Skip to comments.Both Sides Must Give Ground To Avoid Fiscal Cliff
Posted on 11/19/2012 12:21:54 AM PST by Kaslin
In his first formal press conference in months, Barack Obama showed that getting re-elected can increase a president's confidence and combativeness. He staked out tough stands on several issues, especially on the looming budget negotiations.
Looking ahead to the "fiscal cliff" on Dec. 31, when the 2001 and 2003 tax cuts expire and sequestration cuts government spending sharply, Obama demanded $1.6 trillion of increased revenues as part of any budget bargain.
That's twice the number he and Speaker John Boehner agreed on in the grand bargain talks in the summer of 2011.
Those talks fell apart when Obama telephoned Boehner and raised his demand to $1.2 trillion. Boehner refused, and as Bob Woodward describes in "The Price of Politics," congressional leaders of both parties worked out their own approach. Sequestration, first suggested by Obama's budget director, became part of the deal.
There's a solid argument that limiting high earners' deductions could raise $800 billion or more. A $25,000 cap on deductions, according to The Wall Street Journal, would yield almost $1.3 trillion of additional revenue. The Simpson-Bowles commission showed that broadening the tax base could net $1.1 trillion.
And there's a solid argument that raising tax rates on high earners, in conjunction with the increase that's part of Obamacare, would slow down economic growth. That's because many small businesses are taxed at the individual income tax rate.
Obama once accepted that argument, albeit reluctantly, when he temporarily abandoned his quest for higher rates in December 2010. Raising them, he conceded, would hurt while economic growth was still sluggish.
It's actually more sluggish today than it was then, although as Obama pointed out in the press conference, we are further away from the sharp economic decline of 2008-09.
In effect, Obama is giving House Republicans a choice between a growth slowdown due to higher tax rates now and the much sharper slowdown that some economists predict -- 5 percent is a number bandied about -- if we go over the fiscal cliff.
The political leverage seems to be on Obama's side, or so he seems to believe. Most of the media inevitably blame Republicans when Republicans and Democrats are not able to reach agreement.
Politico reports that a number of House Republicans, including some staunch conservatives, think they'll have to give in on higher rates. Many members don't want to defend them back home.
But there is also a force working against Obama: the gravity of the government's fiscal condition. The president himself has recognized that entitlement programs are on an unsustainable trajectory.
Federal spending under Obama has been 24 percent to 25 percent of gross domestic product. Even in World War II, revenues never reached that level. Since that war, the highest level was 20.6 percent of GDP in 2000, when the government was flush with tax revenues from the capital gains of dot-com founders.
Growth does increase revenue in a progressive tax system like ours.
Several participants in the grand bargain negotiations, Woodward recounts, described them as trying to solve a Rubik's Cube. Republicans wanted lower tax rates with base-broadening tax reform to provide added revenues, and they wanted changes in the trajectory of entitlements.
Democrats wanted higher rates on high earners but were not averse to broadening the tax base and were at least talking about entitlements.
The problem is not just reaching agreement, but reaching agreement on something that can get majorities in both houses of Congress.
Some members of both parties won't vote for any bargain in which the other side gets something. So leaders of both parties have to persuade colleagues that they have made sufficient policy gains to warrant the policy concessions.
History shows that can happen. In Bill Clinton's second term, he and Newt Gingrich reached agreement, with the aid of then-Chief of Staff Erskine Bowles, because there was something for both sides. Republicans got a capital gains tax cut, Democrats got S-CHIP (State Children's Health Insurance Program), and they both got a balanced budget.
Clinton and Gingrich were even making progress on Medicare reform and negotiating about Social Security until the Lewinsky scandal erupted.
House Republicans have a majority and some leverage but cannot hope to prevail on all fronts. They may decide that higher tax rates are tolerable if they can make significant progress toward spending discipline and changing the trajectory of entitlements.
In summer 2001, Obama wasn't able to produce such a package. Will the second-term Obama succeed?
Yeah we just need to reach across the aisle and moderate our tone.
Let’s dump some of the extremists and work with liberals to get all their ideas passed.
It hasn’t worked yet, but that just means we’re due for a win. :)
Butch Cassidy: Alright. I’ll jump first.
Sundance Kid: No.
Butch Cassidy: Then you jump first.
Sundance Kid: No, I said.
Butch Cassidy: What’s the matter with you?
Sundance Kid: I can’t swim.
Butch Cassidy: Are you crazy? The fall will probably kill you.
Sundance Kid: Oh, shit...
If they wimp out and increase the taxes and it looks like from this article some are trying to say they are for that..then when the nation fails, it will be their fault. People will not want to grow their companies if the tax rate is so high, profits are not there, to endure long term stability. The economy should be saved but not like this. If they do this, the party will be punished again. They will not cut spending they always tie it back into bills. They are doing smoke and mirrors. Obama and Speaker probably already made a deal. Lord, why do they even consider raising taxes-look how they lied about the bailouts. We have no one to trust/count on it seems.
