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U.S. Fiscal Cliff Talk Breakdown
Written by: PaxForex analytics dept - Friday, 27 June 2014 0 comments
Senate Majority Leader Reid, a Nevada socialist, announced yesterday that talks have broken down in order to reach an agreement that would prevent the U.S. from bungee jumping off the fiscal cliff without a cord. Those who prefer a technical analysis terminology may understand the following description better. Fiscal cliff talks have formed a rising wedge formation and now trade at the top of the formation. MACD shows a negative divergence while RSI is trading in extreme overbought territory and alos formed a negative divergence. Volume on declines exceeds volume on advances by a margin of three-to-one.
January 2013 will see a combination of tax increases as well as spending cuts totaling $607 Billion. Socialists drag their feet and want to punish success. They think the solution is to tax wealthy individuals more and create an even bigger divide as it would not treat every American equal while at the same time plan to increase spending on socialistic projects which are not efficient.
Republicans walked away as they will not allow such a move and asked socialists to offer a comprehensive plan on necessary spending cuts in order to address the fiscal deficit. Republicans also want tax cuts across the board for every citizen and do not want to create a bigger social divide then Mr. Obama already created. The country has not been disconnected to this extend since the Civil War.
The U.S. can’t tax its way out of the situation which was started in the late 60’s and early 70’s. As a matter of fact, the country has so much debt that even growing out of it is almost impossible. Republicans want to create more revenue for the country and in order to enable revenue growth taxes need to be slashed across the
The best start would be to eliminate capital gains taxes, dividend taxes, property taxes as well as inheritance taxes. After that corporate tax rates should be lowered to 8%, while personal income taxes should be lowered to 5%. This should eventually all be reduced to zero as the government gets out of business and allows the private sector to handle all necessary tasks.
Corporations should not pay taxes directly to the government, but rather provide the capital for essentials that all citizens should have free access to such as healthcare, education and energy as well as infrastructure. This would allow corporations to keep more of their earnings which would benefits its shareholders and therefore the entire economy while essential services would be provided for. Corporations would maintain and upkeep those services, each corporation would pay a percentage equivalent to their size, while not having to hand money over to governments and politicians who will pork it up and waste it.
Individuals should not be taxed at all on their income, and the government should implement a nationwide consumption tax which would provide all the revenue they require for the services they will be in charge for. Essential consumption such as food as well as energy should not be taxed. Consumers will have plenty of capital which they will use to consume and invest which would further fuel the economy.
The U.S. will also face another debt ceiling debate as the U.S. Treasury said it would reach its current borrowing limit next month and can pay its obligation into early January or maybe February. After that point the U.S. will default on its debt. In 2011 Mr. Obama decided to play hardball with Republicans and the U.S. was close to a full default which would have send borrowing costs through the rough while services would have been suspended as the country would have been locked out from global debt markets.