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Wonkbook's Number of the Day: 6.2%, or $3,446. According to the Tax Policy Center, that's the blow to after-tax income for the average family (well, technically, it's for the average "tax unit," but let's just say "family," as we're not robots from the planet budget wonk) if Congress goes over the fiscal cliff. But forget the average, which gets dragged up by the size of the tax increase on the rich. Let's get more specific.

For families in the bottom 20 percent of the income distribution, the hit to post-tax income is 3.7 percent, or $412, most of which comes from the expiration of the stimulus tax breaks. Families right in the middle lose 4.4 percent of their after-tax income, or about $1,984, mostly from the expiration of the stimulus tax breaks and the payroll tax cut. And for families in the top one percent, going over the fiscal cliff will mean losing 10.5 percent of their after-tax income, or $120,537, mostly due to the expiration of the Bush tax cuts. So everyone takes a hit, but the rich get hit the hardest.

Step back for a moment to consider what this means: After a decade in which median household income fell by more than $10,000 -- making it perhaps the worst decade for the middle class in modern American history -- Congress, by virtue of being unable to come to a deal, might actually cut the money middle-income Americans have to spend after taxes by another $1,984.

They are, to their credit, trying to come up with a way to keep that from happening. We've got much more on those negotiations, and on the fiscal cliff in general, in today's top story, so keep reading!

Wonkbook election dashboard

RCP Obama vs. RomneyObama +3.5%; 7-day change: Obama +0.4%.

RCP Obama approval48.9%; 7-day change: -0.7.

Intrade percent chance of Obama win74.0%; 7-day change: +4.6%.

Top story: What happens when the "fiscal cliff" happens?

Congress is planning a post-election dodge of the fiscal cliff. "Senate leaders are closing in on a path for dealing with the 'fiscal cliff' facing the country in January, opting to try to use a postelection session of Congress to reach agreement on a comprehensive deficit reduction deal rather than a short-term solution. Senate Democrats and Republicans remain far apart on the details, and House Republicans continue to resist any discussion of tax increases. But lawmakers and aides say that a bipartisan group of senators is coalescing around an ambitious three-step process to avert a series of automatic tax increases and deep spending cuts...[S]enators would come to an agreement on a deficit reduction target -- likely to be around $4 trillion over 10 years -- to be reached through revenue raised by an overhaul of the tax code, savings from changes to social programs like Medicare and Social Security, and cuts to federal programs. Once the framework is approved, lawmakers would vote on expedited instructions to relevant Congressional committees to draft the details over six months to a year." Jonathan Weisman in The New York Times.

And if they fail?

READ: The Tax Policy Center's breakdown of who pays, and how much, if we go over the cliff.

Going off the fiscal cliff means a tax hike for 90 percent of Americans. "Nearly 90 percent of Americans would face higher taxes next year if Congress lets the nation hurtle over the'“fiscal cliff,' the year-end precipice of tax hikes and spending cuts that threatens to throw the nation back into recession. A study published Monday by the nonpartisan Tax Policy Center finds that taxes would go up by a collective $536 billion next year, or about $3,500 per household, reducing after-tax income by more than 6 percent -- an 'unprecedented tax increase.'" Lori Montgomery in The Washington Post.

@ryanavent: Joe Biden warning that Republicans will literally push Americans off a cliff.

The tax hikes which come with the fiscal cliff are progressive. "The Tax Policy Center has calculated that the fiscal cliff will raise taxes on 90 percent of Americans, raising the average tax rate 5 percentage points. The tax hike would be largely progressive, with the tax rate increasing more on high-income Americans than lower-income taxpayers. The lowest 20 percent would see their tax rates increase by 3.7 percentage points, while the top 1 percent would see a 7.2 percentage point increase, the study explains." Suzy Khimm in The Washington Post.

@DKThomp: mmmmm fiscal cliff bars

But the fiscal cliff still means a hard fall for the middle class. "The payroll tax affects 159 million Americans, who’ve been benefiting from a temporary payroll tax cut that reduced the tax on their wages from 6.2 percent to 4.2 percent. As the New York Times’ Annie Lowrey reports today, it’s highly likely that this tax cut will expire Jan. 1, regardless of who’s elected president. A hike on payroll tax, which funds Social Security, would affect both middle- and upper-income Americans...But the average benefit of the tax cut doesn’t increase substantially with income: Households with incomes between $100,000-$200,000 benefit an average of $2,050 from the payroll tax cut, the Tax Policy Center calculates, while those with incomes of more than $1 million receive just a $2,711 average benefit, as most of millionaires’ income doesn’t usually come from payroll wages." Suzy Khimm in The Washington Post.

