains, including private-equity managers’ carried-interest income. The top rate will go to 23.8 percent, including taxes from the 2010 health-care law that took effect yesterday.
Many households with incomes above $500,000 won’t face the higher rates at all, because deductions are subtracted from gross income before the rates are assessed.
Deduction Limits
Limits on itemized deductions and personal exemptions will also return, starting at $250,000 of income for individuals and $300,000 for married couples.The deal would set the top estate-tax rate at 40 percent, splitting the difference between the parties’ positions. The per-person exemption will be more than $5 million and indexed for inflation.
The burden of higher taxes will fall hardest on the top 1 percent and particularly on the top 0.1 percent of taxpayers. Those making more than $2.7 million will pay an average of $443,910 more in 2013, or 26 percent of the additional burden, according to the Tax Policy Center. Households with income between $500,000 and $1 million will pay an average of $14,812 more.
Tax Breaks
Miscellaneous tax breaks will get extended through 2013, including the production tax credit forwind energy and the tax credit for corporate research.The boundaries of the fiscal debate have shifted repeatedly since Congress began focusing ondeficit reduction in 2010.
What’s happening instead is deficit reduction achieved in fits and starts. Democrats see a multi-stage game where they lost badly in 2011 and have now recovered their footing to insist on pairing tax increases with spending cuts.
In 2011, using the debt ceiling as leverage, Republicans got Obama to agree to more than $1 trillion in spending cuts plus another $1.2 trillion still set to start this year.
Deficit Reduction
A 2011 deficit-reduction supercommittee deadlocked, pushing the issue into the 2012 election. Democrats were able to prevail only after Obama won a second term campaigning on tax increases, while Democrats gained seats in the House and Senate.Republicans, particularly in the House, want to insist on spending cuts at every turn. Although they failed in this round, they drove that argument in last year’s debt-ceiling fight, and they will replay it in the next few weeks.
The U.S. hit the debt limit Dec. 31 and the Treasury Department began employing so-called extraordinary measures to finance about $200 billion in deficits in 2013. A debt limit increase will be needed as early as mid-February, according to the Congressional Budget Office.
To contact the reporters on this story: Richard Rubin in Washington atrrubin12@bloomberg.net; Roxana Tiron in Washington at rtiron@bloomberg.net; James Rowley in Washington at jarowley@bloomberg.net
http://www.bloomberg.com/news/2013-01-02/bipartisan-house-backs-tax-deal-vote-as-next-fight-looms.html
United States fiscal cliff
From Wikipedia, the free encyclopedia
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In the United States, the "fiscal cliff" refers to the economic effects that will result from tax increases, spending cuts, and a corresponding reduction in the US budget deficit, potentially beginning in 2013. The deficit—the difference between what the government takes in and what it spends—is projected to be reduced by roughly half in 2013. TheCongressional Budget Office estimates that this sharp decrease in the deficit (the fiscal cliff) will likely lead to a mild recession in early 2013 with the unemployment rate rising to roughly 9 percent in the second half of the year.
The laws leading to the fiscal cliff include the expiration of the 2010 Tax Relief Act and planned spending cuts under the Budget Control Act of 2011. Nearly all proposals to avoid the fiscal cliff involve extending certain parts of the Bush tax cuts or changing the 2011 Budget Control Act or both, thus making the deficit larger by reducing taxes or increasing spending. Because of the short-term adverse impact on the economy, the fiscal cliff has stirred intense commentary both inside and outside of Congress.
The Budget Control Act was a compromise intended to resolve a dispute concerning the public debt ceiling. Some major programs, like Social Security, Medicaid, federal pay (including military pay and pensions), and veterans' benefits, are exempted from the spending cuts.[note 1] Spending for defense, federal agencies and cabinet departments will be reduced through broad, shallow cuts referred to as budget sequestration.
At around 2 a.m. on January 1, 2013, the Senate passed a compromise bill, the proposedAmerican Taxpayer Relief Act of 2012, by a margin of 89–8. The bill would delay the budget sequestration by two months, and includes $600 billion over ten years in new tax revenue relative to extending 2012 levels, which is about one-fifth of the revenue that would have been raised had no legislation been passed. The revenue would come from increased marginal income and capital gains tax rates relative to their 2012 levels for annual income over $400,000 for individuals and $450,000 for couples; a phase-out of certain tax deductions and credits for those with incomes over $250,000 for individuals and $300,000 for couples, an increase in estate taxes relative to 2012 levels on estates over $5 million, and expiration of the two-year-old cut to payroll taxes, which is applied to income under the Social Security Wage Base, which was $110,100 in 2012. These changes would all be made permanent.[1][2] The House passed the bill without amendments by a margin of 257–167 around 11 p.m. EST on January 1, 2013.[3]
[edit]Background
[edit]Etymology
Budget deficits, projected through 2022. The "CBO Baseline" (in red) shows the effects of the fiscal cliff under current law. The "Alternative Scenario" (in blue) represents what could happen if Congress extends the Bush tax cuts and repeals theBudget Control Act-mandated spending reductions.
