Free Markets, Free People
Obama has strained to make everyone believe he is open to “negotiations” on the tax rates in dispute that are leading us inexorably to this “fiscal cliff” everyone is talking about.
The word “negotiate” implies compromise. You give a little, he gives a little, you reach a deal neither really likes but both can live with.
He has no intention of giving anything. Why should he? He can’t run for a third term. He has nothing to lose if he stands his ground. Nope, the only one’s who have anything to lose in this one are the usual deer-in-the-headlights suspects. And, of course, Obama has someone else to blame:
By taking an absolutist line, he’s basically gambling that Republicans will be more reasonable than he is and will blink. But if they don’t blink and we go over the cliff, from his point of view so what? Mr. Obama then has an excuse to blame Republicans if there’s another recession. Meanwhile, he pockets the higher tax rates that take effect on January 1 anyway, and he can then negotiate a budget deal next year without having to make any tax concessions.
He pleases his left wing for which higher tax rates are a secular religion, while pinning one more defeat on Republicans. Lest you think this is a conservative fantasy, it’s more or less the tax cliff strategy that Democratic Senator Patty Murray of Washington advocated on Sunday on ABC’s “This Week” and that labor leaders lobbied for at the White House on Tuesday.
So, as we wander toward Taxmageddon, fear not, either way it goes, Obama figures he wins. So why try?
A horrifying combination of expiring pro-growth tax policies from 2001 and 2003, the end of the once-temporary payroll tax cut, and just a few of Obamacare’s 18 new tax hikes, Taxmageddon will be the largest tax increase EVER to hit Americans. It’s nearly $500 billion in one year, starting January 1. That’s two months away.
What that means per person:
One result you can count on:
The businesses that would pay the higher tax rates proposed by President Obama earn almost all the income earned by small businesses that employ workers. According to President Obama’s own Treasury Department, these job creators earn 91 percent of the income earned by flow-through employer-businesses. These are the biggest, most successful small businesses. They employ more than half the private workforce, according to an Ernst and Young study. Raising their taxes would destroy more than 700,000 jobs.
Meanwhile the guy in charge? Well he’s got other things on his mind:
It is worth recollecting the array of attacks from the Obama camp that failed to carry the day. Romney’s approval rating is now higher than Obama’s and the Obama team tried portraying Romney as: 1) the “vulture” capitalist; 2) a tax evader and/or a felon for signing (or not signing) Bain documents after he left to run the Olympics; 3) killer of Joe Soptic’s wife; 4) outsourcer of jobs to China; 5) determined to take contraception away from women; 6) ready to give a tax cut to the rich and hike middle-class taxes; 7) egging on the auto industry’s demise; willing to throw granny over the cliff on Medicare; 9) President George W. Bush’s political twin; and 10) Big Bird terminator.
Taxmageddon? Yeah, not so much. Romeny wants that, apparently. No mention of the 18 ObamaCare taxes by our man. Wonder why? Jobs? See result of Taxmageddon. But he’ll tell you he’s focused like a laser beam. Or is that Uncle Joe’s job? Sequestration? What’s that?
He does have a shiny new booklet out that he calls “a plan”. Nothing new, but lots of pictures.
No sweat though … after the 700,000 jobs are destroyed, he’ll talk some more about a “Department of Business”, okay?
Oh, my … the White House is on the offensive trying to save the middle class, or something:
The White House has launched a new offensive in its fight with congressional Republicans over taxes, arguing 114 million middle-class families will see their taxes rise without action by Congress.
A report from President Obama’s National Economic Council released Monday contends the families would see their taxes rise by an average of $1,600 if the George W. Bush-era tax cuts expire as scheduled at the end of the year.
A) they’re not tax cuts, they’ve been the tax rate for years.
B) Republicans have already made an offer. They said they are willing to extend the rates for all so it is obviously not a tax increase the middle class must suffer.
Of course, that’s where the rub is, because the Democratic Senate and the White House want to raise taxes on a certain level of income earner. They’ve staked their class warfare gig on it.
Because, you see, they’re trying to convince everyone that’s only “fair” and to further imply it will solve the insolvency problem. Well they’re wrong, as usual, on both counts.
Here, take a look at this. Even those who don’t count economics as their strong suit should be able to figure out what this means:
That’s right, the problem isn’t revenue. The problem has nothing to do with high income earners and their “fair share”. It has to do with out of control spending which has accelerated dramatically under this president. And, oh by the way, the increase in taxes on the wealthy would be a mere drop in the bucket of red ink Obama has charted out for the next 10 years.
So while he whines about a $1,600 tax per family if no action is taken, ask him what he’s adding in debt per family with a 10 year plan to spend $46.9 trillion dollars we don’t have, okay?