@grossdm: Rosh ha-fiscal year: it will be written who shall live and who shall die after falling off the fiscal cliff

And the poor aren't spared, either. "For households in the lowest income quintile, earning less than $20,113 a year, the average federal tax rate would climb 3.7 percentage points, with taxes increasing $412 on average. That works out to about $8 a week. 'For us, it’s lunch,' said Roberton Williams, a study co-author. 'For other people, it’s dinner and lunch and breakfast that day.' Moreover, many low-income families, particularly those with children, would end up paying much more, because of changes like the halving of the child tax credit." Annie Lowrey in The New York Times.

@mattyglesias: The "fiscal cliff" metaphor is spawning dozens of annoying spin-off metaphors.

Fed chairman Ben Bernanke to Congress: Be careful with that cliff. "'I certainly don’t underestimate the challenges that fiscal policymakers face. They must find ways to put the federal budget on a sustainable path, but not so abruptly as to endanger the economic recovery in the near term. In particular, the Congress and the administration will soon have to address the so-called fiscal cliff, a combination of sharply higher taxes and reduced spending that is set to happen at the beginning of the year...According to the Congressional Budget Office and virtually all other experts, if that were allowed to occur, it would likely throw the economy back into recession. The Congress and the administration will also have to raise the debt ceiling to prevent the Treasury from defaulting on its obligations.'" Dylan Matthews in The Washington Post.

@ryanavent: I bet Bernanke's sensible answers will win over lots of QE skeptics.

What about the agricultural cliff? "[T]he 112th Congress managed to let the farm bill lapse... This year was the year to renew...But what about the interim period? Is it a disaster that the country now has no farm bill? Not necessarily. Or at least not yet...We’re going to party like it’s 1949. Technically, the country now reverts to the 1949 farm bill, the last permanent farm bill written into law...For the time being, the nation’s farms (and food stamps) will remain intact...Some of the farm bill’s conservation programs, however, won’t be so lucky...Also, milk prices are now in danger of skyrocketing on Jan. 1...'Under permanent law [i.e., the 1949 bill], government-supported prices would be about four times higher than current law and about twice as high as current market prices.'" Brad Plumer in The Washington Post.

KLEIN: Part of the fiscal cliff comes from Congress choosing to give up on fiscal stimulus. "[B]oth parties agree that the payroll tax cut should be permitted to lapse -- meaning that both agree this is a good time for a $920 tax hike on the average family. This might make sense if the economy had entered a period of self-sustaining recovery where private demand was both cutting into the unemployment rate and poised to continue cutting into the unemployment rate. But that’s not happening. The labor market is stagnant...[T]he Congress and the White House aren’t simply resisting the calls to increase the amount of fiscal stimulus in the economy. They’re literally taking stimulus away...[T]he various players seem tired of fighting over the payroll tax cut and antsy to move onto deficit reduction. It’s not 'mission accomplished' so much as 'mission too hard, let’s try something easier.'" Ezra Klein in The Washington Post.

@ObsoleteDogma: Politicians talk about "going over the fiscal cliff" like it means deficits will increase. Um, the opposite, guys.

Top op-eds

BLINDER: The case against a CEO for president. "[A]re business achievements important, or even relevant, to the presidency? Probably not. Presidential history teaches us that the abilities, character traits and attitudes it takes to succeed in business have little in common with what it takes to succeed in government. In some respects, they are antithetical...This negative correlation between business success and political success is probably not a coincidence...The differences between business and government are manifold. Start with democracy, the preservation and strengthening of which may be a president's first duty. Not many successful companies are run as democracies; benign dictatorship works far better. All the checks and balances that characterize American democracy would drive a hard-charging CEO, accustomed to getting his own way, crazy." Alan S. Blinder in The Wall Street Journal.