The term fiscal cliff has been used in the past to refer to various fiscal issues.[4] The term started being used in the current context near the original expiration of the Bush tax cuts in 2010.[4][5] In 2011, the term started to be used to refer to the deficit reductions that would occur in 2013 under current law.[4][6]In late February 2012, Ben Bernanke, chairman of the U.S. Federal Reserve, popularized the term "fiscal cliff" for the impending 2012 fiscal crisis.[7] Before the House Financial Services Committee he described that "a massive fiscal cliff of large spending cuts and tax increases" would take place on January 1, 2013.[4][8][9]
Some analysts have argued that fiscal slope or fiscal hill would be more appropriate terminology because while the cumulative economic effect over all of 2013 would be substantial, it would not be felt immediately but rather gradually as the weeks and months went by.[4][7][10][11]
[edit]Legislative history
During a lame duck session in December 2010, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The act extended the Bush tax cuts for an additional two years and "patched" the exemptions to theAlternative Minimum Tax (AMT) for tax year 2011. This act also authorized a one-year reduction in the Social Security (FICA) employee payroll tax. This was extended for an additional year by the Middle Class Tax Relief and Job Creation Act of 2012, which also extended federal unemployment benefits and the freeze on Medicare physician payments.[12]On August 2, 2011, Congress passed the Budget Control Act of 2011 as part of an agreement to resolve the debt-ceiling crisis. The Act provided for a Joint Select Committee on Deficit Reduction (the "super committee") to produce legislation by late November that would decrease the deficit by $1.2 trillion over ten years. When the super committee failed to act,[13] another part of the BCA went into effect. This directed automatic across-the-board cuts (known as "sequestrations") split evenly between defense and domestic spending, beginning on January 2, 2013. Also, the Affordable Care Act imposed new taxes on families making more than $250,000 a year ($200,000 for individuals) starting at the same time.[14]
At the end of 2011, the patch to the AMT exemptions expired. Technically, the AMT thresholds immediately reverted to their 2000 tax year levels, a drop of 26% for single people and 40% for married couples. Anyone over these reduced thresholds at the end of 2012 would be subject to the AMT. Therefore, more taxpayers would pay more unless some legislation was passed (as was done in 2007) that affects the exemptions retroactively.[12]
[edit]Key laws leading to the fiscal cliff
CBO projections of the sources of deficit reduction in the FY2013 budget, not counting economic feedback.
Expiration of tax cuts and the subsequent growth in the AMT: $221B (36.41%)
Expiration of 2% FICA payroll tax cut: $95B (15.65%)
Other expiring tax provisions: $65B (10.71%)
Affordable Care Act taxes: $18B (3.97%)
Spending cuts ("sequestration") under the Budget Control Act of 2011: $65B (10.71%)
Expiration of federal emergency unemployment insurance: $26B (4.28%)
Reduction in Medicare payment rates for doctors: $11B (1.81%)
Other changes (mostly revenue, primarily reflecting economic growth): $105B (17.30%)
A number of laws led to the fiscal cliff, including these provisions:[15][16]- Expiration of the Bush tax cuts extended by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010;
- Across-the-board spending cuts ("sequestration") to most discretionary programs as directed by the Budget Control Act of 2011;
- Reversion of the Alternative Minimum Tax thresholds to their 2000 tax year levels;
- Expiration of measures delaying the Medicare Sustainable Growth Rate from going into effect (the "doc fix"), as extended by the Middle Class Tax Relief and Job Creation Act of 2012(MCTRJCA);
- Expiration of the 2% Social Security payroll tax cut, most recently extended by MCTRJCA;
- Expiration of federal unemployment benefits, as extended by MCTRJCA.
- New taxes imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.
On the other hand, some lawmakers intend to attach a bipartisan extension to the expiring wind-power tax credit.[18] Unlike the provisions above, this will reduce, not increase, taxes by $1.3 billion.[19]
Proposals to avoid the fiscal cliff involve repealing legislation containing certain of these provisions or passing new legislation to extend provisions that are due to expire. Different proposals may include changes to some or all of the above provisions. For example, theCongressional Budget Office's "Alternative Fiscal Scenario" includes only the first four items above. Changes to other provisions are also sometimes included in such proposals; for example, changing the original caps on discretionary appropriations contained in 2011's Budget Control Act, indexing the AMT exemptions for inflation (rather than capping them for one year at a time) or the wholesale or partial reform of the tax laws and/or the entitlement programs (sometimes called "the grand bargain").[20]
[edit]Effects
[edit]Effects of sequestration
Main articles: Budget Control Act of 2011 and United States Congress Joint Select Committee on Deficit ReductionU.S. Federal budget deficit as % of GDP assuming continuation of certain policies for 2012-2022. The baseline deficit assumes current law takes effect, meaning tax cuts expire and spending cuts are applied. Avoiding the "fiscal cliff" increases the projected deficit.
