In an attempt to prove that they are trying to avert the so-called “fiscal cliff” scheduled to occur at the end of the year, Congressional Republicans have floated a “compromise” on taxes: they’ve agreed to new revenue, so long as it comes from closing loopholes and “dynamic scoring” (i.e. revenue increases due to economic growth), not raising tax rates. The catch, of course, is that tax cuts in the past have not led to appreciable revenue growth.

President Obama — who has said that a budget deal should include $1.6 trillion in new revenue — rejected the GOP’s dynamic scoring canard yesterday, saying “What I will not do is to have a process that is vague, that says we’re going to sorta-kinda raise revenue through dynamic scoring or closing loopholes that have not been identified.” Sen. Chuck Schumer (D-NY) derided dynamic scoring as a “Rumpelstiltskin fairy tale.” And 13 more Democratic senators evidently share that sentiment:

A group of at least 13 Democratic senators, led by Jay Rockefeller of West Virginia and Tom Harkin of Iowa plan to send a letter to President Barack Obama laying out principles for a budget deal.

The letter calls on Obama to strike a deal on the fiscal cliff that has a 1-to-1 ratio of tax increases to spending cuts.

“These revenues must be real and not inflated by ‘fuzzy math’ like dynamic scoring,” the letter reads. “Any deal should end the Bush tax cuts for the wealthiest two percent of the population and close tax loopholes benefitting wealthy Americans and corporations. Furthermore any deal must include a one-to-one ratio of revenues to spending cuts.”

“Dynamic scoring in this context is an illusion — just a way to turn wishful thinking into numbers. It is not serious and should be taken off the table,” said MIT economist Simon Johnson.

Since the election, many Republicans have come out in support of the Bowles-Simpson plan for deficit reduction. For instance, Sen. Lindsey Graham (R-SC) said, “I’m willing to say yes to Simpson-Bowles,” newly elected Minority Whip Sen. John Cornyn (R-TX) called it a “roadmap,” and Sen. Saxby Chambliss (R-GA) said the country should use “the Simpson-Bowles approach.” Senate Minority Leader Mitch McConnell (R-KY) reacted to President Obama’s demand for $1.6 trillion in new tax revenue by saying, “let’s be clear: an opening bid of $1.6 trillion in new tax hikes isn’t serious. It’s more than Simpson/Bowles or any other bipartisan commission has called for.”

However, new report from the Center for American Progress explains that the Bowles-Simpson plan for deficit reduction actually creates almost $500 billion more revenue than President Obama’s budget. If fully enacted, the bipartisan commission’s plan would generate $2.7 billion from tax increases by 2022:

The oft-cited figure is that the Bowles-Simpson plan would raise $1.2 billion in new revenue. However, this misses an important piece of the puzzle: the panel assumed the Bush tax cuts for the wealthiest Americans would expire and create $1.5 billion in new revenue separate from the $1.2 billion found elsewhere.

The bipartisan committee that produced the report, known as The National Commission on Fiscal Responsibility and Reform, was created by President Obama in 2010. Its proposal never made it to Congress, though, because Republican members of the House — led by former Vice Presidential candidate Paul Ryan — voted it down.

– Greg Noth

Income inequality has grown in nearly every state in the country over the last three decades and continues to climb across the nation, according to new report from the Center on Budget and Policy Priorities and the Economic Policy Institute.

While a slow recovery from the Great Recession for middle- and low-income families has exacerbated income inequality in the short-term, government policies that are preferential to the wealthy and the long-term stagnation of wages have caused significant growth in the gap between the wealthiest 20 percent of Americans and the poorest fifth, the report found. Across the country, the richest 20 percent make eight times more than the average income of the bottom 20 percent, a ratio that didn’t exist in a single state 30 years ago:

In the United States as a whole, the poorest fifth of households had an average income of $20,510, while the top fifth had an average income of $164,490 — eight times as much. In 15 states, this top-to-bottom ratio exceeded 8.0. In the late 1970s, in contrast, no state had a top-to-bottom ratio exceeding 8.0.

Look:

Nationally, the richest fifth experienced more in income gains ($2,550 per year) each year during the three decade period than the bottom fifth experienced over the entire 30 years ($1,330). For the richest 5 percent, the gap was even bigger: in 11 large states the study examined, average incomes for the top 5 percent rose by more than $100,000. The largest increase any state experienced for the bottom 5 percent was just $5,620.

