Things I Learned While Falling Off a Cliff

That’s not to say that we don’t have social problems too, or that we don’t have defense problems too. But even those can be somewhat alleviated by fixing our economic problems.

Too many of us don’t go to church or synagogue every week… too many of us don’t have intact families. And our nation is beset with threats from criminals from across our border and from terrorists from across the ocean.

But if we were to fix our economic problems, one byproduct of that fix would be that those other problems would be diminished. So many of our social problems are exacerbated by a welfare state that divides and discourages intact families, trapping millions in self-perpetuating ever-worsening circumstances; so many of our foreign policy problems are exacerbated by pouring oil dollars into the coffers of islamofascist nations that sponsor terror and foment war. So we must concentrate on fixing the economy first.

New Year’s Day, 2013, will not be remembered as the day we went over the fiscal cliff. Not because we didn’t, but only because a popular agreement by the political and journalistic class was to only define a portion of the events of the day as a cliff, so when some of those events were averted by a lousy last-minute deal, the announcement was made that we had been spared. As if a losing sports team, afraid that it would lose by 30 points, would cheer with delight when a last-minute touchdown enables them to lose by only 23.

In fact, January 1, 2013 was indeed a cliff, and the country did in fact tumble over it.

The Social Security Tax is of course unconstitutional, but it has been the law of the land for some 80 years now. It gradually grew over the years until it was some 15% of every worker’s income. We don’t see it all; we don’t notice it… the government came up with a brilliant deception: split it in half so that you only see seven and a half points removed from your salary; the other half is paid by your employer on your behalf. The employer’s half is never shown on your pay stub, so you don’t notice it.

Then they had the brilliant idea of splitting out Medicare – so now instead of seeing seven and a half points removed for Social Security, you only see six. The other one and a half is called Medicare. Either way, of course, you’re paying fifteen percent, but as long as it’s broken up into four parts, the technocrats of Washington figure, you won’t squawk. And sure enough, most don’t. Fifteen points confiscated to cover Social Security and Medicare, but the average American doesn’t do the math, doesn’t know about his employer’s half, doesn’t realize that this system is robbing him blind.

Imagine what a retirement package you could build for yourself with fifteen percent of your income!

A couple of years ago, Washington wanted to give out an income tax cut, but for half of American workers – yes, half! – they couldn’t, because there was no income tax to cut! Some 47% of our nation’s workers pay plenty of other taxes, but not federal income tax; they’re exempt. So the only way to give them a tax cut too was to cut their contribution to Social Security. Two points were shaved off, so that instead of seeing six points, you only saw four. For the past two years now.

Thirteen percent of our income is still confiscated for Social Security and Medicare; the programs are insanely expensive. But we’ve only seen the four percent entry for Social Security, and less than another two for Medicare, so these seem so small. “What are those Republicans always whining about,” they ask? “Taxes aren’t all that high; why, I don’t pay any income tax at all, and my Social Security tax is only four percent. Those Republicans sure are cheapskates, whining about that.”

Very difficult to convince folks in that situation that taxes are too high. Very difficult to educate such voters about the economy… but we need to. They need to know how much they’re paying, and why, and who it is that blocks reforms every time the GOP has tried.

The only people who really get it are the entrepreneurs, the small businessmen. They pay both halves of the Social Security and Medicare bite. They know how much they’re robbed, and they don’t understand why the rest of the country doesn’t see it. It’s all because the Democrats have done an amazing job designing a system in which so many of the taxes are divided up so that they just don’t look so bad to any but those already conditioned to dig deeper, in an age when so few do.

All working Americans saw a tax increase; two percent more of everybody’s paycheck just got sucked out of the economy and made a quantum leap into the black hole that is Washington, D.C.

On January 1, 2013, the two year payroll tax cut ended. It wasn’t part of the Fiscal Cliff, so it wasn’t part of the Fiscal Cliff Deal. It just went up.

When Obamacare was illegally passed in March of 2010 by House members who hadn’t read it and Senators who hadn’t read it, and signed by a president who’s never read anything but Saul Alinsky (possibly not even the books he claimed to have written himself), it was chock full of new taxes, designed to be deferred until Obama’s reelection was behind him.

