Going over the cliff allows Congress to technically say that it isn’t raising taxes, but is cutting them instead. CBO’s score backs them up on this by scoring the Senate bill as a $3.6 trillion tax cut. No one should fall for this. The Senate bill is a tax hike because it allows taxes to go up from 2012 to 2013. The tax increases in the bill will reportedly raise about $600 billion over the next 10 years.
Also of note in the CBO score is that the Senate bill increases spending by around $330 billion by extending expanded unemployment benefits, a temporary “doc fix” patch to prevent cuts to Medicare, and extension of the agriculture programs.
There was some good in the Senate bill — the harmful defense sequester cuts were postponed and most tax hikes were avoided. But there was bad — tax hikes that will hurt the economy and do little to tame the deficit, especially factoring in the spending in the bill.
The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.
More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of yesterday.
According to the CBO, the deal would raise taxes by $41 for every $1 cut from the budget. Have we really dodged a fiscal cliff?
The President, while not presenting concrete proposals, has been quite clear on what he wants: to raise taxes on the top two percent, keep the Bush tax cuts for everyone else, offer only vague promises of future spending cuts, and gain the unprecedented authority to raise the debt limit without Congressional approval. He does not plan to reform the entitlements so dear to his heart and his base’s. Instead of less spending, he would like to spend more on “stimulus” and “investments.” Obama knows that physicians will desert Medicare if he cuts their compensation by the scheduled 26.5 percent. That is simply not going to happen.
Here are Obama’s desired alternative fiscal policies to avoid the fiscal cliff in order of their effect on the five-year budget as estimated by the CBO:
1. Preserve Bush tax cuts and other tax provisions for everyone except the top 2 percent: Raises the five-year deficit by $2.0 trillion.
2. Drop the fiscal-cliff sequestration of spending and expand discretionary spending by the rate of inflation: Raises the five-year deficit by another trillion dollars.
3. Raise the tax rate on the top 2 percent: Lowers the five-year deficit by $300 billion.
4. Extend enhanced unemployment benefits: Raises the five-year deficit by $200 billion.
5. Do not cut Medicare payment rates to physicians: Raises the five-year deficit by some $100.
Four of the five fiscal policies on Obama’s wish list raise the deficit. Only one – the vaunted tax on the rich on which he based his campaign – lowers the deficit, but only by a miniscule $300 billion ($60 billion per year). If Obama gets the tax and spending changes he wants, his 2017 successor will inherit a national debt in excess of $20 trillion.
A warning: The 2013-2017 budget deficits could be much higher. No one knows what the costs of Obama Care will be. By 2017, the federal government will be spending more on health care than on social security. The CBO projection assumes that the costs of Obama Care come in on target. If Obama Care cannot contain health care costs, we could easily see a five-year deficit well in excess of $5 trillion, for an annual deficit of more than a trillion dollars. The CBO also uses a historically low rate of increase of discretionary non-defense spending equal to the rate of inflation. If we return to “business as usual” in Washington, the discretionary spending figure could also be blasted out of the water.
Obama based his re-election campaign on “the rich should pay their fair share” and “I killed Osama.” Well before the election, it was clear from the government’s own figures that taxing the top two percent would make only a tiny contribution to solving our deficit problems.
Why was this not pointed out by the media, who played along with the “tax the rich” fairy tale? Why was this not the central theme of the Republican campaign?
I think that point I highlighted in bold deserves emphasis. Obama ran up over $6 trillion in new debt – pushing us to a $16.5 trillion dollar debt. His “balanced approach” will generate a measly $60 billion a year in “new revenues”, assuming that “the rich” don’t just curtail their productive activities and shift their operations elsewhere (Canada). If you generate $60 billion in revenues, there is NO WAY that this is going to pay for a trillion dollars a year in new debt. So we are on track to hit over $20 trillion in national debt in Obama’s second term, taking us into Greece-like territory.
And that is according to the official CBO numbers.
Conservative M.P. Pierre Poilevre (Nepean-Carleton), a member of the majority government in Canada, explains how Canada embraced the free entreprise system that America has rejected, and the results they got.
Here is the speech that went viral on Youtube:
And here is his article in the liberal Huffington Post.
In a few days the “fiscal cliff” deadline will arrive and potentially bring massive automatic spending cuts and tax increases. Even if Congress and the President agree to avoid the cliff, the next crisis awaits. Treasury Secretary, Timothy Geithner, wrote the Senate this week to report that the “statutory debt limit will be reached on December 31, 2012,” which will require extraordinary measures to prevent a mass default. These measures will give the government 60 days before it runs out of money and Uncle Sam’s head smashes into the so-called “debt ceiling.”
It has long been said that when the U.S. sneezes, Canada catches a cold. So why have these debt-related ailments in the U.S. not afflicted the Canadian government?
The answer is that Canada has been practicing what the U.S. always preached: free markets, low taxes and minimal state interference. And it is working.
For example, Canada avoided the interventionist policies that led the U.S. to the sub-prime crisis.