The spending reduction elements of the fiscal cliff are primarily contained within the Budget Control Act of 2011, which directed that both defense and non-defense discretionary spending[note 2] be reduced by "sequestration" if Congress was unable to agree on other spending cuts of similar size. Congress was unable to reach agreement and therefore the sequestrations are expected to take effect on January 2, 2013 if Congress and President Obama do not agree to a budget deficit reduction plan. The scope of the law excludes major mandatory programs such as Social Security and Medicare.The effect on both defense and non-defense discretionary spending will be significant if the cliff is not avoided. Cuts totaling $110 billion per year will be applied from 2013 to 2022, split evenly ($55 billion each) between defense and non-defense discretionary spending. For scale, discretionary funding for 2011 totaled $1,278 billion: budget authority of $712 billion for defense and funding totaling $566 billion for non-defense activities.[20]
During 2013, defense and non-defense discretionary spending would be maintained around 2012 levels due to the sequester. However, the spending begins to rise thereafter, but not at the pace projected prior to the sequester. In other words, the trajectory of spending increases is reduced, but spending is not frozen at 2012 levels. Defense and non-defense discretionary spending increases from 2013–2021 would be about 1.5% annually, significantly below the prior decade.[20]
For example, according to the CBO Historical Tables, defense spending (including overseas contingency operations for the wars in Iraq and Afghanistan) grew from $295 billion in 2000 to $700 billion in 2011, an annual growth rate of 8.2%. Non-defense discretionary spending grew at a 6.6% annual rate during that time, from $320 billion to $646 billion.[21]
The austerity represented by the sequester is not unprecedented; from 1990–1999, defense spending actually declined by about 1% annually, from $300 billion to $276 billion, although non-defense discretionary spending grew by 4.5% annually, rising from $200 to $297 billion.[21]
The CBO estimated the possible impact on defense spending in October 2011 testimony: "Compliance with the caps on discretionary funding could occur through many different combinations of defense and non-defense funding. For example, defense and nondefense appropriations might be cut proportionally relative to the funding that would be necessary to keep pace with inflation. In that case, funding for defense programs apart from overseas contingency operations would drop from $552 billion in 2011 to $538 billion in 2012 before rising again and reaching $637 billion in 2021 (see Table 3).[20]
Between 2012 and 2021, such funding would be $445 billion less than the amount that would occur if the amount of funding for 2011 grew at the rate of inflation. When measured as a share of GDP, funding for defense would decline by about 1 percentage point from 2011 to 2021, or by more than one-fourth (see Table 5). Funding for defense in 2021 (excluding overseas contingency operations) would represent 2.7 percent of GDP; by comparison, annual funding for defense (excluding overseas contingency operations) has averaged 3.4 percent of GDP during the past decade."[20]
The CBO estimated the possible impact on non-defense discretionary spending in October 2011 testimony: "If defense and nondefense appropriations were cut proportionally relative to the funding that would be necessary to keep pace with inflation, nondefense budget authority would decrease from $511 billion in 2011 to $505 billion in 2012 before rising again and reaching $597 billion in 2021 (see Table 4). Between 2012 and 2021, budget authority for nondefense purposes would be $418 billion less than the amount that would be provided if funding grew at the rate of inflation after 2011. Under an assumption that the obligation limitations for certain transportation programs grow over time at the rate of inflation, nondefense funding in 2021 would represent 2.8 percent of GDP; by comparison, such funding has averaged 4.1 percent of GDP during the past decade (see Figure 6)."[20] A number of organizations have also argued that significant cuts to programs included under non-defense discretionary spending would harm low-income families deeply.[22]
[edit]Effects of tax increases
Various sources have estimated the impact on taxpayers from the tax increases that would occur if the Bush income tax cuts and the Obama payroll tax cut are allowed to expire. The table below shows the dollar and percentage increase in income taxes for the 2013 tax year, if current law remains in effect.[23]Income Level | Single - 1 Allowance | Married - 2 Allowances | With Two Children - 4 Allowances |
$50,000 | $1,693 / 17% | $1,870 / 32% | $1,870 / 32% |
$100,000 | $4,193 / 16% | $3,272 / 17% | $3,038 / 18% |
$150,000 | $5,967 / 15% | $5,046 / 16% | $4,812 / 15% |
$200,000 | $7,467 / 13% | $6,546 / 14% | $6,312 / 14% |
$250,000 | $8,046 / 13% | $8,046 / 13% | $7,812 / 13% |
Each piece of the fiscal cliff has varying effects on people at different income levels. Low-income households are most affected by expiring expansions of the child tax credit and earned income tax credit. Middle-income households are affected most by the payroll taxand income tax. Households at the top income level are most affected by the income tax and the tax increases on unearned income such as capital gains.
Although European companies and investors will hardly see any direct taxation effects, corporate taxation of their US subsidiaries may change significantly.[24]
[edit]Congressional Budget Office projections
[edit]CBO scenarios
Decisions regarding the fiscal cliff will have meaningful implications for deficits, debt, and economic growth. The Congressional Budget Office (CBO) has projected two fiscal scenarios for the years 2013 to 2022:[25]- The baseline projection, following current law. This scenario would have lower deficits and debt but also have lower spending and higher taxes.
- The alternative fiscal scenario, estimated as another option in which some laws are changed. This results in higher deficits and debt but lower taxes and higher spending.[note 3]
US federal debt from 1940 to 2022. The right side of the diagram projects what would happen to the debt if Congress (a) allows current laws to take effect and reduce the deficit (the baseline) or (b) extends the current policies, such as keeping tax cuts in place (the alternative).
