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Krugman points out that a centrist solution is not the panacea it sounds. A lot depends on what it is and what is seen as centrist, if it really is centrist, and if it makes sense. A centrist proposal that leaves out tax expenditures but is different from the positions staked out by the factions on both sides of the political spectrum, and sounds moderate may not be the right solution.

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Republicans and Democrats decided to tackle the U.S. fiscal cliff in several steps. The first step for the Bush tax cuts to be extended to single earners with income under $400,000, and couples earning under $450,000 was part of the agreement reached Jan. 1, 2013. Republicans see this as protecting small business owners who generate jobs in the U.S. economy. Democrats see this as progress in taxing the wealthy to reduce spending cuts in other programs. As expected the deal was reached between Senate colleagues Republican Mitch McConnell and former Democratic senator and Vice President Joe Biden, as rapport is missing in the relationship between Speaker Boehner and president Obama. The $110 fiscal cliff spending cuts on entitlements and defence will be postponed for 2 months till early March under the deal. Debt ceiling will not be raised and negotiations will be needed again by the end of Feb. 2013 to raise the debt ceiling. By March 27, 2013 short term funding measures lapse. Republicans see accepting tax cuts on the wealthy as a way to remove this issue in future negotiations to focus on spending cuts needed to improve U.S. finances. ...

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Standard and Poor's changed its rating of U.S. Treasury securities from stable to negative. U.S. Treasury securites are still rated AAA. Moody's made no change in the rating. U.S gross debt as a percentage of GDP is 91.6%, with the comparable number for Germany at 80%, France 82%, Canada 84%, the UK at 77%, Japan 221%. The U.S. budget deficit as a percentage of GDP is 10.6%, the comparable number for Germany is 3.3%, France 7%, Canada 5.5%, the UK 10.4%. John Chambers, the head of the sovereign ratings committee at Standard & Poor's stated that "the sign of political gridlock was a key determinant in our outlook change." The budget deficit will go up to $1.5-$1.65 trillion, or over 10% of America's GDP in 2011. The gross debt for the U.S. is at $14.219 trillion, just short of the $14.294 trillion cap. With rising entitlement costs and the interest on debt this is expected to go over the debt ceiling as early as July 8, 2011. Again political gridlock and the divide between Republicans and Democrats about deficit reduction is causing concern about the delay in raising the debt ceiling....

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The "cut, cap and balance" pledge of Republican candidates for the presidential election of 2012. The current House version requires capping federal spending at 19.9% of GDP by 2018. This say House leaders is in accordance with the average spending levels for the last 30 years. It would have to come down from 24%. The balanced budget amendment caps spending at 18% of GDP and a balanced budget within a decade. The pledge is written promise to cut spending immediately.

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The skills to navigate different personalities and work patiently on the issues surrounding changes to the U.S. tax system of Rep. Dave Camp (MI), chairman of the U.S House of Representatives Ways and Means Committee, will be immensely useful in the effort to make changes to the U.S. tax system. Camp works well with fellow House Republican leaders Boehner, Ryan, Cantor, and his Democratic counterpart in the U.S. Senate Max Baucus. Camp is a good listener, refuses to engage in partisan criticism, and has the patience to work through difficult issues of achieving savings and keeping fairness in the the tax changes. Earlier efforts to achieve consensus in late 2011 failed, making it even more important to have leadership which can create productive debate and bridge the differences. The tax changes are part of the overall effort for U.S. economic recovery by reducing the deficit.

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Britain's Tax Service reports the number of taxpayers reporting incomes of 1 million pounds a year declined by over 60% in fiscal 2010-2011 from the prior year. In 2010 the Labor government of Gordon Brown introduced a 50% income tax rate for this income group, up from 40%. The number of million dollar incomes filed declined to 6000 from 16000 in 2009-2010, and revenues declined from 13.4 billion pounds or 9% of total taxes from taxpayers to 6.5 billion pounds or 4.4% or about half. The Labor government had hoped for additional 2.5 billion pounds in revenue, showig unintended consequences and surprises in economic policies.