In an attempt to expand home ownership, administrations from Carter to Bush Jr. forced banks to offer mortgages to people who would otherwise not qualify for them. Washington then ordered government-sponsored enterprises such as Freddie Mac and Fannie Mae to insure these “sub-prime” mortgages.
According to a 2010 Report on the U.S. Financial Crisis by the World Bank’s Development Research Group, Freddie and Fannie bought an estimated 47 per cent of these toxic mortgages. Harvard financial historian Niall Ferguson indicates that the amount of mortgage debt backed by these government-sponsored enterprises grew from $200-million in 1980 to $4-trillion in 2007.(1) The government pumped so much air into the housing bubble that it burst in 2008. The resulting financial crisis led to government bailouts of the banking sector.
Big government caused the economic crisis. So we are told the solution is more big government. Funny how the problem becomes the solution.
Because the Canadian government did not impose sub-prime mortgages on the country’s charter banks, we avoided the crisis and did not bailout a single financial institution. To keep it that way, Canada’s Finance Minister has ended all government-backed insurance of low-down payment and long-amortization mortgages. In other words, if you want to take on risky debt, taxpayers will not insure you.
Governments must lead by example when managing their own debt and spending. Low debt is the result of low spending. Federal government spending as a share of the overall economy is 15 per cent in Canada (2) and 24 per cent in the U.S. (3). The numbers are not merely the result of prodigious U.S. military spending, though that is certainly a factor. Non-military federal government spending is 14 per cent of Canada’s economy (4), and 18 per cent of America’s (5).
Take a look at some of these graphs from earlier in the year about the Canadian 2012 budget. (This is straight from their government’s web site – they have new transparency/anti=corruption measures now, so the citizens know everything that government does). When comparing the deficit and debt of Canada to the United States, always multiply the Canadian number by 10 to get a benchmark to compare. For example, Canadian GDP is 1.7 trillion, and the US GDP is 15 trillion.
Canada’s budget deficit is around 30 billion, but ours is 1.2 trillion:
If we were doing as well as Canada, our deficit would be about $300 billion. But we have run up about 6 trillion in debt over 4 years! Not only that, but Canada’s national debt is only $600 billion. If we multiple that by 10, we would expect ours about $6 trillion. And it was that – during the Bush Presidency. But then the Democrats took over the House and Senate in 2007 and everything went wrong and we packed trillions and trillions onto the debt, including about $6 trillion during Obama’s first term.
Canada’s Debt to GDP ratio is 34%:
But things are even worse for the United States, now. The current United States Debt to GDP is 105%, according to official U.S. government figures. We are due for yet another credit downgrade, and should see Greece-like levels of Debt to GDP during Obama’s second term. We are spending too much, and we aren’t going to be able to make up trillion dollar deficits even if we confiscate every penny that rich people earn. (And they won’t be daft enough to keep working as hard if we did that – they would move, and probably to Canada)
What is happening to us here in the United States is self-inflicted. We are – and have been – voting to impoverish ourselves and generations of children born and unborn, by punishing those who work hard and play by the rules, and rewarding those who don’t work and don’t play by the rules. It didn’t have to be this way. We could have elected a President who actually knew something about business and economics. Knowledge matters. We can’t just choose a President who gives us the “tingles” and then expect him to perform the actual duties of being President. Competence is more important than confidence. Substance is more important than style.
On Fox News Sunday, Speaker John Boehner said Republicans have offered a balanced approach to averting the fiscal cliff but the president is “not being serious about coming to an agreement.” Boehner says the White House is holding tax increases over the heads of the middle class while demanding more spending and tax rate hikes that will hurt small businesses.
Here are some of the highlights:
Boehner: President Obama’ s Fiscal Cliff Offer is “Nonsense,” a “Non-Serious Proposal”:
“A non-serious proposal. The president was asking for $1.6 trillion worth of, uh, new revenue over 10 years, twice as much as he’s been asking for in public. He has stimulus spending in here that exceeded the amount of new cuts that he was willing to consider. It was not a serious offer. … I looked at [Secretary Geithner] and I said, ‘you can’t be serious?’ … You know, we’ve got several weeks between Election Day and the end of the year. And, uh — and three of those way — weeks have been wasted, uh, with the — with this nonsense.”
Boehner: President Obama Asked for More New Spending Than Spending Cuts:
“We’ve put a serious offer on the table by putting revenues up there to try to get this question resolved. But the White House has responded with virtually nothing. They have actually asked for more revenue than they’ve been — been asking for the whole entire time. … And all of this new stimulus spending would literally be more than the spending cuts that he was willing to put on the table. … Look at the fact that they put $400 billion worth of unspecified cuts up that they’d be willing to talk about, but yet, at the same time, that’s over $400 billion over 10 years. Uh, while he wants over $400 billion in new stimulus spending. And this is — this is — it’s a non-serious proposal.”
Boehner: What Will President Obama Do With $1.6 Trillion? Spend It!
“I mean think about the — the proposal we got from the president. If we gave the president $1.6 trillion of new money, what do you think he’d do with it? He’s going to spend it. It’s what Washington does. … They’ll spend it.”
