CBO: Time for Compromise?
The Congressional Budget Office (CBO) recently weighed in regarding the apparent options for the politicians when it comes to this country’s impending woes. Bottom line: somebody better starting getting serious, and real soon.
CBO says, based on the assumptions below, that the deficit will decline to about $641 billion in fiscal 2013 – some $500 billion less than the $1.1 trillion predicted by Obama. That’s the good news. But with the good comes the bad: 2013 will bring another recession and 9% unemployment.
The main assumptions:
- “Bush tax cuts” are allowed to expire this New Year’s Eve
- The 2 percentage point cut in the Social Security tax and the extension of emergency unemployment benefits expire
- Automatic enforcement procedures created by the Budget Control Act of 2011 to hold back discretionary and mandatory spending kick in for 2013
- Significant reductions in Medicare payment rates for docs’ services take effect
Alternatively, with indefinite extension of the “Bush tax cuts,” holding constant
doctors’ reimbursement rates, and no automatic spending reductions, while the 2013 economic situation would be better, gi-normous budget deficits will persist, as will slower economic growth, and higher interest rates will return. CBO’s conclusion: eventually, these policies would lead to a level of federal debt that would be unsustainable (there’s that word again) from both a budgetary and an economic standpoint.
So what’s a politician to do? Might some sort of compromise be the only realistic solution?
And from our “special interests” department comes word this week that the real estate lobby has scored a few points with the Republican party, which had initially refused to include a plank in the party platform to endorse retention of the age-old and sacrosanct mortgage interest deduction. Final resolution – some weasel words, according to the Wall Street Journal, to the effect that if the GOP fails in overall tax reform efforts, it would favor retention of the mortgage interest deduction.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at 831-7288, welcomes comments at firstname.lastname@example.org, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.