Fiscal Cliff / A Reminder

What is causing all the sturm und drang? Is this really a Mayan apocalypse of expiring tax breaks and sequestered spending cuts.

Hardly — here is what we are discussing, in terms so simple even a congressman could understand it:

• Bush tax cuts expire; tax rates revert to Clinton-era levels. Recall this was originally designed to get rid of that pesky surplus (mission accomplished), and to expire in 10 years. It is now year 13;

• Top marginal rate go from 35% to 39.6%; Middle-class tax payers see increases of ~$2,200 per year;

• Payroll tax cut stimulus expires; Americans will go back to paying 6.2% up from the current 4.2%, this rate applies to the first $113k of income.

• Unemployment insurance expires for 2.1 million long-term unemployed, with another 1 million Americans scheduled to see those benefits terminate Q1 2013.

• Sequestration kick in. $1.2 trillion in cuts spread out over the next decade. (That’s hardly a cliff after all).

• Specific Savings: $492 billion come from Defense; half from discretionary programs (non defense, non entitlements). That adds up to $984 billion — the balance of $1.2 trillion are interest rate savings on the smaller debt.

• Annual Spending Cuts: The specific savings amounts to $55 billion in Pentagon cuts plus $55 billion from non-defense discretionary programs.

• Alternative Minimum Tax patch expires. A messy set of repairs to that operates to fix the simple error of the AMT not being inflation adjusted since 1969.

• Medicare doctor payment adjustments: Another annual fix-the-original-error expires tomorrow. Without this, Medicare doctors get a 26.5% Medicare payment reduction.

 Choosen excerpts by Job Market Monitor from

So Simple Even A Congressman Could Understand It… | The Big Picture.