Whatever happens with the fiscal cliff, no one expects the gift tax exemption to be as generous next year.

They say nothing is certain except death and taxes, but—as estate planners know—there’s nothing particularly certain about those either, especially this year. In the month and a half since Barack Obama won re-election, the only thing wealthy New Yorkers have been sure of is that if you want to give a gift, the time to do it is before January 1. And if you want to give the gift of your co-op apartment, well, you’d better hope for a holiday miracle.

If (or more likely when) America hurtles over the fiscal cliff, one of the casualties will be the $5.1 million gift tax exemption. When the ball drops in Times Square, it will revert back to $1 million. The inheritance tax, meanwhile, will leap from 35 to 55 percent.

Attorneys and property managers say that they, and countless boards around the city, are being bombarded with requests—many of them late-breaking—to transfer apartments to trusts before the window closes. Of course, at this point it’s practically impossible to get a meeting with a co-op board, let alone secure the necessary approvals. (Assuming your board even allows such transfers—and more than a handful do not.) During the first nine months of the year, the financially prudent rushed in, now only the fools remain.

“We represent several hundred co-op or condo buildings, and we’ve never seen this many transfers taking place that must be by year end,” Eva Talel, a real estate lawyer at Stroock & Stroock & Lavan, told the Transom. “For people who want to transfer, there’s a very big financial consequence if it happens, and there’s a lot of pressure on managing agents to make it happen.”

“This impacts New Yorkers in particular, because in New York a lot of people have a big portion of their wealth tied up in their apartments,” she added. And in New York, older residents planning their estates have often lived in their apartments for decades, watching values climb from well under a million to well over it. Unfortunately, it is difficult in a uniquely New York way as well, since only in New York do people own multimillion-dollar homes over which they have limited control.

While many boards are more familiar with trust transfers than they once were—a number of residents prefer to buy with them—they’re neither quick nor easy, noted Mary Ann Rothman, the executive director of the Council of New York Cooperatives and Condominiums. Ms. Rothman told the Transom that her office has spent the last few months fielding calls from perplexed co-op dwellers, calls that continue to come despite the all-but-impossible deadline.

“For decades it’s been an estate-planning device, but it doesn’t happen at the snap of fingers,” said Ms. Rothman. “The board wants to make sure it doesn’t lose one iota of control. And of course, there are still some co-ops who won’t allow it. The kind of white-glove co-ops who want all-cash purchases, which most of the world finds rather difficult in the 21st century.”

But things might not be as dire as they seem. Whether we as a country run over the fiscal cliff or not, it’s likely that the gift tax will be higher than $1 million. Mr. Obama, who was actually responsible for raising the gift tax in the first place when he signed a piece of temporary legislation in 2010, has proposed setting it at $3.5 million, which would likely be retroactive.

This is good news, given that, even for people who live in buildings with the most accommodating co-op boards on earth, there’s another, more daunting problem with gifting an asset in late December.

“Right now you can’t get an appraisal for love or money, and that’s the case across the country,” said Steven Schanker, an estate lawyer with Schanker and Hochberg. “We’re still getting phone calls from people who want to gift, and I tell them it had better be cash.”

kvelsey@observer.com

Photo illustration by Ed Johnson.

The conventional wisdom insists that President Obama has all the leverage right now over the Republicans in their negotiation for a “grand bargain” to close the budget deficit. Bolstered by his smashing election victory, gains by the Democrats in both houses of Congress and a changing popular mood, this would seem like the ideal moment to forge a deal largely on the president’s terms—one that would raise federal income tax rates on the wealthiest Americans while cutting spending and “reforming” Social Security, Medicare and Medicaid.

Proof of Mr. Obama’s upper hand is seen in the dropping stock of anti-tax zealot (and forced-abortion apologist) Grover Norquist. One after another, Republicans even in deep red states have been forswearing their previous oaths to Mr. Norquist never to vote for any tax increase. Surely, the president—renowned “Zen master,” and player of “three-dimensional chess”—hovers on the brink of another improbable victory, one that will secure his historical legacy. Right?

Nothing could be further from the truth.

In fact it’s Mr. Obama, not the Republicans, who is caught between a rock and a hard place. To hit our tenuously recovering economy right now with tax increases (even on the very wealthiest) and massive cuts in federal spending is a terrible idea. It could easily push us into a “double-dip” recession. To cut entitlement benefits and push back the age at which Americans can retire—possibly all the way to 69—will also be economically disastrous, not to mention unspeakably cruel and a grotesque betrayal of the president’s own base. It could split the Democratic party beyond repair.