Baseline projection. The CBO has been publishing baseline projections, following the then current law, since 1985.[20] Under the current baseline, tax cuts are allowed to expire and spending cuts are implemented in 2013, resulting in higher tax revenues plus reduced spending thus lowering deficits, debt and interest for the next decade and beyond. Future deficits would be reduced from an estimated 8.5% of GDP in 2011 to 1.2% by 2021. Revenues would rise towards 24% GDP, versus the historical average 18% GDP.[26]The total deficit reduction or debt avoidance over ten years could be as high as $7.1 trillion, versus the $10–11 trillion debt increases if current policies are extended. In other words, roughly 70% of debt increases projected over the next 10 years could be avoided by allowing the expiration of tax cuts and required sequestration expected at the end of 2012 in the absence of new legislation.[27]
CBO estimates, under the baseline projection, that public debt rises from 69% GDP in 2011 to 84% by 2035.[28] In the long run, lower deficits and debt should lead to relatively higher growth estimates. But, in the short run, real GDP growth in 2013 would likely be reduced to 0.5% from 1.1%. This would mean a high probability of recession (a 1.3% GDP contraction) during the first half of the year followed by 2.3% growth in the second half.[29][30]
Alternative fiscal scenario. If Congress "avoids" the fiscal cliff, the future more closely resembles the continuation of 2012 policies as described by the CBO's "alternative fiscal scenario." This scenario involves extending the Bush tax cuts, repealing the automatic spending cuts, restricting the reach of the AMT and keeping Medicare reimbursement rates at the current level (the so-called "doc fix", versus declining by one-third). Revenues are assumed to remain around the historical average 18% GDP. Under this scenario, public debt rises from 69% GDP in 2011 to 100% by 2021 and approaches 190% by 2035. This scenario has considerably higher debt and interest payments than the baseline projection, but short-term impact on the economy is avoided.[28]
[edit]Projected effects
Overall effects of the fiscal cliff.
The Congressional Budget Office estimates that allowing certain laws on the books during 2012 to expire or take effect in 2013 (the baseline scenario) would cut the 2013 deficit approximately in half and significantly reduce the trajectory of future deficits and debt increases for the next decade and beyond. However, the 2014 deficit reduction would adversely impact the economy in the short-run. On the other hand, if Congress acts to extend current policies (the alternative scenario), deficits and debt will rise rapidly over the next decade and beyond, slowing the economy over the long run and dramatically increasing interest costs.[25]CBO estimates that if the baseline scenario is allowed to take effect in 2013, it would reduce federal spending by $103 billion and increase tax revenues by $399 billion (and another $105 billion "mostly in revenue") through September 2013 (the end of FY2013). This would amount to a net total of $560 billion, roughly half the $1.2 trillion FY2011 deficit.[29] The White House estimates that a family of four with an income of $50,000 to $85,000 would pay an additional $2,200 in federal taxes.[31]
The CBO has identified the following metrics for its baseline and alternative scenarios for the period starting January 2013:[32]
Consideration of these scenarios and other options[note 3] leads to what the CBO calls "a broad spectrum of fiscal policy choices".[32]
[edit]Estimated deficit for the first year
The CBO estimated that the total deficit of fiscal year 2012 (which ended on September 30, 2012) will be $1.171 trillion. The CBO also estimated that the total reductions to the fiscal year 2013 deficit by letting current laws take effect (which increase taxes and reduce spending) would be about $560 billion.[29]Therefore, since the total US public debt was approximately $11.053 trillion as of July 2012,[33] the public debt will climb by the end of FY2013 to either $11.664 trillion.
Under current laws scheduled to take effect by the end of 2012, the total 2013 deficit will be $612 billion, as opposed to $1,171 billion for the previous year. The pie chart to the right contains a breakdown of the currently authorized reductions to the FY2013 deficit. The total of this chart is $606 billion but this is without considering economic feedback. Reduced taxes and increased spending, due to the 1.3% contraction in the first half of 2013, as well as other constraints, are expected to decrease the savings by $47 billion, giving a net total of $560 billion in deficit reduction during FY2013.[29][30]
[edit]CBO analysis of policy options
The CBO reported in November 2012 the economic and employment effects of various policy options related to the cliff. Each option has a different GDP and employment impact per dollar of deficit impact. In other words, some choices are economically more efficient. CBO explained why spending cuts have a more significant adverse impact on the economy than tax increases per dollar of deficit reduction: “The larger 'bang for the buck' next year of the spending policies under the alternative fiscal scenario occurs because, CBO expects, a significant part of the decrease in taxes (relative to those under current law) would be saved rather than spent."[34][edit]Negotiations
[edit]Democratic proposals
Democratic and Republican leaders meet in late November as part of the fiscal cliff debate.
