The holiday season, consumerism, and the fiscal cliff - a perfect storm
Let me start with saying I strongly beleive that kicking the can down the road long term, a la anything Romney might have done to lower taxes and "stimulate" the short term economy for another four years would have been a BIG BIG mistake.
But now I cannot help noticing how early the big retailers have been in rolling out the Christmas merchandise in full force. This year seems extraordinary. Wall mart is at 110% Christmas toy & gizmo capacity, and we're barely past Halloween.
So I ask myself, do they know something is coming? Are they trying to beat the "fiscal cliff" that could throw consumer confidence completely into the toilet and send the economy back into a massive contraction?
The last time these discussions came up in Congress, it was in the summer months during "slow" part of the retail cycle. Now it is squarely in the middle of the holiday peak season.
Personally, I don't think there will be much downside to the economy from rolling back the Bush tax credits, particularly if it's done gradually. I see absolutely NO downside to re-instituting the estate tax (people aren't going to stop dying, and in fact they will either spend more on legal services setting up evasion trusts, or they will "give" it away faster to the kids who are likely to spend a portion of it...)
That led me to the conviction that the President should stare down House Repuke's all the way over the cliff if they are prepared to go there. No compromise without a substantial return to progressive taxation. Let's fix the AMT so that it's not just inapplicable to families under $100K, $250K, pick a reasonable gross income number, BUT SO THAT IT WORKS THE WAY IT IS SUPPOSED TO: There should be no way for the Mitt Romeny's or even Warren Buffets of the world to be paying a lower tax rate than their secretaries! That means an asset test, and dis-allowance of paper "deferrals" of income or other "investment income" exclusions. If you are going to disregard someone's home mortgage expense, an investment in not only the US housing market, but their ability to live under a roof, there should be other claw backs on every other deduction and loophole the mega rich can afford to have their lawyers set up for them.
Now I waver in this conviction of timing. Perhaps a six month extension of negotiations is the way to go here. Move the cliff back so that it doesn't coincide with the make-or-break-it holiday retail shopping season. I will be honest - I personally will be cutting back on my holiday shopping if it looks like we are headed over the cliff, even though I think that fundamentally in the long term it is better for the country than a half baked trickle-down compromise that cuts substantial government spending anyway.
Thoughts from others here?
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