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Thursday, December 13, 2012

The Fiscal Cliff

Unless the republicans and democrats get a deal before year's end, the country will head over the so-called "Fiscal Cliff" including a budget sequestration that will cause automatic cuts to most federal agencies. This will be a disaster for science, grants will be delayed or not awarded, perhaps even spending freezes on current funds. University presidents have banded together in my old state and new to drive this point home.

Don't panic too much about the fiscal cliff, which will be short lived if it happens at all. But the consequence may lead to deep short or long term budget cuts in science. If charitable deductions are eliminated, that can be a large hit on university endowments. Pell grants might also be in play. 

On the other hand, science and education has its friends in Washington, starting with Barack Obama. So maybe the whole fiscal mess will work out just fine for us and we can go back to worrying whether universities will be decimated by MOOCs. 

9 comments:

  1. People have spoken, and they want short term entitlements with disregard for the long term sustainability. If you fire all federal employees, every soldier and bureaucrat, and leave only the entitlements, you still won't balance the budget. Then you have the Obamacare which will kick in slowly. (worth 1.9 trillion in entitlement spending over 10 years) Research is in the long term category. People voted for short term ...and the government is acting on this. The Fed buying 40 billion dollars of mortgages (plus 45 billion on assets) every month, basically means that it pumps money into the people that have houses (older people) at the expense of the young and the unborn. Again, short term view. Fair? Immoral? Debatable... but this is what people want.

    You have to come up with a very good reason how the people that voted can benefit from this research in the time-frame that they care about, which is short term.

    As for the charity donations, this is a big loophole in terms of taxes. Buffet pledged over 99% of his yet-to-be-taxed wealth, and his rate overall is lower than 0.1%. But this doesn't stop him to ask for a higher rate of "rich" people. What he really means, is a tax on other rich people, but not him. Really, you have to defend the status quo on this one: why should the university donations be tax-exempt?

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    1. One proposal that wouldn't cap charitable contributions but might be fairer would be to have the tax value of a charitable contribution be based on a lower rate than the top earners. For example, a 28% cap. Canada does this kind of thing for ALL itemized deductions: They compute the total tax and then all the things that we have as itemized deductions become tax credits which are computed at the lowest rate of something like 19% rather than the higher rates. Why should giving $100 to a charity save a high earner more income tax than it saves a low earner?

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    2. " If you fire all federal employees, every soldier and bureaucrat, and leave only the entitlements, you still won't balance the budget. "

      This is false. Look up the numbers.

      Moreover, as Clinton showed, a modest increase in the top tax rates is all that is needed to balance the budget.

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    3. Another false statement: Warren Buffett's tax rate was 17.7 percent.

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  2. No worries, republicans will "cut taxes" after the we drop from the fiscal cliff and taxes get back to normal automatically. Not only they will keep their pledges not to rise taxes, they will actually cut them. This shows why the tax cuts should not become permanent while we have these idiots running the country.

    But we should admit it is kind of hilarious. Incompetent politicians with opposing ideologies can't agree how to deal with a serious problem, so they point a gun to their own feet that will fire if they don't agree by end of the year, and yet they still can't agree.

    for TC: http://www.economist.com/node/21563725

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    1. We are living in a Mel Brooks movie and the part of Cleavon Little is being played by Congress.

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  3. Alternatively, if the Republicans want to let the Bush tax cuts expire, wouldn't any new ones then become Obama tax cuts?

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    1. perhaps a reason why President Obama might want the cuts to expire, so the replacement ones get his name

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  4. I think at least in math/compsci/philosophy, a good cutback would actually be helpful, at least under the assumption that it reduces individual paychecks rather than reducing the total number of students. We need more Ramanujans and Erdoses, not more "yet another paper allegedly applying PDE's to medicine or biology, $cha-ching$"

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