The Pending "Fiscal Cliff"

[georgedwilkinson]

NP, my "alternative" was an illustration that what people seem to be saying we need to do might not be near enough.

 

[Steve R.]

Thanksgiving is over and its back to pseudo work for Congress. The Washington Post ran this highly deficient article today: ‘Fiscal cliff’ could slow recovery, White House says

• The White House is "concerned" about a Frankenstein issue that they created!!!! Kessler of the Washington Post gave Obama 4 Pinocchios for attempting to weasel out of the "fiscal cliff": "Obama’s fanciful claim that Congress ‘proposed’ the sequester" :banghead: Obama profusely claimed that he would make the tough decisions, yet he kicked-the-can-down-the-road till after the election. I wonder why? It was a partisan political decision to avoid losing votes from the guy who claimed to be above petty politics.

• The emphasis of this article is on "tax breaks" to keep the economy moving. If one reads between the lines, Obama is simply proposing continued deficit spending. Mentions of reductions to deficit spending are simply empty rhetoric.

• The article never deals into the fact fact that taxes are necessary to fund government operations. The article simply speaks of taxes in terms of the economy. Well, there is a future economic impact to think about. How is the growing debt to be paid back? That will stifle economic growth in the future. I guess the Post reporters can't think that far into the future. As they say, you pay now or you pay later.

• The Post has also run several articles attacking Grover Norquist's "no tax increase pledge". The "no tax increase" pledge has been waived about by the Democrats as proving Republican "obstructionism". Well guess what, the Democrats are just as "obstructionistic". The Post article writes: "Democrats, led by Sen. Patty Murray (D-Wash.), say they are willing to go over the fiscal cliff if Republicans don’t play ball. "(emphasis added) So, it would seem that if the Democrats stand on principle, that is good; but if the Republicans to the same, it is bad. Hypocritical. What is needed is compromise, by both sides.

 

[Steve R.]

Steve, you seem to have a lot of information on financial matters in regards to the US government. If you were hired as an adviser to President Obama to help balance the budget, what would be your recommendations? Be specific as to what would be cut from spending.

In responding, please be aware that my responses are conceptual. Not only that, but I would seriously doubt that Obama would have any interest in following through on some of my suggestions since I am not philosophically in-tune with him. I have not done any numeric analysis on how realistic the suggestions below would be, in terms of balancing the budget.

The main purpose of taxation is to fund government operations, which means that we need to define what government services are to be provided and tax accordingly. Taxes are a cost of doing business, just like paying salaries and advertising. If a business is not economically viable due to "taxes" (as an excuse) then it should not be in business.

1. The budget for the military can be reduced. We do not need to be the policeman to the world.
2. Eliminate the Department of Homeland Security (including TSA, DEA).
3. Eliminate programs that collect revenue at the local level, move the revenue up to Federal government and then redistribute that money back to the local level. (Department of Education, Housing and Urban Development) That will eliminate the expense of operating these agencies.
4. Eliminate (most) subsidies and tax credits. That includes things like the home mortgage deduction. See this Washington Post story and graphic: Ever-increasing tax breaks for U.S. families eclipse benefits for special interests
5. Reduce/limit certain government benefits to a "reasonable" amount and period. (Food-stamps, unemployment).
6. Eliminate all government loan guaranty programs. See my comments here.The taxpayers end-up being stuck with the bill. Let the private sector assume the risk.
7. Eliminate ObamaCare. I have no issue with a National Health Care Plan funded by a clean tax. (Note: the word "plan" as opposed to "insurance")
8. How much the points above will generate in "savings" is unknown. But the question really is how much does the government need to operate? Once the anticipated costs are computed, a tax rate needs to be computed that will fund government expenditures plus providing the additional revenue necessary to begin the process of paying down the National debt.
   
   Obviously this raises the question of how is this tax to be collected. I would favor a consumption based flat tax. It would be simple and easy to collect. Of course some will complain that this would not be "fair" to certain groups. The problem is that there is no such thing as a "fair" tax. Decisions have to be made and implemented.

Adam: your turn: "If you were hired as an adviser to President Obama to help balance the budget, what would be your recommendations?"

 

[Steve R.]

As the "fiscal cliff" deadline approaches, it seems (based on what is being reported in the Washington Post) that Obama is changing the message so that the implied "tough" fiscal decisions will be swept under the rug so that Obama can once again avoid the "tough" fiscal decisions.

Obama public relations effort aims to avoid ‘fiscal cliff’

Obama renews call for stimulus, highlighting tax breaks for businesses

Mr. Obama’s time to lead on entitlements

Obama has a PR plan and nothing else

Mr. Rogers, in his opinion piece, correctly observed that: "There isn't even much news coverage about limiting spending — it's all about Republicans and taxes". The Washington Post, in an editorial, noted: "Democrats, meanwhile, are sounding more and more maximalist in resisting spending cuts."