KLEIN: Mitt Romney doesn’t need new zingers. He needs new policies. "Behind in the polls and facing mounting panic among his donors, Mitt Romney is readying his secret weapon for the debates: Zingers...Pro tip: If your strategy to turn the presidential election around relies on Romney’s sense of comic timing, you might want to prepare a Plan B, as well...The idea that this election can be reshaped by a zinger speaks to a deeper problem in the Romney campaign’s fundamental view of the race. As they see it, Obama’s record is an obvious disaster and their job entails little more than pointing that out over and over again...The Romney campaign’s strategy of papering over the fractures in the GOP with a vague policy platform would have worked if hammering Obama’s record had been enough to take control of this race. But it hasn’t been, and now Romney is losing. Zingers aren’t going to change that. But perhaps some new policies might." Ezra Klein in The Washington Post.

PONNURU: The flaws in Obamacare. "Obama’s plan makes tax credits available to people who get health insurance from exchanges set up by state governments. If states don’t establish those exchanges, the federal government will do so for them. The federal exchanges, however, don’t come with tax credits: The law authorizes credits only for people who get insurance from state-established exchanges. And that creates some problems the administration didn’t foresee, and now hopes to wish away...People won’t be able to afford the insurance available on them without the subsidy...States have another incentive to refrain from setting up exchanges under the health-care law: It protects companies and individuals in the state from tax increases. The law introduces penalties of as much as $3,000 per employee for firms that don’t provide insurance -- but only if an employee is getting coverage with the help of a tax credit. No state exchanges means no tax credits and thus no employer penalties." Ramesh Ponnuru in Bloomberg.

BROOKS: An opening statement for Romney. "I’ve allowed that to happen to me. I’m a nonideological guy running in an ideological age, and I’ve been pretending to be more of an ideologue than I really am. I’m a sophisticated guy running in a populist moment. I’ve ended up dumbing myself down. It hasn’t even worked. I’m behind. So I’ve decided to run the last month of this campaign as myself." David Brooks in The New York Times.

@mattklewis: My only debate advice for Mitt Romney: Memorize the names of all the governmental departments you plan to abolish.

SOLTAS: The GOP needs to remember how to speak the language of moderates. "[T]he Republican platform has gone unchanged, whereas the rhetoric has taken a turn to the Manichean, invoking a voice of puritanical extremism that reflects the policy views of but the slimmest sliver of the party's right wing. It's as if they are applying the strategy which has worked for Obama, and fantastically well for Clinton before him, in reverse. Make no rhetorical concession to your opponent, the Republican approach seems to go, so that he can paint you into an ideological corner. Behave like children, so that he can fairly characterize any cooperation with you as unproductive. When you've managed to isolate yourself totally -- that is, when you've burned every bridge leading off Right-Wing Island -- let your opponent win layup policy victories wholly uncontested. Render yourself so irrelevant to the actual policymaking process that you give your opponent the opportunity to effect the greatest expansion of government health programs since the Great Society. Make sure you have absolutely no leverage to prevent taxes from increasing this January." Evan Soltas in Bloomberg.

Top long reads

Jason Zengerle takes a look at the polling behind the 2012 election:"American politics has gone gaga for poll numbers -- while polling pros feel less and less certain about the methodology behind the madness. Some days even Nate Silver is left scratching his head."

Chrystia Freeland peers into the victimization-by-Obama complex of billionaires:"The growing antagonism of the super-wealthy toward Obama can seem mystifying, since Obama has served the rich quite well. His Administration supported the seven-hundred-billion-dollar tarp rescue package for Wall Street, and resisted calls from the Nobel Prize winners Joseph Stiglitz and Paul Krugman, and others on the left, to nationalize the big banks in exchange for that largesse. At the end of September, the S. & P. 500, the benchmark U.S. stock index, had rebounded to just 6.9 per cent below its all-time pre-crisis high, on October 9, 2007. The economists Emmanuel Saez and Thomas Piketty have found that ninety-three per cent of the gains during the 2009-10 recovery went to the top one per cent of earners. Those seated around the table at dinner with Al Gore had done even better: the top 0.01 per cent captured thirty-seven per cent of the total recovery pie, with a rebound in their incomes of more than twenty per cent, which amounted to an additional $4.2 million each. Notwithstanding Occupy Wall Street’s focus on the “one per cent,” or Obama’s choice of two hundred and fifty thousand dollars as the level at which taxes on family income should rise, the salient dividing line between rich and not rich is much higher up the income-distribution scale. Hostility toward the President is particularly strident among the ultra-rich."