On July 25, 2012, the Democratic-controlled U.S. Senate voted 51–48 to pass a bill supporting the President's tax proposal which extended the Bush tax cuts for 98% of taxpayers, while allowing them to lapse for the top 2%. The Senate also rejected the Republican proposal of extending the tax cuts for all by 45–54.[35] The U.S. House of Representatives rejected, 170–257, the President's tax proposal on August 1, 2012.[36]During November 2012, President Obama expressed a preference for replacing the more blunt cuts of the sequester with more targeted cuts, while raising income tax rates on the top 2% of earners. Senior White House officials recommended a veto of any bill that: 1) averts defense cuts while leaving intact non-defense cuts; or 2) excludes an increase in tax rates for top earners.[37] Obama wants to continue to extend the Bush tax cuts for American couples earning less than $250,000 and individuals earning less than $200,000.[37]
As of November 30, 2012, Obama was calling for an undeclared amount of spending cuts, $1.6 trillion in higher taxes over ten years, and cuts of $400 billion from Medicare and other benefit programs over a decade. Obama also wanted "an extension of the 2 percentage point payroll tax cut" and spending of "at least $50 billion" in 2013 "to boost the economy."[38] Although Democratic Congresspersons have in general supported President Obama's proposal,[39] its November version was based on the President's 2013 budget proposal,[40][41] which Republicans say was rejected unanimously in both the House and the Senate earlier in 2012.[42] In March, House Minority Leader Nancy Pelosi said that the bill proposed by House Republicans for a vote "was a caricature of the President's budget, so we voted against it."[43]
[edit]Republican proposals
Congressional Republicans have proposed that the Bush tax cuts be extended in their entirety.[44] In August 2012, the CBO estimated that extending these tax cuts for the 2013–2022 time period would add $3.18 trillion to the national debt relative to the current law baseline, comprising $2.74 trillion in foregone tax revenue plus another $0.44 trillion for interest and debt service costs.[45]On December 3, 2012, Speaker John Boehner proposed a Republican plan that included $2.2 trillion in deficit cuts over a decade. Revenue would be generated mainly by reducing tax expenditures (exemptions and deductions) rather than increasing income tax rates. Further, it included raising the Medicare eligibility age from 65 to 67 and slowing increases in Social Security costs by reducing cost of living adjustments.[46]
On December 18, 2012, Boehner announced that a new "Plan B" would be taken up by the House.[47] This plan would raise tax rates for those who earn over a million dollars.[48] However, by December 20, 2012, he was forced to pull the measure when it became clear that House Republicans would not support it.[47]
[edit]Other viewpoints
[edit]Gang of Eight
As of November 1, 2012, a group of senators, now being referred to as a Gang of Eight,[49] composed of Democratic Whip Richard J. Durbin D-Il., Finance Committee member Tom Coburn, R-Okla., Budget Committee Chair Kent Conrad, D-N.D., Sen. Michael F. Bennet, D-Colo., Sen. Mark R. Warner, D-Va., Finance member Mike Crapo, R-Idaho., Sen. Saxby Chambliss, R-Ga., and Sen. Mike Johanns, R-Neb., have been working since 2011 but "[have] so far failed to reach an agreement after more than a year of talks."[49]Because of the number of spending cuts and tax changes, at least half a dozen committees, such as the House Ways and Means and Senate Finance committees, might want to weigh in on the bill.[49] Congressional rules allow bills to skip committee hearings, but the group lacks the clout to "push its plan through Congress outside the regular order of business".[49][edit]IRS
In a three-page letter, Steven Miller, acting IRS Commissioner, outlined the effects of the fiscal cliff and said that the IRS is working under the assumption that Congress would "patch" the Alternative Minimum Tax (AMT). The patch prevents the AMT from affecting many more taxpayers. This is similar to what Congress has done in previous years.[50] The Congressional Budget Office (CBO) estimated in August 2012 that if the patch were not implemented, federal revenues would rise by a total of $864 billion over the 2013-2022 period.[51][edit]Federal Reserve
On December 12, 2012, the Federal Reserve announced it would keep short-term interest rates near zero percent in an effort to lower unemployment to 6.5 percent.[7][52] However, when commenting on the upcoming fiscal cliff, Federal Reserve officials "agree that the impact of the bank's stimulus campaign will be trivial in comparison to the consequences, and the economy will most likely return to recession."[52][edit]Treasury
The US debt-ceiling became involved in the fiscal cliff debate when Treasury Secretary Timothy Geithner introduced the President's authority to raise the country's borrowing limit as a part of his first formal proposal.[53] Although not strictly part of the fiscal cliff,[note 4]the current debt-ceiling will also expire around the end of the year, unless "extraordinary measures" are used.[54]On December 26, 2012, Geithner announced that the federal government would exceed the current debt ceiling on December 31, 2012. Therefore, a number of measures would be put into place to delay this from happening, starting with suspending issuance of State and Local bonds on December 28 and investing in two goverment pension plans. These and other measures would normally delay reaching the debt ceiling for about two months but, because of debate over the fiscal cliff, this might be extended if there is no change in the current laws.[55]
[edit]Defense
According to former Secretary of Defense Robert Gates the deep across-the-board cuts in defense spending required by the Budget Control Act will threaten military-dependent local economies and "do great damage" to American military strength and homeland security.[56][edit]Others
Many experts have argued that the U.S. should avoid the fiscal cliff while taking steps to bring the long-term deficit and debt trajectory under control.[57][58][59][60] For example, economist Paul Krugman recommended that the U.S. focus on employment in the short-run, rather than the deficit.[59][60] Federal Reserve Chair Ben Bernanke emphasized the importance of balancing long-term deficit reduction with actions that would not slow the economy in the short-run.[58] Charles Konigsburg, who directed the bi-partisan Domenici-Rivlin deficit reduction panel, advocated avoiding the fiscal cliff while taking steps to reduce the budget deficit over time. He recommended the adoption of ideas from deficit panels such as Domenici-Rivlin and Bowles-Simpson that accomplish these two goals.[57]Other experts at the Center on Budget and Policy Priorities and the Carlyle Group have argued that allowing the tax increases and spending cuts to occur under current law may be necessary to create the "grand bargain" required to get the U.S. deficit and debt trajectory under control for the long-run. In other words, allowing current law to take effect would create conditions under which legislators might be forced to enact better designed deficit reduction approaches of similar or greater magnitude.[61] Conservative budget experts have opposed calls to raise taxes or to allow defense sequestration, and have called on congressional leaders to return to normal budgetary process. Patrick Knudsen, a Heritage Foundation fellow, argued that lawmakers should seek long-term stability by rejecting short-term fixes and "grand bargains."[62]
[edit]Summary
This table[63][64] contains a comparison of the official proposals and counter-proposals from President Obama and Speaker Boehner, as of December 18, 2012. It does not include leaked or partial information about one specific aspect of an offer nor does it include partisan votes in the House or the Senate.Dollar amounts are shown in billions.
