All You Need To Know About the Fiscal Cliff

Discussion in 'Politics' started by AAAintheBeltway, Nov 29, 2012.

  1. Obama overreaching on tax plans
    By George Will

    November 29, 2012

    Washington — With a chip on his shoulder larger than his margin of victory, Barack Obama is approaching his second term by replicating the mistake of his first. Then his overreaching involved health care — expanding the entitlement state at the expense of economic growth. Now he seeks another surge of statism, enlarging the portion of gross domestic product grasped by government and dispensed by politics. The occasion is the misnamed “fiscal cliff,” the proper name for which is: the Democratic Party’s agenda.

    For 40 years the party’s principal sources of energy and money — liberal activists, government employees unions — have advocated expanding government’s domestic reach by raising taxes and contracting its foreign reach by cutting defense. Obama’s four years as one of the most liberal senators and his four presidential years indicate he agrees. Like other occasionally numerate but prudently reticent liberals, he surely understands that the entitlement state he favors requires raising taxes on the cohort that has most of the nation’s money — the middle class.

    Mitt Romney as candidate and others before and since have suggested increasing revenues by capping income tax deductions. This would increase that tax’s progressivity, without raising rates that would dampen incentives. Obama’s compromise may be: Let’s do both. Remember the story of when the British Admiralty sought six new battleships, the Treasury proposed four, so they compromised on eight.

    Those proposing higher taxes on the wealthy note that when the income tax began in 1913, the top rate was 7 percent. But in 1917, war brought a 67 percent rate. Between 1925 and 1931, the rate was 24 percent or 25 percent, but in only five of the subsequent 80 years — 1988-92 — was the top rate lower than it is today.

    Republicans, however, respond that because lower rates reduce incentives to distort economic decisions, they promote growth by enhancing efficiency. Hence restoration of the higher rates would be a giant step away from, and might effectively doom, pro-growth tax reform. Furthermore, restoration of the Clinton-era top rate of 39.6 percent would occur in the very different Obama era of regulatory excesses and Obamacare taxes. Hence Republicans rightly resist higher rates.

    Given liberals’ fixation with the affluent paying their “fair share,” it might seem peculiar that they are so vehemently against Paul Ryan’s “premium support” proposal for Medicare. Their recoil is, however, essential to the liberal project.

    Ryan’s supposedly radical idea is that people should shop for health insurance, with government subsidizing purchases by the less affluent. This would introduce what soon will be inevitable — means testing, aka progressivity. But liberals reject it with a word the incantation of which suffices, they think, as an argument — “voucher.”

    This is peculiar because perhaps the most successful federal program of the 20th century was essentially a voucher program. The purpose of the 1944 Servicemen’s Readjustment Act — aka the G.I. Bill of Rights — was to facilitate demobilization by helping men and women acquire educations and buy houses — and hence form families. The government did not build universities or houses. It, in effect, gave individuals conditional cash — vouchers — by helping to pay for home loans and college tuition.

    Liberals’ strenuous objection to vouchers is that vouchers, as the functional equivalent of cash, empower individuals to make choices. It is the business of the liberals’ administrative state, staffed by experts, to make choices for inexpert individuals. This is why, while Democrats in Washington are working to reduce the portion of Americans’ private income that is disposed of by private choices, two tentacles of the Democratic Party — the Indiana and Louisiana teachers unions — are currently in their states’ courts waging futile fights against school choice programs, lest thousands of low- and moderate-income parents be as empowered as millions of demobilized servicemen were.

    Washington’s contentiousness about the “cliff” is producing a blizzard of numbers. The argument, however, is not about this or that tax rate but about the nature of the American regime. When the Republican House majority acts as though it has a mind — and a mandate — of its own, this is not Washington being “dysfunctional,” it is the separation of powers functioning as the Founders intended. Their system requires concurrent congressional majorities — one in the Senate, with its unique constituencies and electoral rhythms, another in the House, with its constituencies and rhythms. And at least 219 of the 234 House Republicans won in November by margins larger than Obama’s national margin.
  2. The cliff that worries me is the one the republicans seem to be racing towards in lemming like fashion. That would be destroying their brand as defenders of low taxes and limited government. We saw how well that worked out for Bush 41 when he broke his "read my lips no new taxes" pledge.

    What do they have to run on then? Amnesty? Free contraceptives? Do they really think a suicidal neo-con foreign policy of endless and pointless wars is all that popular?

    It wouldn't bother me at all if the republican party ceased to exist. Other than Ronald Reagan, the presidents it has produced have been notable mainly for their mediocrity. The losing candidates, other than Romney, have been jokes. John McCain? Seriously.

    The problem is the alternative is the Tea Party, which seems to be controlled by people who view accomplishment and ability as negatives.

    In any event, the republicans face an existential crisis. To be fair, it is one of their own crafting. They allowed Bush to run up huge deficits, they ran two dreadful campaigns against Obama, they negotiated the budget deal that set up the fiscal cliff. The only problem is the rest of us have to pay for their incompetency.
  3. pspr


    Just yesterday Obama said we should raise the taxes this year and deal with the spending cuts next year. (Code for let's raise taxes and forget about any spending cuts)

    And, surprise, today Boehner says the talks are going nowhere. The Democraps aren't serious about spending cuts.

    We are headed for the fiscal cliff soon to be followed by the fiscal tsunami.
  4. I predict pain. LOL

    Seriously, the only thing republicans can do is go on every TV show and say the president and democrats are unwilling to deal with the deficit and prefer to saddle our children with it. And that Obama intends to spend every last dollar of any tax increase, so it won't help the deficit at all.

    Then refuse to budge and settle for a six month or year extension in the cliff. They should also tell Obama that if there is no deal on an extension, then they will not approve the debt ceiling increase that is coming up.
  5. I hope it is done soon. Every time someone comes on TV, could be Obama's dog barking about the fiscal cliff, some dramatic move happens. This kind of exogenous shock every single day is just not conducive to consistent trading.
  6. It's right out of the Nancy Pelosi playbook. Obama is saying we must raise taxes before we see what cuts can be made.
  7. You're so right. You never know when an anvil will fall out of the sky and hit you. Very nerve-wracking.
  8. pspr


    We need a man in Washington to text us who's about to talk and what they are going to say before the fact.