Send this to your boss, we dare you interlude: Science shows that your productivity is enhanced -- enhanced! -- by looking at pictures of cats on the Internet.

Got tips, additions, or comments? E-mail me.

Still to come: Changes on mortgage regulations go into the rulebook; as do health reform policies; how the DREAM Act is pro-growth; the EPA's Science Advisory Board and why it matters; and a U.S. geography game.


Good news in industrial production. "American manufacturing rebounded in September, expanding for the first time in four months despite uncertainty at home and slumping economies around the globe. The Institute for Supply Management on Monday said its index of factory activity, based on a survey of purchasing managers across the U.S., rose to 51.5 in September from 49.6 in August. It was the first time since May that the index crossed the 50-point threshold that indicates expansion. Gauges of new orders and employment also inched up, boosting hopes that production and hiring will improve in coming months." Josh Mitchell and Ben Casselman in The Wall Street Journal.

@Neil_Irwin: Don't let today's decent ISM number fool you: The manufacturing recovery is sucking wind.

JPMorgan slapped with big new lawsuit. "New York Attorney General Eric Schneiderman on Monday filed a civil lawsuit against JPMorgan Chase and a pair of subsidiaries, alleging widespread fraud in the way that mortgages were packaged and sold to investors in the lead-up to the financial crisis. The case was filed in New York State Supreme Court using the state’s Martin Act, which gives the attorney general broad powers to investigate securities-fraud cases. But it represents the first such case undertaken by the Obama administration’s federal mortgage task force, formed this year, of which Schneiderman is co-chair. It also marks the first in a string of similar actions likely to be filed by state and federal officials against other financial firms that dealt heavily in mortgage-backed securities." Brady Dennis and Sari Horwitz in The Washington Post.

@MattZeitlin: WSJ: New York's top prosecutor filed a civil complaint against J.P.Morgan, alleging widespread fraud in sale of mortgage-backed securities

Government policy changes on mortgages take effect. "A significant element of the government’s historic settlement with big banks over foreclosure abuses takes effect Tuesday, when firms face a deadline for carrying out more than 300 changes in the way they service mortgages and treat struggling homeowners...Although the new standards haven’t received as much attention, they are crucial for fixing a broken mortgage system, government officials said. The standards forbid the pervasive practice of 'robo-signing' -- essentially filing forged and shoddy legal paperwork to speed the foreclosure process -- that caused national outrage in late 2010. In addition, mortgage servicers no longer can foreclose on a borrower while simultaneously negotiating a loan modification, a practice known as 'dual tracking.' They must provide customers with a single point of contact, rather than shuffling them around between different employees with each call. And they must treat foreclosure as a last resort, only after considering a range of other options to keep borrowers in their homes." Brady Dennis in The Washington Post.

Is saving money the new spending money? "Americans have poured record amounts of money into savings accounts even though interest rates are at historic lows, new federal data show...The total amount in those accounts climbed nearly 5 percent to $6.9 trillion in the spring, the highest level recorded since the Federal Reserve launched its regular reports on the flow of money in the economy in 1945...The pattern suggests that Americans, wounded by the financial crisis and scared by an uncertain job market, do not want to take any risks with their money." Danielle Douglas in The Washington Post.

Geography interlude: I bet you are way worse at U.S. geography than you think you are.

Health Care

Ring in the new fiscal year -- and health care reform. "October 1 is arguably the day that the health reform law changed the way they get paid for providing health care. There are two big parts of the health reform law going into effect today. One penalizes hospitals if patients are re-admitted to the hospital within one month of a visit for a condition that should have been dealt with on the first trip. The other seeks to redistribute higher Medicare payments to the hospitals that are delivering better care. Both are part of an effort to fundamentally transform the health-care system in the United States by moving it from a system that pays for value rather than volume." Sarah Kliff in The Washington Post.