Much of the explanation for rising income inequality lies in wage stagnation, rising pay at the top of the income scale, and preferential tax rates for the wealthy. Pay for chief executives rose 127 times faster than worker pay over the last 30 years, according to one recent study. At the same time, tax rates for the richest Americans have plummeted, leaving the country with more inequality than places like Ivory Coast, Pakistan, and even Ancient Rome.

Soon after President Obama affirmed his intention to let the Bush tax cuts on income in excess of $250,000 expire at the end of the year, Sen. Marco Rubio (R-FL) warned that raising taxes on the wealthiest members of society would “wipe out some small businesses.” At the Atlantic Washington Ideas Forum on Thursday, Rubio acknowledged that Obama’s plan would lower the deficit by 7.7 percent every year, but argued that small businesses were somehow in danger:

The question becomes what problem are you solving and are you willing — are you prepared — to wipe out some small businesses in exchange for seven and a half percent of deficit reduction potentially? I think that’s a bad trade off.

Studies show the Bush tax cuts for the rich do practically nothing for economic growth, and in fact sharpen income inequality. Only 3 percent of small businesses would be affected by the expiration, according to the Joint Committee on Taxation. In fact, small businesses grew twice as fast under the old Clinton tax rates as they did under Bush.

While Rubio may not want to believe these studies, small business owners do; according to a recent poll, 57 percent of small business owners think that raising taxes on the wealthy would do less harm to the economy than spending cuts that would impact education, job training, and infrastructure investment.

Rubio also argued that the tax hike would be pointless, as millionaires and billionaires could simply game the system and “hire the best lawyers, lobbyists and accountants in America to figure out how not to pay those higher rates.” Despite widespread support for tax increases on the wealthy, Republicans are attempting to tie an extension of the Bush tax cuts to a deal to avoid the so-called “fiscal cliff” in early 2013.

Austerity policies meant to turn around the European economy and reduce the debts and deficits of countries like Italy, Portugal, Spain, and Greece continue to have the opposite effect. The continent’s economy shrank for the second consecutive quarter in the three months leading up to September, officially pushing the European economy back into recession. The 0.1 percent contraction marked the fourth consecutive quarter that the European economy either shrank or experienced no growth.

Protesters filled streets in Lisbon, Madrid, Rome, and Athens this week, as austerity policies in all four countries have driven up unemployment and led to social service cuts, while failing to address the economic crisis. The protests have taken a violent turn recently, with protesters setting fire to urban streets and riot police firing back on them. 140 were arrested in Spain, where the unemployment rate has jumped above 25 percent. The economies of other struggling countries also continue to decline:

Portuguese unemployment jumped to a record 15.8 percent while in Spain, one in four of the workforce is jobless.

Greece’s economic output shrank 7.2 percent on an annual basis in the third quarter as the debt-laden country staggers towards its sixth year of depression.

Close to 26 million people are unemployed in the European Union while governments cut spending.

A study recently found that rather than increasing growth and reducing debt, austerity was driving down economic growth and increasing debt levels. Others have shown that austerity has put 116 million Europeans at risk of falling into poverty.

The United States has fared better, largely because it embraced stimulative economic policies instead of rampant budget cutting. But the U.S. is now at risk of following a similar path, as the so-called “fiscal cliff” policies that will slash spending would inflict an even larger austerity package on the American economy than any European country has pursued. This week, 350 economists called on Congress to avoid budget cuts and instead focus on investments into infrastructure and education that would stimulate growth and create jobs.

The Labor Department today announced that 439,000 workers filed for initial jobless claims last week, a large jump from the previous week. The increase is largely attributable to Hurricane Sandy. As the Associated Press explained, “applications increased by 78,000 because a large number of applications were filed in states damaged by the storm. People can claim unemployment benefits if their workplaces close and they don’t get paid.” Economists expect the storm to distort economic data for at least a few more weeks.

However, Fox News and other conservatives have a different explanation: More cooking of the books by the Obama administration. When the unemployment rate dropped in September, conservatives alleged a conspiracy on the part of the Labor Department to aid Obama’s re-election. Fox News, along with Gov. Scott Walker (R-WI), were once again alleging a conspiracy after the latest numbers were released today:

– FOX NEWS’ ERIC BOLLING: “The Department of Labor is getting sketchier and sketchier with each one of these numbers.”

– FOX NEWS’ GRETCHEN CARLSON: “A lot of people are going to be raising some eyebrows pretty high today that, after the election, we go up to this whopping number of 439,000.”

– GOV. SCOTT WALKER (R-WI): “Well, real concerns about the numbers. Certainly, some will question the timing.“

Watch it:

However, Fox’s television anchors evidently did not coordinate coverage with the network’s own website, which posted the AP’s take on the number: