Taxmageddon: A Sliver of Hope
Taxmageddon 2013 is looming. It will be, by far, the largest tax increase in U.S. history.
There will be a 3.5% of GDP tax increase in 2013 if Congress fails to act before December 31st… twice that of 1968.
The tax cliff is very, VERY real and could throw the fragile U.S. economy into a serious tailspin next year.
Fortunately, it’s looking like another debt ceiling debate this year isn’t going to complicate things more.
Compared to $494 billion in tax increases, it isn’t much help… but at least its a start.
Debt Ceiling Reached by October 13th, 2012?
About a month ago I made a calculation based on the growth rate of the national debt since the last debt ceiling debate and found we’d reach the next debt ceiling again on October 13th, 2012.
With “extraordinary measures” the government can stretch that out another 77 days or so before it actually defaults.
That meant that the Congress probably would have had to have another debt ceiling debate again this year as well as having to deal with everything else in Taxmageddon 2013.
New Debt Ceiling Debate Recalculated to January 30th
Happily, the newest calculations show, worst case, that we can last until January 30th, 2013 before the federal government actually defaults on its debt.
This time, I based the calculation on this year’s national debt growth rate ($3.66B/day). I also made a 2nd calculation based on last month’s national debt growth rate ($3.55B/day).
Based on those two calculations we will now reach the debt ceiling again between November 15th and November 21st… that’s AFTER the 2012 elections. The politicians can breath a collective sigh of relief!
With the 77 day cushion of “extraordinary measures” that the U.S. Treasury always resorts to (stealing from every protected cookie jar it has left) that will take us to around January 30th before the federal government will actually default.
Btw… U.S. Treasury Secretary Tim Geithner has already started the first wave of this year’s extraordinary measures on January 17th, 2012. Bet you didn’t know that!
Not for the country, but it’s positive news for Congress that it can kick the “debt ceiling debate” can down the road a little further again before it has to deal with it.
However, Congress still has to face Taxmageddon 2013 before they go home this year.
That most certainly will further divide this nation between fiscal ideological barriers. There is no sign Republicans and Democrats will come together over anything this year. It doesn’t help that President Obama is using political division as a tactic in his re-election strategy.
The way that Taxmageddon 2013 gets dealt with this year could have as much impact on the economy as did the Great Recession of 2008.
There could be a silver-lining in all this for Republicans. There is a very good chance they will win back the Senate in November. With control of both houses of Congress, that would put them in a much stronger position to deal with debt and deficits.
That possibility delights Republicans but deeply frightens the anti-austerity crowd.