Americans are paying more for health care, but they're seeing the doctor less. "The average annual number of times Americans visit medical providers has been falling over the last decade, according to a new report from the Census Bureau. But their overall spending on health care is still rising. Among Americans 18 to 64 years old, the average person visited medical providers 3.9 times in 2010, compared to 4.8 times in 2001...Visits to the doctor and other medical providers may be falling, but health spending is still substantially higher today than it was a decade ago, according to the Labor Department’s Consumer Expenditure Survey. The typical household (including residents of all ages) spent $3,313 on health care in 2011, compared to $2,771 in 2001, after adjusting for inflation." Catherine Rampell in The New York Times.

The contraceptives mandate stands in court. "A number of lawsuits, challenging the health law’s required coverage of contraceptives, are winding their way up through the federal court system...A court in Missouri today became the first to rule on a lawsuit’s merits: Whether, as the case argues, the contraceptives mandate is a violation of the First Amendment freedom to practice religion. In a ruling written by George Bush-appointee Carol Jackson, the Eastern District of Missouri court found the health law provision to be constitutional...The main thrust of the opinion though, is this: The requirement that employers cover contraceptives does not represent a substantial burden on employers’ ability to practice religion." Sarah Kliff in The Washington Post.

Domestic Policy

Are you DREAMing about a better economy? "A new think tank report argues that passing the controversial DREAM Act, which would provide a path to legal status for undocumented youth, would not only advance the immigration debate in the U.S., but it would also help the American economy. The Center for American Progress report, based on data from the American Community Survey, says that passing the DREAM Act for the estimated eligible 2.1 million youth would add $329 billion and 1.4 million new jobs to the U.S. economy by 2030." Allen McDuffee in The Washington Post.

Science policy for a lean-budgets era. "[U]nmanned space exploration seems to me much more exciting and scientifically worthwhile than human spaceflight, especially at a time of restricted budgets and nascent technology. Sending Curiosity to Mars cost only about 10 times what it would cost to make a movie about sending Bruce Willis to Mars -- and perhaps a hundredth of the cost of actually sending humans there and back...In terms of scientific payoff, it makes far more sense to spend money on Mars rovers, since 99 percent of the cost of sending humans into space involves keeping them alive and getting them back, leaving precious little for science." Lawrence M. Krauss in The New York Times.

How election fraud actually happens. "[A]s a rising furor over voter fraud has prodded some states to mount extensive efforts against illegal voters, election-fraud cases more often involve citizens who sell their votes, usually remarkably cheaply...It may still be possible to steal an American election, if you know the right way to go about it. Recent court cases, from Appalachia to the Miami suburbs, have revealed the tricks of an underground trade: Conspirators allegedly bought off absentee voters, faked absentee ballots, and bribed people heading to the polls to vote one way or another. What they didn’t do, for the most part, was send people into voting booths pretending to be somebody else." David A. Fahrenthold in The Washington Post.

The threat of defense-contractor layoffs recedes. "Several defense contractors on Monday backed off threats to issue layoff notices to employees in coming weeks, a move they had said might be required given the threat of mandatory federal budget cuts in January." Marjorie Censer in The Washington Post.

Cruciverbalist interlude: A crossword writer looks at the candidates.


When you can't change the science, change the scientists? "House Republicans introduced a bill late last week that would require the Environmental Protection Agency (EPA) to reform its Science Advisory Board, the body that acts as a scientific adviser to the EPA as the EPA writes regulations. Republicans said reform of the Board is needed because of complaints that a majority of people serving on its advisory panels have received environmental research grants in the last decade from the EPA. The GOP also argues that the Board's scientific advisory panels often exclude the private sector, and that more public participation and input into panel decisions is needed." Pete Kasperowicz in The Hill.

Nuke proliferation regs in spotlight. "A nuclear energy industry group is lobbying the Energy Department (DOE) to eliminate a trade barrier that it says would help U.S. firms add jobs. Specifically, the Nuclear Energy Institute (NEI) says DOE should change a rule, known as Part 810, to enhance exports to a list of restricted nations for products — such as consulting services and software -- that it says do not pose a nuclear proliferation threat. The rule change would allow U.S. commercial nuclear firms to discuss operations with foreign partners more freely, according to NEI." Zack Colman in The Hill.

Wonkbook is produced with help from Michelle Williams.