Economic Implosion Inevitable: Tax Rates Are Now PERMANENT! Any Deficit Reduction Will Have To Come From Spending Cuts. The Expiration of A Payroll Tax Cut Is Just The Beginning As The Fiscal Deal Will Increases Debt By $4 Trillion Over 10 Years! Market Rally Won’t Last More Than 24/48 Hours.


2013 Taxes Are In Effect! If You Are Making Between $50,000 And $200,000 A Year, You Will See Your Biweekly Check Cut By $68 Or More

from Bloomberg:

The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.

More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of yesterday.

The heaviest new burdens in 2013, compared with 2012, would fall on top earners, who would face higher rates on income, capital gains, dividends and estates. The top 1 percent of taxpayers, or those with incomes over $506,210, would pay an average of $73,633 more in taxes.

Much of that burden is concentrated at the very top of the income scale.

The top 0.1 percent of taxpayers, those with incomes over about $2.7 million, would pay an average of $443,910 more, reducing their after-tax incomes by 8.4 percent. They would pay 26 percent of the additional taxes imposed by the legislation.

Among households with incomes between $500,000 and $1 million, taxes would go up by an average of $14,812….

Despite Cliff Deal: ‘Nothing Really Has Been Fixed’

Tax Rates Are Now PERMANENT!

Yesterday, the American government voted to extend almost all of the Bush Tax Cuts permanently.

Not temporarily, as a stimulus measure.

Permanently.

Ever since the Bush Tax Cuts were first enacted in 2001–temporarily, as a stimulus measure–one goal of the Republican party has been to “make the Bush Tax Cuts permanent.”

For most of the last decade, this goal has seemed like an extremist view: Making the Bush Tax Cuts permanent would drastically reduce the federal government’s revenue. It would also increase inequality and balloon the national debt and deficit–so how could we possibly justify doing that?

 

Get Prepared For The Spending Cuts, Market Rally Won’t Last More Than 24/48 Hours

Investor relief is understandable, given weeks of uncertainty and what appeared to be some heated debate at times between lawmakers. But that relief will be temporary, say strategists who harp on the U.S. borrowing limit and longer-term budget cuts that still must be tackled.

“No doubt the market will use early month, New Year and the fact we avoided ‘an even worse’ event to take the market higher, but I doubt it will last more than 24/48 hours.  The market is long and too long, we look for correction as debt ceiling talks gets going,” says Saxo Bank’s chief economist, Steen Jakobsen, in emailed comments.

It’s a deal that just buys lawmakers some time, he and others say. “Politicians failed again to do any  reform…it increases debt by $4 trillion over 10 years and it only includes higher taxes, no real spending cuts. Stopping the tax hike is almost negated by payroll taxwe see this as a net drag on the U.S. economy to the tune of 1.7% net and increased uncertainty,” says Jakobsen. The deal raised taxes on higher-earner households, but also let a 2% payroll-tax cut expire, meaning everyone’s taxes will go up.

 

CBO: ‘Fiscal cliff’ deal carries $4 trillion price tag over next decade

The Senate deal to avoid the “fiscal cliff” will add roughly $4 trillion to the deficit when compared to current law, according to new numbers from the Congressional Budget Office (CBO).

The CBO determined Tuesday that the package, hammered out late Monday evening by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.), would — over the next decade — come with a $3.9 trillion price tag.

The Final Phase Of The 2008 Crash Dead Ahead: Our Denial Of The Inevitable Is Creating The Inevitable. America Is Obsessed With Cheap Money, Bull Markets, Profits, Consumerism, Fiscal Cliffs. Washington Is Setting Up A New Crash And You’re Not “Going To Get Early Warning Signal When New Bank Meltdown Hits

Higher Borrowing Cost:  The US Downgrade Imminent

From SocGen:

The scaled-down deal passed in the Senate addressed the fiscal cliff but did nothing to address longer term fiscal health of the nation. This puts the US rating at risk for a downgrade. However, credit rating agencies may decide to wait and see what emerges from the subsequent talks. There is an implicit new cliff at the end of February related to the sequester and to the expected exhaustion of extraordinary measures related to the debt ceiling. This date is expected to be used by Republicans as leverage for spending cuts. President Obama has already signaled that a new round of spending cuts – those related to the sequester as well as entitlement spending – will have to be matched by additional revenue increases. Therefore entitlement and tax reform are likely to be at the center of discussions over the next two months.

And recall from Moody’s in September:

Budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the US government’s Aaa rating and negative outlook, says Moody’s Investors Service in the report “Update of the Outlook for the US Government Debt Rating.”

 

If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable, says Moody’s.

 

If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.

 

Moody’s views the maintenance of the Aaa with a negative outlook into 2014 as unlikely. The only scenario that would likely lead to its temporary maintenance would be if the method adopted to achieve debt stabilization involved a large, immediate fiscal shock—such as would occur if the so-called “fiscal cliff” actually materialized—which could lead to instability. Moody’s would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook.

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