Curious how OBozo claims he now can do all he would desire. Based on less than 1% edge in votes that he claims give him the win. Especially curious considering that is about the margin of fraud we know exists. Someone may want to remind OBozo, if there is someone close to him that does actually care about him, that dictators dying of natural causes like Fidel and Hugo are NOT the typical ending. Hanging from a meathook is more likely. Not threatening, just pointing out that there is no such thing as an “ex dictator”. There are ex Presidents. When it is clear the elctions are a sham then the peaceful transfer of power cannot occur.
I’m going deer hunting again.
freaking politicians. Wish they would just leave my money to myself. bastiges.
Go ahead and cave in, PUBs. You’re going to do it anyway. You know it; I know itl the RATs know it; heck, everybody knows it.
Then, in 2014, you all can kiss your jobs goodbye.
This is nuts.
Obama doesnt want a solution to the fiscal cliff. What he really wants is the chaos that results from an economic collapse. He’s setting up a Cloward-Piven situation.
Any tax increases will be hung around the Republican’s necks like a cursed albatross but no tax increase at this point will save the nation. None! The Republicans need to hang tight and fight tough against any effort to brand them as the cause of an economic collapse.
The deficit, no matter how much the Democrats try to shift the blame, belongs to BHO2. He brought it on and he alone owns it.
This Republican dominated House of Representatives must continue to try to do the peoples business honorably. It is, after all, why we elected them.
BHO2 is following the Cloward-Piven plan to collapse the system, and out of the resulting chaos establish communism. That is why he has armed certain governmental departments.
Get ready for a civil war, folks!
I am getting so tired of these people in charge. No one with any common sense does these things in their lives- Hey, Joe-citizen you can spend yourself out of debt. All of them are basically corrupt or so incompetent its not even funny any longer. They have a government that they don’t even know how to manage, nor to run efficiently, to delegate the nations business..its only about punishing the successful man along with making America into some free dope oriented anything goes global community without any mention of God. You want to marry your dog, Teddie...come on down- you want to tell a family Christmas is illegal-come on in; we’ll give you free legal counsel to file this urgent case.
We see a racists agenda and no one will call him on anything. He is not a good man. He is just a man though. The media has successfully neutered the republican male (political correctness). Yippee! How much longer am I willing to follow these people. This is becoming difficult to defend any longer. Barely can listen to talk radio-local DJ’s have more guts to tell it like it is. TV is off in our home. Our side needs to come out and tell Obama NO! and not cross the aisle.
What do they have to lose by being firm. I don’t want to end up paying higher taxes for a much larger welfare state. It is insane. Enough, people. They are working us over while people oh yes, let the rich guy pay more. The rich guy keeps companies running not the poor guy. Liberals bring misery to whatever region of the country they control.
Jesus expected the poor to work. Jesus is good. Liberals are for bad things. Can’t deny it.
I think it is wrong for them to increase taxes. You know they are all crooks because if they wanted to save the economy they could impose a new fair tax or flat tax like now..the economy would soar with this burden out of the way. Pretty soon, we are all going to be up to 40/45% in taxes..The younger generations better start growing up.
They will ignore the fraud..already doing do. Paul Ryan says Obama won fair and square.
Let's get it over with and screw the history books.
Perhaps Obama could give the Republicans lessons in bowing. Then the Republicans could bow to the Democrats. That would be, like, bipartisan! Right?
You give an inch they’ll want a mile.
(Say hi to Bambi for me)
The $800 BILLION is over 10 years. Our debt is increasing $120 billion a MONTH. Do the math. Total confiscation of all income of all “rich” wouldn't address 6 months of the problem. Plus obama’s demand for $1.6 trillion of the American people's money doesn't even include the costs of obamacare.
“Tax increases on the rich” are pure democrat political theater. It is certain the democrats are only doing this to hang the economy-ruining effects of the petulant marxist’s tax increases on the GOP.
These are perilous times. Thee question is no longer whether to give obama his tax increases, but how to make OBAMA and the democrats irrevocably OWN the results.
Given how very many so-called middle class people are 1-2 paychecks away from disaster, the effects of these taxes plus all the other costs going up (healthcare, energy, food costs) will be sobering. Let sobriety begin
The Democrat’s plan is push the Private Sector over the Fiscal Cliff no matter what.
Actual spending cuts, not promises of spending restraints, should be the price for any tax increases and the magnitude of spending cuts and tax increases must equal. Obama always talks about fairness what could be more fair?
Then, in 2014, you all can kiss your jobs goodbye."
Yes, and when the GOP loses big, they will conclude it is because they didn't compromise enough. They will draw the wrong conclusions from their losses and compromise some more. Rinse and repeat. Maybe the country should be taken over the cliff and see if something new and better emerges or if we end up with Cuba, instead.
They will blame the GOP no matter what.
Screw them. Put a flat tax in front of them, kill all the unfunded entitlements, and watch them get voted out in 2014.
16 trillion in debt probably over half of that is owed to the friendly folks over at the Federal Reserve Bank, who like a rich uncle, will forgive the debt when push comes to shove!
