Spending Daily | November 9, 2012

CBO: Unemployment Will Rise Past 9% If We Go Over Fiscal Cliff
The Hill reports, “The nonpartisan Congressional Budget Office (CBO) on Thursday laid out in substantial detail the costs of not dealing with the so-called ‘fiscal cliff.’ CBO had already estimated that going over the cliff would spark a recession, while simply voiding the tax and spending increases would add trillions to the debt. But the new study breaks down the costs and benefits of allowing various parts of the fiscal cliff to remain in place. It finds that unemployment would rise from 7.9 to 9.1 percent by the end of 2013 if the nation went over the cliff. … The CBO report says that extending all the Bush-era rates and patching the Alternative Minimum Tax would help the economy expand by an additional 1.4 percent by the beginning of next year. … Avoiding the cliff altogether would add 3.4 million full-time-equivalent jobs, the report estimates. Just extending the payroll tax and unemployment benefits — as some Democrats are advocating — would add 800,000 jobs.”

Gretchen Hamel, executive director of Public Notice, issued the following statement on the CBO study:

“Americans are once again left with a choice between the lesser of two evils. The last thing we need in Washington is lame-duck lawmakers pushing through hastily written legislation with one eye on the upcoming holiday season, but the fact is something must be done to avert another recession.  Ultimately, the burden is on President Obama to bring both parties together and lead to find real solutions.  But right now, because of Congress and the president’s failure to set priorities and cut specific spending last year that gets to the root of the problem, Washington will have to pull the parachute and buy some more time before we hit bottom.”

“Obama to speak on ‘fiscal cliff’”
The Hill reports, “Fresh off his reelection win, President Obama will address the economy on Friday and the action Congress can take to reduce the deficit.  Delivering a statement in the East Room of the White House, Obama is expected to discuss the tax increases and spending cuts that are set to take effect in January, and will likely urge Congress to take action on both. He is not likely to put forward a new plan. Obama spent much of the presidential campaign calling for people who earn more than $250,000 per year to pay their ‘fair share’ in taxes, and that the George W. Bush-era tax rates for high-earners should be allowed to expire at the end of the year.”

Video: MSNBC’s Joe Scarborough Talks About the “New Reality” Under President’s Healthcare Law
On MSNBC’s Morning Joe, host Joe Scarborough discussed what he was hearing from the small business owners in Pensacola about the “new reality” of the president’s health care law and how it will impact their business.  Scarborough said, “I got a couple of emails from people saying that I talked to my accountants, and this is what this is going to cost me, and it was almost like it hit these small business owners for the first time that this is the new reality.  And the three or four emails I got from small business owners in my hometown of Pensacola, Florida all said the same thing.  I’m going to have to drop people.  There are going to be a lot of people working less than thirty hours a week.  And when I do that, I’m going to lose my best people.  I’ve got to start figuring out how I’m going to survive in this new climate.”  Click here to watch the video.

Lines in the Sand: Boehner Says Tax Hikes “Unacceptable”
ABC News reports, “Raising tax rates is ‘unacceptable’ to House Speaker John Boehner as he prepares to open negotiations on the looming “fiscal cliff” with the president and congressional Democrats, he told “World News” anchor Diane Sawyer today in an exclusive interview. ‘Raising tax rates is unacceptable,’ Boehner, R-Ohio, said in his first broadcast interview since the election Tuesday. ‘Frankly, it couldn’t even pass the House. I’m not sure it could pass the Senate.’ That stance could set up a real showdown with the White House given that the president has said he would veto any deal that does not allow tax cuts for the rich to expire. But the speaker said that Republicans would put new tax revenue on the table as leaders work toward a deal.”