Boehner: Raising Tax Rates Will Hurt Small Businesses and Destroy Jobs:
“Now, listen, I believe that raising tax rates hurts our economy, hurts the prospects for more jobs in our country. And I realize that the president may disagree. But the fact is, is that if there’s another way to get revenue, uh, from upper income Americans, that doesn’t hurt our economy, then why wouldn’t we consider it?”
Boehner: Spending Cuts & Reforms Must Exceed Any Increase in the Debt Limit:
“Forever. Silliness. Congress is never going to give up this power. I’ve made it clear to the president that every time we get to the debt limit, we need cuts and reforms that are greater than the increase in the debt limit. It’s the only way to leverage the political process to produce more change than what it would if left alone.
Boehner: Going Over the Fiscal Cliff Will Hurt Our Economy, Is Not Fair to the American People:
“[T]his isn’t an issue about Democrats and Republicans. My goodness, this is about our country. And we get — ought to get serious about dealing with the problems at the end of the year. And we need to get serious about our deficit and our debt, uh, that are burying our children’s future. … [G]oing over the cliff will hurt our economy, will hurt job creation in our country. It’s not fair to the American people. … This agreement should come sooner rather than later, because just the threat of the fiscal cliff is already hurting our economy.”
That’s where the Republicans stand. They did offer to tax the rich by capping tax deductions, so that the very wealthy would pay more in taxes. But Obama turned down that offer. That was a solid offer, and Obama turned it down.
Right now, I am just sick of the American people who re-elected this spendthrift. I want the Republicans to let all the tax cuts expire. It will be good for the American people as a whole to see the importance of not re-electing an ignorant fool. Maybe we have to hit the bottom of how much we can borrow before the people who voted for “Obamaphones” will feel the effects of their economic ignorance.
Hostess Brands is going to liquidate, a blow to lovers of Twinkies, Wonder Bread and Drake’s Coffee Cakes all around the globe.
But CEO Gregory Rayburn told CNBC today that as the company winds down its operations after failing to reach an agreement with a union, it will try to sell its various brands. There are 30 separate brands under the companies sugary umbrella.
[…]Rayburn, a restructuring veteran brought in for the bankruptcy, did not shy away from blaming the striking bakers’ union for the liquidation after the company put out an ultimatum earlier this week for them to return to work or face this consequence. He told the television network the union hasn’t “returned our calls in a couple of months.”
The reason: insurmountable (and unfundable) difference in the firm’s collective bargaining agreements and pension obligations, which resulted in a crippling strike that basically shut down the company… [the company] was unable to survive empowered labor unions who thought they had all the negotiating leverage… until they led their bankrupt employer right off liquidation cliff.
[…]Hostess’ numerous brands will be bought in a stalking horse auction by willing private buyers, however completely free and clear of all legacy labor and pension agreements which ultimately led to the company’s liquidation.
Now that’s progress. But what causes union bosses to be so uninformed and ignorant of basic economics? How is it that they do not understand how businesses work?
Consider this quote from Richard Trumka about the looming fiscal crisis:
AFL-CIO President Richard Trumka has declared there’s no fiscal cliff and any address of runaway government spending is just “a manufactured crisis.”
[…]”‘Take what the media are calling ‘the fiscal cliff.’ There is no fiscal cliff!” Trumka thundered at a National Mediation Board Conference Thursday, sounding like an alcoholic pleading for one last swig well before he hits rock bottom.
[…]”What we’re facing,” he said Thursday, “is an obstacle course within a manufactured crisis that was hastily thrown together in response to inflated rhetoric about our federal deficit.
“But all the deficit chatter has distracted us from our real crisis — the immediate crisis of 23 million unemployed or underemployed workers. It’s time to protect Social Security benefits. It’s time to protect Medicare and Medicaid benefits. And it’s time to raise taxes for the richest 2%,” he went on.
In short, Trumka is arguing that there’s no such thing as too much government spending, that deficits don’t matter and that entitlements cannot be cut. Such denialist thinking is beyond irresponsible in the face of a $16 trillion debt, highest on global record and a sign of an irrational agenda often followed by would-be tyrants.
Trumka is trying to intimidate congressional Democrats into intransigence on a debt deal with Republicans to restore the solvency of the U.S. Instead, he wants them to stand fast on the idea that the debt, deficit and entitlements can be addressed simply by taxing higher-income earners who already account for more than half of federal income-tax revenue.
This is the kind of irresponsible thinking that has triggered riots in Greece and Spain — a belief that the money is there and only the meanness of austerity is keeping the common man from his share.
In reality, the money is not there — the pot is empty. Medicare and Social Security are now on “unsustainable paths,” paying out more in benefits than they take in, with their trust funds projected to run dry by 2024 and 2033, according to their own trustees.
Socialism is meeting its natural end — which, in the words of former U.K. Prime Minister Margaret Thatcher, is when it “runs out of other people’s money.”
Unions don’t make anything on their own, only businesses do. And they just don’t understand that. They don’t understand that at some point it is possible to suck too much blood from the host so that the host dies.