Right on schedule, twenty-some new taxes – depending on how you count them – went into effect on January 1 to pay for various portions of the utterly unconstitutional slow nationalization of our healthcare industry.

-) 2.3% of gross sales on medical device manufacturers. Yes, that will have an impact on their employees’ paychecks, and on everyone else in their communities, when this last straw drives these medical device manufacturers out of business or out of the country for good.

-) 3.8% surtax on income from investments – yes, in addition to existing capital gains taxes, for filers with incomes over $200K.

-) Another 0.9% increase in the Medicare tax on those same alleged "high earners" (which includes most small businesses and therefore the people they employ) – small enough to still seem small, but it takes the current combined Medicare tax of 2.9% and raises it to a combined 3.8%. It all adds up…

-) There are new limits on Flexible Spending Accounts and Medical Savings Accounts. Those who have always been careful to be proactive and responsible in the funding of their own healthcare needs are being punished for it, by limit after limit, by tax after tax.

These many Obamacare taxes and punitive limitations are expected to suck approximately a trillion dollars more out of the economy. But they weren’t part of the Fiscal Cliff, so they weren’t addressed in the Fiscal Cliff Deal. They just went up.

Thousands of pages of new regulations have been drafted by unconstitutional White House czars and their underlings, largely hidden until after the election, for release in 2013. New red tape, new limitations, new restrictions, new requirements.

The Federal Register will be more than a paperweight, more than a doorstop. In 2013, the Federal Register will be the size of a sculptor’s block of granite, only there won’t be anyone with the power to chip away at it.

The government is no longer a nanny state, passing laws ostensibly to contribute to our best interest. The federal government, and many state governments as well, now institute regulations blatantly intended to curb our freedoms, restrict our lives and limit our livelihoods.

The incandescent lightbulb ban that forces far more dangerous CFL bulbs into our homes, the new rules about workplaces and homes and construction and energy, all add up to a climate that will stifle initiative, depress business startups and housing even more, and kill the employment outlook for years to come.

The Obama administration has released some 5500 new regulatory proposals in the last ninety days alone, most of which they’ll be able to implement without a peep from an overwhelmed Congress buried under tax and spending issues and deadlines.

The new regulations are actually far more dangerous, both short term and long term, than taxes or entitlement spending could ever be. Taxes and spending can be changed by the next Congress, or even by the same one if public pressure is great enough. But businesses choked by red tape, or forced to flee the country – as so many whole industries have – and small businesses that die of impossibility before they’re even incorporated, can never be regained. Even if the country wakes up and elects an honorable Senate and an honorable President at the next opportunity, these tens of thousands of startups, these millions of jobs, are lost forever.

But these thousands of pages of regulations weren’t part of the Fiscal Cliff, so they weren’t part of the Fiscal Cliff Deal. Quietly, painfully, under cover of night, they’ll just be implemented, and they’ll slowly strangle thousands of businesses and destroy millions of jobs and potential jobs, without any newspaper giving the murder a headline above the fold, usually without even earning a blurb on the business page.

“Restaurant closes.” “Factory plans fall through.” “Business plan rejected by venture capitalists due to unfeasibility in current regulatory climate.” These stories are so widespread nowadays, no newspaper considers them worth the ink anymore.

The Fiscal Cliff was so named because it represented an impossible crisis, one negotiated by Congress in 2011. They couldn’t come to an agreement on needed spending cuts, so they kicked the can down the road a year and a half. “If we don’t solve it by then, we’ll let all income taxes go back up automatically to pre-Bush levels, and we’ll cut defense and Medicare spending big time.” In other words, we’ll wreck the economy this way, if in all that time, we can’t agree on some other way to wreck the economy instead.

So they voted to compromise on the tax changes. Instead of letting all the Bush-era tax cuts expire, they just let some of them expire, so that high earners’ rates, and relatively high earners' rates, and small businesses' rates, would all go back up, and the rest of us would continue to enjoy the tax cuts that we’ve enjoyed for much of a decade.

