Public Would Accept Tax Hikes in Debt Deal
By Jessica Chau
We have lots of surveys and polls today. The latest United Technologies/National Journal poll shows that voters are more likely to embrace tax increases for the rich than cuts to domestic spending. Another poll by the National Association of Business Economists shows that economists believe taxes will likely increase next year. And finally, the Wall Street Journal surveys economists in a piece about the likelihood that the country will go over the fiscal cliff.
National Journal, Fawn Johnson, 10/16/2012
Voters are more likely to embrace tax increases for households making $250,000 or more than cuts to Medicare or other domestic spending, according to the latest United Technologies/National Journal Congressional Connection Poll. They are also more worried about cuts in entitlement programs than about tax hikes as a part of any deal that policymakers strike to fend off the sequester’s $1.2 trillion in automatic cuts at the start of next year.
The public’s opinions are virtually unchanged from similar National Journal polling one year ago when a congressional super committee was facing the same dilemma—make a deal or face automatic cuts. The super committee failed. The cuts are still looming. The only difference between then and now is that the deal-making is slated to occur after the election, which theoretically will shield the negotiators from voter blame for at least two years.
Then, as now, just over half of poll respondents (55 percent) said they think that tax rates for families with incomes above $250,000 should increase on Jan. 1 as part of expiring Bush tax cuts or that wealthier families should see a decrease in their itemized deductions (58 percent). Last year, those figures were 53 percent and 55 percent, respectively.
Washington Post, Suzy Khimm, 10/16/2012
What do economists think will happen with the fiscal cliff? Opinion is highly divided, but the vast majority can agree on one thing: Taxes will go up.
The National Association of Business Economists surveyed a group of economists at leading corporations and financial analysis firms, along with a handful in government.
A full 59 percent believe that the payroll tax holiday is done for, meaning the average household would face a $1,000 tax hike.
But opinion is more divided when it comes to the Bush tax cuts: 36 percent believe they’ll expire for high-income earners but not lower-income ones (what the Democrats want), while 55 percent believe that all of the Bush tax cuts will be extended for another year (what Republicans are demanding). So while most believe that taxes are likely to go up next year, it’s more uncertain how much they’ll rise.
Wall Street Journal, Jeffrey Sparshott, 10/16/2012
What are the odds of the U.S. running off the so-called fiscal cliff — the mix of spending cuts and tax increases that would likely tip the U.S. into recession?
On average, economists in the latest Wall Street Journal economic forecasting survey put the probability at just 17%, but some economists and analysts say that may be too low.
“Our view remains that the debate in D.C. following the election will be contentious beyond precedent and that this difficulty in finding common ground suggests the odds of going over the cliff are higher than people seem to appreciate,” RBC Capital Markets chief U.S. economist Tom Porcelli said Tuesday in a note to clients.
In a separate research note out Tuesday, Guggenheim Partners‘ senior policy analyst Chris Krueger said, “the risks of going off the cliff (and staying off) are hugely underappreciated.”
To be sure, all hope isn’t lost.
Royal Bank of Scotland economists figure that the U.S. economy is on more solid ground than many estimate–with a notably improving housing market recovery, steadily falling unemployment and solidifying bank and household balance sheets.
“While going over the so-called fiscal cliff (in its entirety) would almost certainly lead to a sharp contraction in economic activity in early 2013, the improving economic base we now observe leads us to conclude that such a downturn would likely be short-lived,”William O’Donnell and Edward Marrinan said.
Meanwhile, RBC’s Mr. Porcelli expects the “cold hard reality” of the cliff to raise pressure on politicians to do something–ranging from extension of some Bush-era cuts to pushing off the day of reckoning for at least a few months.
But at best, that would leave the U.S. economy growing only slowly–about a 2.0% quarterly annualized rate, he estimates.