The Republican leadership surely must understand this. What’s more, they have the “fiscal cliff” at their back—the bill they passed during the budget crisis they manufactured last year that mandates severe, automatic, across-the-board spending cuts if no bargain on the deficit is reached. This would likely dip us back into recession as well, and probably set off chaos in the financial markets.

It is widely thought that going over the fiscal cliff will rebound worst against the Republicans, since they will be seen as more intransigent than ever. But what do they care? The one branch of the federal government controlled by the GOP is the House, where nearly all their members hold safe seats in deeply conservative districts. They can probably weather the national outrage against diving off the “cliff” even if it does mean another recession, and they know it.

So, if President Obama fails to reach an agreement on the deficit, he’ll probably set off a worldwide financial panic, and plunge the country back into recession. If he does reach an agreement, he’ll likely alienate most of his own party ... and plunge the country back into recession.

The various, “outside-the-box” alternatives now being offered are no more appealing. House Speaker John Boehner and other leading Republicans have been floating the idea of raising additional tax revenue by closing loopholes instead of increasing rates, so they can kinda sorta say they didn’t really raise taxes.

But closing all the loopholes in existence won’t raise enough revenue. If this approach ever becomes law, it should be called “The Washington Lobbyists Full-Employment Act.” Essentially, this was the idea behind the big Reagan tax reform compromise of 1986: income tax rates were lowered and simplified, in return for eliminating most exemptions. But as the last quarter-century has proved, there’s nothing easier for a lobbyist to do than slip a loophole back into the tax code a little down the line.

Most professional economists would prefer a “tax on consumption” rather than income, through either a national sales tax or a value-added tax at various stages of production.

I can never understand why this is such a great idea, since any capitalist economy is driven by consumption, whereas great accumulated wealth gives people an inherent—and often unfair—advantage. Shouldn’t we be trying to encourage people to make as much money as they can ... then even out the results a little, so that those who have made more can’t use that added income to, say, buy lobbyists and economists to espouse policies in their interests?

On a more practical level, any sort of sales or consumption tax ought to be entitled, “The Mafia Restoration Act.” That’s because of the thousands of industrious citizens who will purchase cargo vans and start actively driving goods in from Canada to sell on the black market if any such tax is ever passed. (Full disclosure: I, too, intend to buy a truck and start shipping goods in from Canada if this happens.)

So where does that leave us? What should a true Zen master do when faced with this menu of unsavory choices?

He should fold.

That’s right. President Obama should offer to give in and support extending the Bush tax cuts for another year, if—and this is a mighty big “if”—the Republicans agree to abolish the fiscal cliff.

Getting an extension of the payroll tax suspension and unemployment payments would also be a good idea, but this one concession is imperative: get rid of the cliff.

Think about it. With the economy showing sure signs of recovery at last, President Obama will only be in a better position a year from now. As Europe insists on sticking to its own austerity programs and China’s economy continues to slow, we will likely be in a post-World War II situation—the only promising investment opportunity left standing. International capital will pour in, accelerating our recovery and starting to shrink the deficit “naturally.”

A year from now, with the economy humming along at last, there would also be no fiscal cliff, no need to slash benefits for seniors or make them die in harness. If Republicans don’t want to accept his budget terms, the president can simply let the Bush tax cuts expire at last.

This scenario would mean higher taxes for the middle- and working classes, which is not ideal. But they will be much better able to afford them during an economic boom. Meanwhile, the rich will at last be forced to pay the extortionate federal income tax rate of 39 percent they labored under during the Clinton years. And all of these new payments will at least continue to ratchet down the debt, appeasing the deficit hand-wringers without the need to punish the elderly and the indigent.

This is what a president who is really a Zen master—instead of, say, a diffident individual always willing to accept the conventional political and economic wisdom—would do. Which is President Obama? We’ll soon find out.

Photo Illustration Ed Johnson

So now that the election is done at last, we can get down to the hard work of striking a “grand bargain” on the budget by cutting spending and raising taxes, and thus avoid the looming “fiscal cliff.”