Budget Category | Obama#1 Nov 29 | Boehner#1 Dec 3 | Obama#2 Dec 10 | Boehner#2 Dec 14 | Obama#3 Dec 17 |
| Discretionary Spending | $0 | $300 | $0 | $850 | $200 |
| Health Care | $350 | $600 | $350 | $400 | |
| Other Mandatory | $250 | $300 | $250 | $200 | |
| Chained CPI for Spending | $0 | $150 | $0 | $150 | $125 |
| Spending Subtotal | $600 | $1,350 | $600 | $1,000 | $925 |
| Upfront Revenue | $950 | $800 | $1,400 | $250 | $1,150 |
| Additional Revenue Through Tax Reform | $600 | $700 | |||
| Chained CPI for Revenue | $0 | $50 | $0 | $50 | $50 |
| Revenue Subtotal | $1,550 | $850 | $1,400 | $1,000 | $1,200 |
| Interest | $225 | $325 | $200 | $300 | $300 |
| Stimulus / Tax Extenders[note 5] | −$425 | $0 | −$425 | $0 | −$175 |
| Total | $1,950 | $2,525 | $1,775 | $2,300 | $2,250 |
| Public Debt in 2022 as a percent of GDP | 74% | 71% | 74% | 72% | 72% |
[edit]Partial resolution
[edit]American Taxpayer Relief Act of 2012
At around 2 a.m. on January 1, 2013, the Senate passed a compromise bill, the American Taxpayer Relief Act of 2012, by a margin of 89–8. This bill had the following provisions:[1][2][65]- The budget sequestration would be delayed by two months, to give time for further negotiations on deficit reduction. The $24 billion cost would be offset by tax increases, as well as a provision allowing 401(k) accounts to be rolled over into Roth IRA plans, requiring taxes to be paid on the assets.
- Marginal income and capital gains tax rates would increase relative to their 2012 levels for those with annual income over $400,000 for individuals and $450,000 for couples, but the rates below these levels would remain at their 2012 levels. The top income rate would increase from 35% to 39.6%, and the capital gains rate would increase from 15% to 20%.
- A phase-out of tax deductions and credits for incomes over $250,000 for individuals and $300,000 for couples would be reinstated. Limits on deductions had existed before the Bush tax cuts, and had disappeared in 2010.
- Estate taxes would be set at 40% of the value above $5,000,000, an increase from the 2012 rate of 35% of the value over $5,120,000.
- Changes would be made to the alternative minimum tax to avoid its application to middle-class families.
- The two-year old cut to payroll taxes would expire.
- Federal unemployment benefits would be extended for a year without a budget offset elsewhere, a cost of $30 billion.
- Some tax credits for poorer families would be extended for five years, including ones for college tuition and an expansion of the Earned Income Tax Credit.
- The Medicare doc fix would be extended for one year.
- A pay freeze for members of Congress was extended, but the general pay freeze for government workers was not.
- Some portions of the farm bill that had expired in September would be extended for nine months, but without changes supported by dairy farmers and legislators.
- A number of corporate tax breaks and loopholes would be extended, including the "active financing" tax exemption for major corporations (cost $9 billion[66]), a rum tax supporting Puerto Rico rum industry ($547 million in 2009) and a tax benefit for NASCAR racetrack owners (around $43 million).[67]
The bill faced uncertain prospects in the House of Representatives as Eric Cantor, the highest ranking Republican in the House after Speaker Boehner, said on January 1 that he did not support it.[68] The prospect was raised that the House would pass an amended bill, but it was determined to be unlikely that the Senate would vote on any amended legislation before the end of the 112th Congress at noon on January 3, 2013 (all legislation under consideration expires at the end of each Congress). The House passed the bill without amendments by a margin of 257–167 at 11 p.m. on January 1, 2013.[3] 85 Republicans and 172 Democrats voted in favor while 151 Republicans and 16 Democrats were opposed.[69]
[edit]Timeline
- March 23, 2010: President Barack Obama signed into law the Patient Protection and Affordable Care Act. One of this law's provisions is to impose new taxes on families making $250,000 per year or more starting in 2013.[70]
- December 17, 2010: Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010,patching the AMT through 2011 and extending the Bush tax cuts to the end of 2012.[71]
- August 2, 2011: The President signed the Budget Control Act of 2011. This act provided that, if the Joint Select Committee did not produce bipartisan legislation, across-the-board spending cuts would take effect on January 2, 2013.[72]
- February 22, 2012: Obama signed into law the Middle Class Tax Relief and Job Creation Act of 2012, which extended the following provisions until December 31, 2012: the 2% Social Security payroll tax cut, federal unemployment benefits and the freeze on Medicare physician payments.[73]
- February 29, 2012: Ben Bernanke popularized the term "fiscal cliff" in his testimony before the House Financial Services Committee.[8][9]
- July 3, 2012: IMF head Lagarde warned that the threat of "going over the fiscal cliff" could weaken the US economy later in 2012. The IMF also reduced its projection for US growth in 2013 from 2.4 to 2.25 percent of GDP.[74]