Obama is subtlety changing his message to avoid making the "tough" decisions concerning fiscal responsibility in order to allow continued unrestrained deficit spending to serve the populist goal of protecting some from onerous taxation. Obama sells the populist message. Obama picks on easy targets, such as the "evil" rich claiming that they need to pay their "fair share". For his base, Obama offers unfunded "gifts" financed by increasing the National debt. The proposed stimulus "gift" would be a hiring subsidy "The tax breaks would target small businesses and refund 10 percent of the cost of new payroll — in the form of new hiring or new wages — up to a total of $500,000 next year."

The "fiscal cliff" is a problem that was created by Obama to avoid making "tough" decisions before the election. Now that the "tough" decisions are on the horizon once again, Obama seeks to morph his message into the populist,"tax breaks to promote business".

 

[Adam Caramon]

The budget for the military can be reduced. We do not need to be the policeman to the world.

Agreed.

Eliminate the Department of Homeland Security (including TSA, DEA).
Eliminate programs that collect revenue at the local level, move the revenue up to Federal government and then redistribute that money back to the local level. (Department of Education, Housing and Urban Development) That will eliminate the expense of operating these agencies.

While I would love to have the TSA gone as a passenger, I do think they are necessary.

As far as the Department of Education, I'm very much for uniform curriculum and the federal government having oversight of what states teach their children. Imagine if some of the southern states wanted to teach their children creationism rather than evolution? Or imagine they wanted to teach their children that the southern states were actually right in the Civil War?

Part of being a unified country is having a unified history, and learning some standard things that affect us as a country. I don't know how you ensure that without having a federal program. leaving it up to each individual state seems like a really bad idea.

Eliminate (most) subsidies and tax credits. That includes things like the home mortgage deduction. See this Washington Post story and graphic: Ever-increasing tax breaks for U.S. families eclipse benefits for special interests
Reduce/limit certain government benefits to a "reasonable" amount and period. (Food-stamps, unemployment).

Agreed.

Eliminate all government loan guaranty programs. See my comments here.The taxpayers end-up being stuck with the bill. Let the private sector assume the risk.
Eliminate ObamaCare. I have no issue with a National Health Care Plan funded by a clean tax. (Note: the word "plan" as opposed to "insurance")

I'm not 100% up on government loan guaranty programs, but I am pretty sure I agree with you there as well.

As far as ObamaCare, I'm fine with it being eliminated assuming that a single-payer system was its immediate replacement. Eliminating ObamaCare without an immediately effective national plan is irresponsible IMO.

Obviously this raises the question of how is this tax to be collected. I would favor a consumption based flat tax. It would be simple and easy to collect. Of course some will complain that this would not be "fair" to certain groups. The problem is that there is no such thing as a "fair" tax. Decisions have to be made and implemented.

I'm in favor of a consumption-based tax where certain necessities are not taxed.

Adam: your turn: "If you were hired as an adviser to President Obama to help balance the budget, what would be your recommendations?"

I'm very surprised to agree with you as much as I did, as it seems most of your posts are all doom and gloom. Generally speaking, I favor a strong centralized government. I believe tax rates on large amounts of income should be very high.

I think the government should stop subsidizing foods that are unhealthy (most meats come to mind). I think all religious institutions should lose their tax exempt status. I think healthcare and education should be heavily subsidized. A healthy and educated people make for a much better workforce and more informed electorate.

I think the budget should be gone through line-by-line and each item considered on its own merit. Anything that isn't absolutely necessary should be phased out over a period of 0-5 years.

I think we need to reevaluate some of our trading relationships to make sure that we're not being taken advantage of. We can't expect our workforce to compete with 3rd world countries, and as such our trading policies should reflect that.

That's all I can think of off the top of my head. Overall I'm cautiously optimistic as to where we are currently heading.

 

[Adam Caramon]

The White House is "concerned" about a Frankenstein issue that they created!!!!

How did the White House create the fiscal cliff? Both sides tried to come to an agreement to move forward. They were unable to come to an agreement. To stave off an incredibly detrimental financial situation, they decided to include mandatory cuts across the board in the event that both sides could not come to an agreement.

In order for the White House to not have created this event, they should have simply given in to the Republicans who refused to include extra revenue? Like they did in the past when they wanted the Bush tax cuts to expire, but Republicans obstructed?

You're viewing this situation from an incredibly partisan angle. You're having a hard time seeing anything objectively. I would think from someone who wants to reign in government spending, you'd be for the mandatory across the board cuts.

The Post has also run several articles attacking Grover Norquist's "no tax increase pledge". The "no tax increase" pledge has been waived about by the Democrats as proving Republican "obstructionism". Well guess what, the Democrats are just as "obstructionistic". The Post article writes: "Democrats, led by Sen. Patty Murray (D-Wash.), say they are willing to go over the fiscal cliff if Republicans don’t play ball. "(emphasis added).

False equivalency. Going over the fiscal cliff does not have any immediate effects other than confidence level. If we go over the fiscal cliff and all taxes revert to 1990 levels, they can then put forward a bill to lower taxes of any individual making less than 200k or family making less than 250k.