As the deadline neared, the left became even more terrified than the right; “what if all these taxes go back up, and then everyone will know that we’ve been lying all along” they must have thought. “What if the public realizes that the Bush-era tax cuts really were across the board after all, that they really truly did help everyone, not just the rich? We can’t let the public realize that!”

So they came to an agreement. No spending cuts, but the income tax wouldn’t go up. On most of us. No need for the American public to ever figure out that the Right was telling the truth all along, and it was the Left that was lying; no need for the public to ever realize that those tax cuts weren’t just for the rich after all. As far as PR goes, this deal wasn’t a good one.

But the Right feels an obligation: anytime we can cut tax rates, we should. Anytime we can resist a tax increase, we should. Anytime we can help keep some of the money in the private sector so that it can remain productive, anytime we can stop even some of it from being sucked down the drain of Washington, we figure we should. And so Congress voted, and averted part of the Fiscal Cliff, for the time being.

But as we look ahead, we have little but disaster to look forward to. Trillion dollar annual deficits as far as the eye can see, another doubling of the national debt within a decade… and unemployment continuing to climb. Our real unemployment rate is between fifteen and twenty percent, when honestly calculated. Some demographics – teens and twenties, blacks, blue collar workers – are much higher, with whole industries stagnant or in contraction.

We did go over the cliff on January 1, because January 1 represented much more than just the artificial deadline of a foolish debt ceiling deal from 2011. January 1 was the day many other taxes went up without a peep. The day that many regulations kicked in, with many more in the wings, to continue to drive down the economy, as this “jobless recovery,” this no-inflation period of food and fuel inflation, this long painful trek to oblivion continues.

Because January 1 also represented the first day of another year with Senator Harry Reid ruling the U.S. Senate with an iron walker, and another year with President Barack Obama living it up in Hawaii while his czars spin asphyxiating webs back in Washington.

We can and must work harder every day, to get by until the day when these engines of economic destruction are gone. Like the owner of an old used car, we must patch it and polish it and push it and service it as best we can for another two years, praying that we can make it last until we can get a replacement.

This economy is down, kicked from a thousand angles by a ruling class with something other than the nation’s best interests at heart. But since all we can do is keep trying, keep working, keep fighting, keep surviving, that is what we must do.

John F. Di Leo is a Chicago-based Customs Broker and international trade lecturer. A one-time spokesman for the Illinois Small Business Men’s Association and Illinois Right to Work Committee back in the 1980s, and a Milwaukee County Republican Party Chairman in the mid-1990s, he has now been a recovering politician for over fifteen years.

Permission is hereby granted to forward freely, provided it is uncut and the IR URL and byline are included. Follow John F. Di Leo on Facebook or LinkedIn, or on Twitter at @johnfdileo.

They cut a deal on January 1, cancelling SOME of the intended tax hikes. That may or may not turn out to have been a good thing... but it's hard to say.

The real deal, the more important deal, is the one we never heard discussed: the unspoken deal between the politicians and the MSM to only refer to a portion of what was scheduled for Jan 1 to be considered part of the Fiscal Cliff.

Just as many routine expenses of government are "off budget", as they say, there was a ton of damage on Jan 1 that was completely "off-cliff"... so when it all tumbled over the edge, the media didn't make a peep.

I discuss these matters in my Illinois Review column today, here, if you're interested...

Morals and morale. What we have immediately here is an economic problem all right, but it got that way because too many Americans who ought to have given a damn, didn’t. No amount of prosperity can make people give damns who are bent on not doing so.

I'm going to respectfully disagree with the author. In much of his work, historian Niall Ferguson speaks of the collapse of civilizations, and it is ALWAYS the social collapse that preceeds the economic collapse. Fix the social, and the economy will typically right itself.

When people cease to believe in the authority or integrity of institutions, they crumble.

That being said, there is no fixing this mess. The America we grew up in has permanently lost a considerable share of it's economic power. Through globalization, the concentration of wealth has, as a natural course, spread out across the world into new markets. Sadly, our existing "safety nets" are built on the OLD model, and unsustainable in the NEW American paradigm.

Oh, yes, and the fact that most developed countries have TCDMO ratios that are astronomical, makes for many more years of pain.

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