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Rep. Dave Camp, House Ways and Means Committee chairman, representing northern Michigan, says every deduction in the tax code is there because of a reason, and powerful lobbies will oppose any changes. The best he can do is work himself out of this job as he will have to tackle the Democrats on entitlements, the business lobbies on tax loopholes, and other lobbies protecting their preferences in the tax code. He plans to achieve a simpler tax code with lowered rates of 25% for business and earners above six figures, and 10% for everyone else. The approach he is taking is to be revenue neutral when tackling tax reform, in the belief that the economic growth generated from a simpler tax code and lower rates would generate revenues of 18 to 19% of GDP, up from about 16% today. He says the economc cost of not getting this done to get the economy rolling again is so high that he is upbeat that both sides can come together after the election no matter who wins. He is also looking at a repatriation tax of 5% on profits kept by American companies overseas, which would boost revenues for business which could be reinvested in stead of sitting idle. Today the much steeper tax rate on repatriation makes businesses reluctant to bring it back....

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Krauthammer says President Obama has failed to come out openly in support of the Bowles-Simpson commission's recommendations on deficit reduction. The recommendations were made in December 2011. The President's February 2011 budget did not take up these recommendations. He gets a sense that there is too much electioneering in the Obama posture on deficit reduction- being in the best position for the 2012 presidential election rather than a sincere effort. He suggests the Republicans pursue a short term debt ceiling hike of $500 billion containing $500 billion in budget cuts by passing this in the House. And couple this with a call to follow the Simpson-Bowles recommendations which, in one option, cut $1.1 trillion of deductions, credits and loopholes while lowering tax rates across the board to a top rate of 23%. This would give enough time to come up with a thoughtful and open effort with public scrutiny, and is preferable to the current closed door negotiations without the deliberations necessary for decisions of such far reaching consequences. Failing this there is the McConnell Plan B. Boles- Simpson focussed on tax expenditures as a key part of their plan. Martin Feldstein and other experts also point to limiting or eliminating "tax expenditures" (the deductions and loopholes that reduce revenues) as a key part of the solution to the U.S. deficit problem....

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Brooks points out that the best way to arrive at workable solutions is to take the best ideas from all sides of the political spectrum. The Republicans and the Democrats are too ideologically and politically driven and lack the imagination to come up with good solutions.

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Matt Miller, a former Clinton aide, says both U.S. parties have failed to do serious problem solving. The reason is that both are looking primarily for election advantage and are not interested in blending the best of liberal and conservative thinking. He even goes so far as to say both parties don't trust the public enough to lay out all the facts openly and explain what action needs to be taken. This is clearly true in one of many examples- the way Clinton advisor Bowles and Republican Senator Simpson took up the job of coming up with a deficit reduction plan looking at things from all angles, and laying out all the facts. Contrast that with the way a Democratic president Obama shied away from openly discussing Bowles-Simpson's closing of most tax expenditures as a key a part of a new action plan. Republican leaders Boehner, Cantor, McConnell, instead of seriously challenging the Democrats to take up the Bowles-Simpson or Rivlin-Domenici proposals, focussed their attention on defunding the government unless certain conditions were met. Serious debates and discussion that should have taken place to arrive at a consensus never took place, eroding the credibility of politicians of both parties, as Miller points out. The failure of leadership brings America back to its roots in community organizing through independent intitiative at all levels for crucial problem-solving discussion. This is the way to arrive at a consensus of what needs to be done for renewing America....

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About 63% of respondents in a Washington Post/ABC poll conducted in July 2011 say they would look for new faces in Congress in the 2012 elections. There is serious public discontent with the lack of compromise by Republicans and Democrats in the debt ceiling and deficit reduction talks.