- July 17, 2012: Bernanke pushed Congress to avoid the fiscal cliff, warning that a failure to do so will further dampen the sluggish economic recovery.[58]
- July 31, 2012: Reid and Boehner agreed on a continuing resolution that would pay for the day-to-day running of the government until the end of March 2013. This does not affect the fiscal cliff or the debt-ceiling.[75]
- August 7, 2012: Obama signed the Sequestration Transparency Act of 2012, which directed his administration to detail in 30 days how they plan to implement the automatic cuts mandated by the Budget Control Act.[76]
- September 14, 2012: Obama released a 400-page report [77] listing his proposal for spending cuts.[78][79]
- October 22, 2012: At the third of three presidential debates, Obama says sequestration will not happen.[80]
- November 16, 2012: President Obama met with Republican and Democratic congressional leaders to discuss the fiscal cliff and to try to come up with their initial plans immediately after the Thanksgiving break.[81]
- November 28, 2012: Certain Republicans, such as Orrin G. Hatch (R-Utah), supported "modifying tax expenditures as a way to raise revenue."[82]
- November 29, 2012: Treasury Secretary Timothy Geithner delivered a proposal containing $1.6 trillion in new taxes, $50 billion in stimulus spending, and $400 billion in federal health savings over the next decade. As part of the proposal, the President wanted an extension of the 2% payroll tax cut and authority to raise the debt ceiling.[53][83]
- December 3, 2012: Both Republicans and Democrats remain in the early stages of negotiations for a possible solution.[84][85][86][87][88] Republicans proposed adding $600 billion in spending cuts by increasing the Medicare eligibility age from 65 to 67 and reducing Social Security benefits.[88][89] However, both parties continued to ridicule each other's proposals,[90] such as when Jay Carney called a proposal "magic beans and fairy dust"[88] or when Boehner called a proposal a "La-La Land offer."[89][91]
- December 5, 2012: Senate Minority Leader Mitch McConnell (R-Ky.) offered to vote on President Obama’s proposal, as proposed by Treasury Secretary Geithner, as an amendment to H.R. 6156, the Russian trade bill, in the Senate.[91][92][93][94] However, Senate Majority Leader Harry Reid, (D-Nev.), prevented the vote.[91][92][93][94] Reid's reported reasons was that the Russian trade bill "is to protect American jobs" [91][93] and “there is no Geithner proposal."[94] McConnell said he would introduce the bill as "a stand-alone vote."[91][94]
- December 5, 2012: Confirming leaks from the White House,[95][96][97] Treasury Secretary Geithner told CNBC that the Obama Administration is "absolutely" willing to go over the fiscal cliff if Republicans refused to back off from their opposition to raising rates on wealthier Americans.[90][98]
- December 13, 2012: Both parties have publicly stated the negotiations are at a stand still.[99][100] Several commentators have reported that a deal is not expected until after December 25, 2012 but not before December 30, 2012.[99][101][102][103][104]Furthermore, one commentator described the parties as "playing familiar roles in a largely choreographed drama."[105][106][107][108]
- December 15, 2012: In confidential talks, Boehner proposed an increase in tax rates for those who earn over a million dollars.[109]
- December 17, 2012: According to media reports, various proposals were exchanged between President Obama and House Speaker Boehner to deal with the fiscal cliff. These included: changing the Consumer Price Index for entitlements to a "chained" CPI,[109][110][111] allowing marginal tax rates to increase on income over $400,000,[110][111] a one- or two-year increase in the debt ceiling[110][111] and increasing the eligibility age for Medicare from 65 to 67.[111][112]
- December 18, 2012: Speaker Boehner announced that the House would vote on a "Plan B", which would raise tax rates on people earning more than a million dollars a year.[48]
- December 20, 2012: "Plan B" was pulled from consideration in the House because the Republican leadership could not find enough votes to pass the legislation.[113] This was seen as a defeat for Speaker Boehner.[47]
- December 21, 2012: With just 10 days left before the end of the year, President Obama scaled back his proposals and urged Congress to adopt stopgap measures to: prevent taxes from rising on income under $250,000 a year, restore unemployment benefits and “lay the groundwork” for budgetary action next year.[114]
- December 26, 2012: The US Treasury Department announced that it will begin a series of measures, similar to the ones taken in the summer of 2011, to delay exceeding the current 16.4 trillion dollar debt ceiling.[55][115]
- December 27, 2012: Obama cuts short a vacation to Hawaii and returns to Washington D.C. in a last-chance attempt at a deal regarding the fiscal cliff.[116]
- December 28, 2012: According to confidential sources,[117][118][119][120][121] the 112th Congress may not pass legislation to avert the fiscal cliff until January because Congress will not meet until December 31, 2012.[1] The 113th Congress is scheduled to convene January 3, 2013 at 12 p.m.[2]
Four bills are being discussed.