The reason they have to play these kind of games is due to Republican obstructionism, which is based off of the no tax pledge. The Republicans (and handful of Democrats) that signed the pledge cannot vote for additional taxes. But if the tax cuts expire, and go up, they can then vote to have some of them come down. That doesn't violate the pledge.

Imagine if there was a no spending cut pledge, and the vast majority of Democrats signed it. Would you think it a problem?

 

[Steve R.]

On December 19, 2012 we had a rash of news concerning the "Fiscal Cliff" with the additional side show of Obama making a media presentation. The Post published a short piece with an attached chart: CHART: All the fiscal cliff offers and counteroffers. The chart unfortunately was incomprehensible since it presented a bunch of aggregate numbers without reference to any time-frames or how those numbers would affect deficit spending. Essentially, the numbers presented were meaningless.

Not only were the numbers meaningless but Obama's assertions concerning his faux plan to control deficit spending was unchallenged. Another example of the media failing to do investigative reporting.

But embedded in that graphic was a small itty-bitty reference to another graphic by Marc Goldwein at the Committee for a Responsible Federal Budget, December 19, 2012. With this graph, one can see that deficit spending, by both Obama and the Republicans, will still continue through 2014. So much for any real fiscal responsibility. :banghead:

It would be nice if the media, like Ross Perot, would dig into these numbers and present their analysis to the reader. All we are getting is churning "smoke and mirrors"

 

[Adam Caramon]

Boehner couldn't even get his own people to support his Plan B measure, which in its self had no chance of passing. I don't see the two sides coming to an agreement.

We'll go over the cliff, and then President Obama will purpose legislation to lower taxes to current levels for those making 250k or less. The question is, will Republicans agree to it at that point?

Polling seems to indicate that the majority of the country stands with the President on this issue. Polls also indicate that Republicans will be more to blame than Democrats if we go over the cliff.

Assuming that holds, Republicans will lose a lot more seats in the next election.

 

[Steve R.]

Polling seems to indicate that the majority of the country stands with the President on this issue. Polls also indicate that Republicans will be more to blame than Democrats if we go over the cliff.

Sigh, the unthinking gullible "mob" (public) has fallen for Obama populist message. Obama knows how to sell the populist message and has apparently succeed in distracting the "mob" (public) from the reality that he has no intention of restoring fiscal responsibility. Obama will continue to dole out (deficit spending) unfunded "gifts". It will be a "bread and circuses" economy till we go bankrupt.

Boehner couldn't even get his own people to support his Plan B measure, ...

A sad reality. A testament to an inability to build a consensus, failed leadership, and an impotence to counter Obama's populist message. Spending appropriations are supposed to originate from the House. It would seem that the House has lost (is losing?) control of the purse strings to the populist "bread and circuses" Executive branch.

 

[Vassago]

Sigh, the unthinking gullible "mob" (public) has fallen for Obama populist message. Obama knows how to sell the populist message and has apparently succeed in distracting the "mob" (public) from the reality that he has no intention of restoring fiscal responsibility. Obama will continue to dole out (deficit spending) unfunded "gifts". It will be a "bread and circuses" economy till we go bankrupt.

Right??? I'm not a fan of Obama, but the Republicans have completely ADMITTED they would pass the tax cuts for the 98%, but ONLY if they get their way in other things, regardless of what the "gullible mob" wants. This isn't bipartisan responsibility, this is nothing but a way to attack the President. If nothing passes, they will of course blame him. Naturally, they will lose more seats. People are waking up to the agenda of the Republicans and their inability to work with the Democrats.

That's not to say the Dems are completely innocent in this regard. They've had ample time to make things bipartisan as well. What people really need to do is start thinking outside the box and not be afraid to vote for someone who isn't their party affiliation. Most people fall in the middle. Most people are very Libertarian in their thinking, they just don't see it because the media (think banks) doesn't want them to.

 

[Steve R.]

People are waking up to the agenda of the Republicans and their inability to work with the Democrats.

The Republicans have not been able to articulate a valid economic message. Blame Bush set the stage for the 2008 recession. Romney essentially proposed a continuation of blame Bush's failed economic strategies. The failed economic policies of the Republican worked to Obama's advantage and through his populist rhetoric Obama was able to outflank the Republicans to win the Presidential election.

Jennifer Rubin, who writes from the "right" wing perspective did some critical assessment through: Boehner Plan B: House Republicans humiliate their leader. One of her observations:

This sort of display suggests Republicans are not capable of governing. What was an argument by Democrats (They are unreasonable! They only care for the rich!) is now a political reality.

Concerning who is or who is not responsible for obstructing the formulation of a consensus to have a reasonable budget; I still contend that Obama has no interest in real compromise. I still contend that Obama has successfully obfuscated the debate. The budget debate appears to be now limited to the issue of raising revenue (by taxing the rich) and is no longer about raising revenue (by taxing all) in conjunction with real program reductions.

“The president’s main priority is to ensure that taxes don’t go up on 98 percent of Americans and 97 percent of small businesses in just a few short days,” Carney