Via Charlie Cook, some things you most likely know:
First, there’s Europe and the eurozone. It’s possible that the situation could be worse in Greece, but not that much worse. There’s a pretty good chance that country will be exiting the eurozone soon, but either way, Greece is putting enormous stress on its economy. Then there’s Spain, which has an economy larger than Greece, also in trouble. With Europe teetering on the edge of recession, there are limits to how much even Germany can do to keep the eurozone—now the world’s largest single economy—from going into a serious tailspin. Europe contributes 21 percent of global economic growth, so there is rather obvious significance for the U.S.
And something you might be somewhat aware of:
Then, there is China, whose economy is slowing. Acknowledging the problem, the Chinese government just announced that it was placing greater emphasis on economic growth. Its central bank is expected to lower rates soon. It’s unlikely that China will go into a recession, but don’t expect purchases of U.S. goods there to match those of the last few years.
Key point in last sentence. We may buy a lot of stuff there, but we also sell a lot of stuff to China. And, our other major trading partner is what? The Eurozone. So what Cook is pointing out is the real possibility of a major slowdown and the problem that would present for a fragile US economy at, if you’re a Democrat, exactly the wrong time.
So Cook lays this out for your consideration. And while you may not agree with everything, read it through:
But it’s the fragile nature of America’s own economy—and questions about whether our political process is capable of coping with immediate and simultaneous challenges—that make things so much worse. The Federal Reserve Board has acted heroically to pump up the economy. As the International Strategy and Investment Group reports, the Fed’s efforts put the trade-weighted dollar at close to a record low, making it almost as competitive as it ever has been. But a weak world economy still limits the U.S. advantage to sell.
The term “fiscal cliff” has been rapidly entering the economic lexicon. People using the phrase may not know exactly what is scheduled to happen at the end of this year. Probably more than anything else, though, they may know that the George W. Bush-era income-tax cuts will be eliminated both for earners above and below the $250,000 level if not renewed by Dec. 31. They also may know that some significant spending cuts will automatically be made, unless Congress takes action, that will cut defense and nondefense funding pretty much evenly. Of course, Social Security, Medicare, and Medicaid, the real drivers in the increase of federal spending, are exempted from those cuts.
A few may even know that the capital gains tax rates will go up unless Congress acts. According to ISI Group, the top rate on dividends would almost triple, going from 15 percent to 43.4 percent. Andy Laperriere, who heads up the ISI shop, said understatedly in a report to his clients, “We find investors to be interested in the many facets of the fiscal cliff, but we don’t believe investors have repositioned their portfolios yet. We suspect that will change late this summer and into the fall as investors begin to focus on the outlook for next year.”
Call me simple, but I think that means that people will start dumping their stocks.
Bingo. He calls it a “fiscal cliff”. I’d characterize it as a fiscal trainwreck. Dale might bring up the red kangaroo and point to the fact that none of this is a surprise – we’ve been able to see it coming for miles. And, as is the nature of politics and government, at least in this country, to date nothing of any significance has been done to address it. Nothing.
The result, at least to now:
The danger, of course, is another stalemate over taxes and spending, but bigger this time. Policy moves that collectively could take an estimated 3.5 percentage-point bite out of the U.S. Gross Domestic Product are scheduled to kick in at the start of next year, hitting a very fragile economy. And let’s not forget the threat of another debt-ceiling showdown. We have the ingredients for enough economic uncertainty that it would be bizarre if many large companies and financial institutions didn’t freeze hiring, expansion, investing, borrowing, and lending. Individual investors would also probably head for the exits.
Sequestration, taxmageddon, the debt ceiling, a global economic slowdown, etc. All looming large. And about all that is happening is finger pointing. If you wonder why business isn’t expanding, hiring and reviving the economy, look at this mess and wonder no more. It’s because of policy – government policy. Or the lack thereof.
Cook, naturally, tries to pass it off to the Republican House. But let’s get real here. All of this – all of it – could have been addressed in the first two years of Obama’s presidency when he had a fully Democratic Congress and told us he was focused like a laser on the economy. But in reality he ducked it for ObamaCare. He was more concerned about his legacy than the country’s economic problems. And now, after the Democrats were spanked by the electorate in 2010 for their economic inattention, he’s stuck with having to compromise, something he’s refused to do to this point.
So yeah, the Charlie Cooks of the world will be spinning this as Republican obstruction – that’s a sort of knee jerk position for the left – but in fact, this is malfeasance by the Democrats and the President. Their opportunity came and went and they did basically nothing. The usual cure was tried – throwing trillions of debt ridden dollars at the problem – and it didn’t work. Now they have this fiscal trainwreck coming and their solution is?
Blame the other guys.
But as we’ve been pointing out here, reality is reality. And it is about to visit the finger-pointers in a big way.