- H.R. 8, the Job Protection and Recession Prevention Act of 2012 (which was later renamed the American Taxpayer Relief Act of 2012), would extend the expiring 2001 and 2003 Bush-era tax cuts for one year.[3]
- H.R. 6684, the Spending Reduction Act of 2012, would prevent the scheduled sequestration cuts.[4]
- Senate-passed Middle Class Tax Cut Act (S. 3412), which was voted on in the Senate in July 25, 2012, would extend for one year the Bush-era tax cuts on the first $ 250,000 of income reported on joint returns and would patch the alternative minimum tax for 2012, but not 2013.[5]
- H.R. 15, the House-passed Middle Class Tax Cut Act, mirrors the Senate-passed bill with substantial similarities.[6]
- Late December 28, 2012: Speaker Boehner and President Obama turned negotiations over to Senator Harry Reid and Senator Mitch McConnell to create a last minute agreement.[122] Boehner stated the House of Representatives "would act on whatever the Senate could produce."[122]
- December 29, 2012: Reid and McConnell proposed various plans to avert the fiscal cliff, but confidential sources say both Senators "were still far apart from a deal."[123][124][125] For the Senators' positions, see this Politico newspaper video. Various elected US officials said they are concerned how the fiscal cliff negotiations will impact their reelection campaigns and the public image of the US Congress.[123][126]
- December 30, 2012: Because Senate leaders could not produce a fiscal cliff agreement deal, Vice President Joseph R. Biden Jr.decided to become part of the negotiations.[127] When reporters asked Senator Reid if negotiations were continuing, Reid said "Talk to Joe Biden and McConnell," which signified that negotiations between Reid and Senator McConnell have ended.[127]
- Early December 31, 2012: According to confidential reports, negotiations were proceeding well.[126]
- Late December 31, 2012: An unnamed source in the Obama administration reported that a temporary deal had been reached that would delay harsh spending cuts by two months, postponing the potential "falling off" to at least March 2013.[128]
- At around 2 a.m. on January 1, 2013, the Senate passed a compromise bill, the American Taxpayer Relief Act of 2012, by a margin of 89–8. The bill would delay the budget sequestration by two months, and increase marginal income and capital gains tax rates relative to their 2012 levels for annual income over $400,000 for individuals and $450,000 for couples. A phase-out of tax deductions and credits for incomes over $250,000 would be reinstated from the times before the Bush tax cuts. The two-year old cut to payroll taxes would expire, while estate taxes would increase, and changes would be made to the alternative minimum tax to avoid its application to middle-class families. These changes would all be made permanent. In addition, federal unemployment benefits would be extended for a year without a budget offset elsewhere.[1][129]
- The afternoon of January 1, 2013, it was reported that House Republicans had expressed "anger" over the Senate-passed deal, potentially jeopardizing its passage.[130] The House nonetheless passed the American Taxpayer Relief Act of 2012 (H.R. 8) that evening with two thirds of the supporting votes coming from Democrats and one third from Republicans.[131]
[edit]See also
[edit]Notes
- ^ Benefits are shielded, but program management costs are not. Medicare has a 2% cap per year in spending.
- ^ Discretionary spending is that part of the federal budget that Congress generally controls through annual appropriation actsincluding the cabinet departments and federal agencies. This is as opposed to mandatory spending: those "self-funded" programs (such as Medicare and federal crop insurance) that have had their expenditures written into their "enabling acts"; that is, the acts that created them.
- In 2011, discretionary spending totaled about $1.35 trillion, accounting for close to 40 percent of federal expenditures. Slightly more than half of the discretionary money went for defense. The rest of the discretionary spending funded a wide variety of government programs and activities, including education, veterans’ benefits, public health and the administration of justice.
- ^ a b The Alternative Scenario incorporates the following assumptions over the Baseline: (a) Expiring tax provisions (other than the FICA tax cut) are extended, (b) the AMT is indexed for inflation after 2011, (c) Medicare’s payment rates for physicians are held constant and (d) the automatic sequestrations do not occur.[25] Both scenarios would still allow the federal unemployment benefits and the 2% FICA payroll tax cut to expire. Both would implement the original caps on discretionary appropriations contained in 2011's Budget Control Act and allow the new taxes for the Affordable Care Actto come into effect.
- ^ This is because the debt ceiling is not a factor in the budget process per se; if the deficit is increased above the debt ceiling then that debt must be authorized in what has historically been a separate process.
- ^ These provisions are basically corporate tax credits or specific spending authorizations, which are set to expire from time to time and therefore must be renewed (or made permanent) if Congress wants that particular effect not to run out. They act against the primary purpose of avoiding the fiscal cliff, either increasing spending or decreasing taxes.
[edit]References
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- ^http://cdn.govexec.com/media/gbc/docs/pdfs_edit/091412cc1.pdf
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[edit]Further reading
- What is the Fiscal Cliff? A primer from the Council on Foreign Relations
- What is the Fiscal Cliff? A simple explanation from about.com
- Between a Mountain of Debt and a Fiscal Cliff An analysis from the Committee for a Responsible Federal Budget
- CBO Infographic - Fiscal Tightening in 2013 and Its Economic Consequences - August 2012
- CBO - The 2012 Long-Term Budget Outlook-June 2012
- CBO-Choices for Deficit Reduction-November 2012
- CBO-Economic Effects of Reducing the Fiscal Restraint Scheduled to Occur in 2013-May 2012
- Moody's Analytics-Fiscal Cliffs and Ceilings-November 2012
- Fiscal Cliff: Options to Limit Tax Preferences as caculated by the Tax Policy Center, a joint venture of the Urban Institute andBrookings Institution
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