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Former U.S. Treasury secretary Robert Rubin talks to Charlie Rose about the August 2 Debt Ceiling and Deficit legislation. He says there are two constructive things about the legislation. There are no serious cuts in 2011 and 2012, so there will be almost no loss in demand as spending cuts do not affect the immediate 18 month period. Former Treasury Secretary Summers also makes this point. And that the cuts include defense and non-defense. He favors the approach of the Bowles-Simpson Commission. On the overall situation Rubin points out the importance of getting a real public discussion going about what this means, what the consequences of decisions made now. Especially important for Rubin is public understanding of the importance of setting up a serious deficit reduction program that sets the date of implementation a couple of years into the future to give time to get back on track, and the need for increased revenues. A useful point Rubin makes is that the question of jobs and the question of getting into a sound position fiscally are really the same question. He cites his experience in 1993 when he helped President Clinton setup and implement a deficit reduction program- which had half spending cuts and half revenue increases. Bowles-Simpson Commission recommendations for closing loopholes for tax expenditures and Martin Feldstein's similiar proposal for limiting the deductions and exclusions to 2% of Adjusted Gross Income offer an option that creates revenues without any tax increases....

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Erskine Bowles, a former chief of staff under President Clinton, and Alan Simpson, former senator from Wyoming, say the U.S. Supercommittee members should remember that their personal priorities and the common good are not at odds. The authors of the Bowles-Simpson Presidents Commission for deficit reduction say there is growing discontent among voters with politicians who are obsessed with gaining partisan advantage. Using issues of national importance that require a common approach from all parties as a way to score political points will only backfire on these politicians. Personal priorities of members of Congress are now no longer at odds with the common good, they are converging. It is upto the Congress, members of both parties, to push back against the special interests and partisan politics, and show leadership on the deficit. The eurozone crisis has shown the dire consequences of any sluggishness or procrastination. The failure of the political class and leadership in Italy and Greece, and in other nations of the EU, has put the fate of these countries in the hands of markets, which have relentlessly pushed up the borrowing rates of Greece, Italy, Spain and other countries, and taken future direction out of the hands of politicians. Erskine and Bowles say don't wait for a fiscal crisis to take action because it will be disastrous economically and politically, with everyone as losers and no winners. Timidity is not an option, leadership is required to take action that is big and broad, tackling tax expenditures, entitlement expenditures, defense, across the board....

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This article in the NYT explains why the loss of jobs particularly in the auto industry to Mexico, with the experience of NAFTA passed by president Bill Clinton, has caused widespread opposition to the TPP trade agreement proposed by president Obama. Both Hillary Clinton and Donald Trump in 2016 oppose the TPP.

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Two weeks after his election Donald Trump says the U.S. will not join the Trans Pacific Trade Agreement during his term in office. Barack Obama took seven years to negotiate the trade agreement which was opposed by trade unions, the auto industry and was unpopular in the midwestern U.S. because of the impact of trade in hollowing out the manufacturing sector. Here Frank Sieren of the DW.com points out that the agreement was not really about trade, as most of the gains of trade had already been realized according to experts. It was part of the "pivot to Asia" to maintain American dominance in the region, says Sieren. After China pulled together some Asian and European countries into its trade agreement, the Regional Comprehensive Economic Partnership (RCEP), the U.S. pushed for TPP as a counterweight to the China sponsored trade zone. China says it will try to integrate the countries in TPP into the trade zone it has sponsored. President Trump has said that the U.S. is better off negotiating agreements with each country and not getting into multilateral trade agreements. He fought the election campaign on the basis of the opposition to TPP and trade agreements that unfairly hurt American workers. This could have provided the 110,000 margin of victory in the states suffering from the hollowing out in manufacturing such as Michigan, Wisconsin, Ohio and Pennsylvania. A similar hollowing out in Ontario favored Justin Trudeau's Liberals against the Conservatives in Canada's election. ...