Any bargain will be a bad bargain, of course. Not so long ago, any moderately bright schoolchild could have told you that you never slash spending or raise taxes when the economy is still slowly emerging from a steep recession. As if the object lesson of the 1930s isn’t enough, we have the ongoing suicide of the European Union to confirm that “austerity” is just one more misguided attempt to apply the same rules that might work for a middle-class household to the course of nations.

It’s not working there, and it won’t work here.

But until Europe collapses completely, China’s slowing economy grinds to a complete halt, and all the “fiscal cliff” metaphors are inevitably replaced by unremitting references to “a perfect economic storm,” our nation’s leaders are bound and determined to continue with this madness. Since the campaign is finally over and our leaders are now reverting to habit—completely ignoring what the rest of us want—all we can offer is this feeble challenge:

The next media pundit who calls for shared sacrifice must describe in detail just what he or she is prepared to give up.

And it has to be a real sacrifice.

The idea that Thomas Friedman might see his federal tax rate go up a few percentage points does not equate with a sanitation worker or Walmart clerk having to clock in for another four years before they can claim Social Security. David Brooks, say, losing a favorite deduction isn’t the same as a retired waitress in her 80s seeing her Medicare slashed.

Right now, “shared sacrifice” means that many wealthy, powerful people share the opinion that the rest of us should sacrifice.

Mr. Friedman, for instance, calls every few minutes or so for President Obama to “endorse the Bowles-Simpson plan” for closing the budget gap. In fact, it’s a stretch to say that any such “plan” even exists. The Bowles-Simpson committee that Mr. Obama set up never actually managed to reach an agreement. Instead, the two committee chairmen, former Clinton chief of staff Erskine Bowles, a North Carolina Democrat, and former Republican senator and professional loose-cannon Alan Simpson of Wyoming came up with a plan between them that they trumpeted—with the help of a fawning media—as a great, bipartisan accomplishment.

It is, instead, a prescription for hunting down every last remaining vestige of the middle class in this country and beating it to death with a stick.

Under the Bowles-Simpson plan to reduce the deficit, the top federal income tax rate would be dropped to 24 percent, the top corporate rate would be cut from 35 percent to 26 percent, and almost all deductions would be eliminated, including those for home mortgage interest, and employer health-care plans. Meanwhile, military pensions, student loan subsidies, Medicare and Social Security would be slashed, while other revenue would come from new, regressive levies such as a 15 percent increase on gas taxes. By the way, if the notion of putting a crazy old, obnoxious right-wing coot and Bill Clinton’s chief fund-raiser at Morgan Stanley in charge of a committee to make the very richest people in America still infinitely richer while at the same time ripping open the underbellies of working people in this country from stem to stern seems like a puzzling idea coming from the great avatar of hope and change, you’re onto something.

It’s another of the truly idiotic notions President Obama misguidedly backed on the advice of all those old Clinton economic advisers he ran against in 2008—and promptly hired back in 2009. It’s likely to work out as well as their other determinations, such as the prediction that unemployment would drop so fast we didn’t need to go any bigger on the stimulus, and that the housing market would turn around in no time.

The idea that we must “reform” entitlements derives partlyfrom the observation that many people are living longer nowadays. That’s true enough overall, but not for most men and women toiling in blue-collar professions, who will be forced to work even longer at jobs that exact a terrible physical toll. For that matter, the extra time for all of us comes at the end of life, which we’re more and more likely to spend in an oxygen tent or a state of dementia.

What’s more, forcing people to work more years, especially amid a dismal labor market, is like squeezing a tube of toothpaste in the middle, and squeezing it hard. It means either that many more people just out of college won’t be able to get jobs right away, or—even worse—that many more people will be laid off in their mid-60s, and forced to somehow scramble to keep hearth and home together until they can qualify for their (much-reduced) Social Security and Medicare.

Besides being appallingly cruel to working people, and destructive to the general economy, what’s wrong with this scenario? Oh, yeah: it will endanger everyone. You really want that fireman with the double knee replacement coming to save you from the flames? How ’bout hitching a ride with that bus driver with the cataracts and the heart condition?

The grand bargain is in fact a grand and arbitrary cancellation of the social covenant that’s brought this country unprecedented prosperity and social justice over the last 80 years, and it’s being pressed by a small coterie of wealthy, overwhelmingly white men who will themselves contribute about the equivalent of a working person’s laundry money for the week.