Fitch Ratings: Fiscal Cliff Would Cause “wholly avoidable, unnecessary recession”
Reuters reports, “The U.S. risks entering a recession that will hurt economic growth worldwide should policy makers fail to avoid the so-called fiscal cliff of automatic tax increases and spending cuts next year, Fitch Ratings said. ‘We think that will tip the U.S. back into recession,’ Fitch Managing Director Ed Parker said in an interview in Istanbul yesterday. ‘This should be a wholly avoidable, unnecessary recession.’ Fitch on Nov. 7 warned that the U.S. may be downgraded next year unless lawmakers avoid automatic tax boosts and budget cuts and raise the debt ceiling, while Moody’s Investors Service said it will wait to see the economic impact should the nation experience a fiscal shock.”

Fitch Ratings: Fiscal Cliff Would Cause “wholly avoidable, unnecessary recession”
Reuters reports, “The U.S. risks entering a recession that will hurt economic growth worldwide should policy makers fail to avoid the so-called fiscal cliff of automatic tax increases and spending cuts next year, Fitch Ratings said. ‘We think that will tip the U.S. back into recession,’ Fitch Managing Director Ed Parker said in an interview in Istanbul yesterday. ‘This should be a wholly avoidable, unnecessary recession.’ Fitch on Nov. 7 warned that the U.S. may be downgraded next year unless lawmakers avoid automatic tax boosts and budget cuts and raise the debt ceiling, while Moody’s Investors Service said it will wait to see the economic impact should the nation experience a fiscal shock.”

Will Obama’s Second-Term Budget Be the Same as the First? 
The National Journal reports, “The talks aimed at preventing the fiscal cliff, the year-end threat of tax hikes and spending cuts, will likely provide a framework for attempts to reach a longer-term budget deal in 2013, one thatcould include tax reform. But with Obama still in office and Congress still divided, the prospects of finding common ground remain uncertain at best. In the speech Obama delivered in Chicago early on Wednesday morning, the president pledged to focus in the coming months on working with lawmakers across the aisle to reduce the deficit and reform the tax code. In October, he set thegoal of a ‘grand bargain’ on the deficit, one that would probably involve some reform of entitlements such as Medicare and Social Security. … But the president has struggled to work with the 112th Congress, even when the rapidly approaching debt limit and looming credit-ratings downgrade pressured lawmakers to act in 2011, and he’ll be facing many of the same forces in the 113th that made striking a deal last year so difficult. … What was fought bitterly over in this Congress—raising the nation’s debt limit—pales in comparison to what members of the 113th Congress have said they will attempt.”

Solving Fiscal Cliff Proves to Be Dilemma for GOP
Politico reports, “Republicans know they’re going to have to budge on revenues in the looming debt and spending debate. The question is when to blink. The problem: Revenue increases, which could solve the fiscal cliff riddle this fall, are also their best bargaining chip for an even bigger fight to overhaul the Tax Code expected next year. GOP lawmakers — especially those on the tax-writing Ways and Means Committee — say tax increases should happen only as part of a fundamental Tax Code rewrite that also lowers marginal tax rates, a policy dream that won’t be realized until next year at the earliest. … Boehner jump-started the so-called fiscal cliff talks earlier this week with a speech that acknowledged revenue as a political necessity. And while he pushed thetype of fundamental tax reform that was last achieved in 1986, the speaker didn’t say whether he’d put taxes on the table before that. ‘For purposes of forging a bipartisan agreement that begins to solve the problem, we’re will to accept new revenue, under the right conditions,’ Boehner said Wednesday.”

Decision on Whether Greece Will Receive Aid Gets Delayed
Bloomberg reports, “Euro-area finance ministers may not make a decision on unlocking funds for Greece until late November as they await a full report on the country’s compliance with the terms of its bailout, a European Union official said. Finance chiefs won’t make the call to release 31.5 billion euros ($40.1 billion) of aid for Greece that has been frozen since June when theymeet in Brussels on Nov. 12, the official said yesterday on condition of anonymity because the deliberations are private. … The EU official said Nov. 26 is a possible date for euro- area finance ministers to sign off on the nextdisbursement of rescue aid to Greece. A Greek government spokesman declined to comment when asked if a decision on the aid payment would be made at the Nov. 12 meeting.”