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Senator Patrick Toomey (Pa.) and Rep. Jeb Hensarling (Tex.) are lobbying Republican party members in Congress behind the scenes to accept $300 billion in taxes as the only way to get an agreement on debt reduction in the Supercommittee. This would be part of a plan that addresses entitlements, and changes the tax code to lower rates and reduce tax expenditures by closing deductions and loopholes. This is leading to an intense debate in the Republican party about the wisdom of a purely ideological position on taxes that does not take into account current realities, and risks letting markets take control of the nation's future.

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A slight shift in American opinion favoring a deal with Iran is shown in a WSJ/NBC poll in July 2015 compared to the poll in April 2015. Support for reaching a nuclear deal with Iran remains stable at 36% in both polls, the opposed drops by 6 percentage points to 17% from 23%, and the percentage of people who say they do not know enough to formulate an opinion goes up to 46% from 40%. The intricacies of a nuclear technology deal and the sites involved lead to a high percentage of don't know enough to give an opinion. Factors hindering a deal include inspection of military sites, and Iranian intentions. Factors favoring reaching a deal now is the risk that this would mean Iran would go back into isolation and the opportunity to work with moderates might be lost. The Rouhani administration was an effort by voters to elect a government that could ease or remove sanctions to improve the economy and living conditions- its failure would lead to Iran losing an opportunity to open up to the world. The pressure from the U.S. Congress and Israel served to push for a verifiable and effective agreement to control development of nuclear technology for weapons systems. Behavioural factors involved are the very young population in Iran which has no memories about the period before the revolution in 1979- 70% of the population of 74 million are people under the age of 35. This group is eager for ties to the outside and could change Iran's outlook and policies int the future towards moderation. Risks in not reaching a deal also include the possibility of the Saudis developing nuclear technology and nuclear proliferation. Winners from a deal because of the flow of Iranian oil to world markets and a period of extended low oil prices are the U.S., Europe, China and India. Germany gains new markets to replace the growth in the Russian market after sanctions. Lifting of an arms embargo, an added risk in the last days of the talks, would be mitigated by making the lifting of that embargo very gradual....

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Stephen Moore of the WSJ interviews Grover Norquist, head of the advocacy group Americans for Tax Reform. Republicans in Congress and other Republican leaders have signed on to the "no new taxes pledge" promoted by Norquist. There is increasing pressure on Norquist as the media, White House, and executives on Wall Street call for flexible positions from both sides on taxes and spending cuts. Norquist insists that not much has changed. He says that the increase in taxes on the rich is only symbolic and has to be followed up with increasing taxes on the middle class. He cites a Rasmussen poll that shows 75% of Americans believe this. Norquist is convinced that the Democrats with their spending plans are out to take the U.S. in the direction of European economies, the tax increase on the rich would be followed up with a energy tax or a value added tax to pay for unrestrained spending. His solution is for Republicans to pass a bill that extends the current tax rates past January after roughing it through the tax cliff date. Even the sequester option is better than increasing taxes says Norquist, letting the Defense Department make the cuts where appropriate. Norquist does not favor the option of reducing tax loopholes and deductions as a way to increase taxes as proposed by Simpson Bowles commission and Ryan-Romney in the election campaign. ...

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Buffett's view that higher capital gains taxes will not result in less business investment. He favors a $500,000 figure instead of the $250,000 proposed by president Obama for Bush tax cuts for incomes below that level.

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Romney says in the first presidential debate he will not increase taxes on the middle class: "I will not reduce taxes paid by high income Americans. And I will not, under any circumstances, raise taxes on middle-income families. I will lower taxes on middle income families." How he would do this is through limiting or eliminating deductions and loopholes among several measures, with work done on this by his advisor Martin Feldstein, Reagan's economic advisor and a professor at Harvard University- Romney's Tax Plan can raise revenue, WSJ, 8/28/2012. Where the Democrats and Republicans differ is that economic growth generated by creating incentives for business to invest and hire also plays a part in generating the additional revenues as it did under Reagan's economic plan. Behavioural factors play a large part of this as much as the incentives and other steps, to create a climate of business confidence- search in Janvoo for the Group "Reagan memo of 1980 by Shultz, Friedman," for more on this....