No one voted for it, and not even most political activists understand fully what it means or how likely it is to pass. An informal survey I took of a dozen, random delegates at the Democratic convention found that not a one of them thought this was or should be a priority for a second Obama term—it’s just not on their radar. (As for Republican die-hards, they didn’t plan on this either—instead, it’s safe to say, most heard whatever Mitt Romney was espousing at any given time as simply, “I will take away stuff welfare mothers in New York are getting and don’t deserve.”)

Are there better ways—once the recession is fully in the rearview mirror—to eventually balance the budget? Sure, and I’ll get to some of them in the weeks ahead.

But first, I’d love to hear the specifics from all the Grand Bargainers: just what do you intend to sacrifice?

UBS, which says it lost $356 million due to Nasdaq's technical difficulties, has said it will sue. Citadel, on the other hand, filed a letter with the SEC saying that Nasdaq's proposed remedies are fair.

In the wake of Knight Capital’s $440 million loss due to a rogue trading algorithm earlier this month, two exchange industry executives are talking up a fat finger provision, allowing regulators to roll back the tape and undo trades in exceptional cases.

The Malkins want to form a REIT to take the Empire State Building public. Some crotchety old New Yorkers are holding up the deal. Bloomberg's David M. Levitt goes long.

Angela Merkel and François Hollande are getting ready to play stern parents to Antonis Samaras as the Greek prime minister begins a trip through Berlin and Paris to ask the European powers for more time to reach austerity goals. Tough talk aside, Retuers suggests Europe may have little choice but to give Greece "a bit of air to breathe."

Will Greece leave the euro before it can be kicked out? Does it matter?

Amid the back-and-forth over Peter Thiel’s sale of 72 percent of his Facebook holdings, Bloomberg asks around, and reports such sudden divestiture to be unusual.

Best Buy founder Richard Schulze, who is working on a bid to take the electronics retailer private, and the Best Buy board are negotiating again over whether and under what conditions to allow Mr. Schulze to conduct due diligence on Best Buy's books.

The Fed's Open Market Committee hinted at further easing in meeting minutes released yesterday, and markets rallied.

It doesn't matter how loud you shout about the fiscal cliff (which, the Congressional Budget Office says could lead to a "significant recession" if lawmakers don't act). The news always seems to get buried.

Securities and Exchange Commission chairman Mary L. Schapiro wanted to bring changes to the way money market funds are regulated, forcing the funds to hold cash against dark days, or let the funds fluctuate with the market. It's not going to happen, at least not at the moment.

Whale-slayer Boaz Weinstein is struggling to keep his head above water, reports The New York Post. Mr. Weinstein's Saba Capital iMaster Fund is only up 0.62 percent for the year, even after profiting in trades against the JPMorgan trader known as the London Whale.

Deposits in German banks rose 4.4 percent against the year before, as uh, Greeks, Spanish and Irish wised up.

European takeovers are down 23 percent year-to-date, by the way.

Ben speaks: Federal Reserve Chairman Ben Bernanke said the central bank was watching the European situation closely, but gave no indication that further monetary stimulus was imminent.

The Fed will hold all U.S. banks to the regulatory schema known as Basel III, and The Wall Street Journal is shocked that smaller lenders weren't exempted.

Mr. Bernanke also warned Congress not to ignore the so-called fiscal cliff that arrives when Bush tax cuts expire at the end of 2012. “If you all go on vacation, it’s still going to happen,” he said.

Here all week: The New York Times' Peter Lattman reports on Goldman Sachs CEO Lloyd Blankfein's testimony yesterday in U.S. v. Gupta. “You became the No. 1 person at Goldman Sachs,” [defense counsel Gary P.] Naftalis said. Mr. Blankfein corrected him. “Chairman and chief executive is my official title,” Mr. Blankfein said. He then broke into a smile. “No. 1’s not an official title.” Blankfein will testify today, as the trial drags on.

Shareholders spring: Chesapeake Energy holds its annual shareholder meeting today in Oklahoma City. Could be a good one.

So sorry: Nomura Holdings apologized to shareholders for its involvement in three insider-trading cases.

Oops: Floyd Norris says MF Global was yet another case of accounting practices that "produced profits that vanished before they were actually realized."

After Goldman: Paul Deighton, a Goldman Sachs investment banker for 22 years, is the guy running the show at the London Olympics.

Banker passes: Former Wachovia chief executive officer John Medlin died at 78.