What deficit? It is all smoke being blown up America’s tail pipe.
The bottom line for Republicans is that it’s easier to stand firm now than a year from now, in an election year. Obama may think he has all the cards, but he needs to be made to understand that he is in imminent jeopardy of blowing up his entire second term even before it begins. If he backs Republicans off the cliff and gets a double dip recession, that’s his legacy. And Boehner should make it clear that there are two more consequences. If there is a government shutdown, even brief, a fair number of offices will never reopen, because Republicans won’t fund them. And in the aggregate, an across the board budget freeze is the best Obama can hope for in the next four years.
“If they wimp out and increase the taxes....”
Taxes will increase automaticaly. There is nothing the Pubs can do to stop it.
Going over this “cliff” isn’t a bad idea. The thing is, if Jan 1st rolls around, Republicans better not then give in as Obama would have got his tax increase AND would get credit from the stupid half of our country. If we have to pay, let’s make it hurt them too. NO NEGOTIATION.
This doesn’t matter. Obama will get what he wants. The Republicans will claim a win for their Rockefeller republican friends. This middle class will once again get screwed. The debt ceiling will go up to 17.5 trillion.
Democrats will use the tax increase to hammer Repiblicans in 2014. Democrats take house. Harry Reid nukes the filibuster rule. Two more lib judges go to SCOTUS.
Kiss energy, heath care, insurance industries goodbye. Get ready to see all those rounds of ammunition purchased going to a new “national police force.” And get ready for the shortages of food and gasoline and a depletion of our oil reserves.
I never understood how one group of people could be taxed at a higher rate than others to begin with. I thought there was an equal protection clause in the Constitution?
I say the Republicans should up the ante. They should suggest a tax rate of 98% on everyone making over Hussein’s magic $250K number.
Two things could happen. 1) The Demcrats blink and lose the whole “soak the rich” argument or 2)revolution ensues (funded by the wealthy, of course).
They should suggest a tax rate of 5% on everyone making over $20k. Everyone must pay.
Fairness is not...... being poor and participating in American society.
We can go over the cliff or slide down the cliff slowly. Either way we end up at the bottom.
I really like that idea. The Democrats’ entire wealth envy argument would collapse.
Anything bad that happens will be blamed on the Republicans.
I already give too much as it is.
Barone can kiss my ass. My wish would be that the Republicans fight obama every inch of the way. But, then again, If the Republicans had the guts to fight, they would not be Republicans, would they?
I wished people would wake up and see the truth
Any new tax will NOT go to the reduction of debt. It will be immediately spent to prop up government union pensions and support new social programs.
The debt will continue to climb until the economy crashes and it will all be blamed the republicans.
Some have.As the election results demonestrated, most ,as longas they still receive their freebies, don’t give a damn.
It’s not a matter of “sides.” It’s a matter of irresponsible policies of spending $3.5 trillion a year, done by both the Republicrats and the Democans.
It’s not a matter of “sides.” It’s a matter of irresponsible policies of spending $3.5 trillion a year, done by both the Republicrats and the Democans.
Indeed, this man has been working toward the collapse of America since he entered community organizing.
The only way to avoid a totalitarian outcome on this thing is for as many people as possible to be as self sufficient as possible.
When your kids are hungry and you can’t feed them otherwise, you’ll accept a “little more” control in order to be fed. If you don’t have to worry about that, you can tell the “helpers” from the gov’t to pound sand.
Leftists and Muslims have a lot in common.
Leftists have the goal of total control and communism.
Muslims have the goal of total submission to Islam or extermination.
They’ll take any concession you give them, but they never “concede” their end goal.
Sure, we’ll take X as a compromise.
We still are going to insist on our final goal.
How does Michael Barone have any credibility at this point?
R I G H T !
How about the Democrats must keep their prior agreements first?
Can anyone, other than the political pundits, give an example of the Democrats keeping their agreements with Republicans over the last, lets say, 50 years?
The art of governing is one of compromise and trust. Unfortunately for the Republic there hasn't been a compromise that the Democrats have kept. This means that the term trust should be translated as “I trust the Democrats to break their compromise within 10 seconds.”
You can not solve a problem if you don't accurately describe it. So, why can't our pundits accurately describe the Democrat's behavior over the last half century?
Making people who don’t pay taxes pay would help raise revenue too.
Hate to say it but with our current debt and obligations, we were over the cliff a long time ago thanks to the insane asylum known as Washington. Let Obama and Congress put their salaries toward debt reduction befoere they lay it on us.
Barone did such a great job analyzing who would win the election we would be fools to not heed his advice. /s
OK, its apparent that some people think we will win a PR war if we let the president win this and simply raise taxes sending the economy into another recesssion while increasing the budget deficit through lower overal tax receipts. This is faulty thinking at best and strategically a loser in the short and long term. The Press is never going to give the R’s any props for anything they do. It’s just impossible. They are at permanent war with us and every battle is spun to their advantage no matter what. If you don’t believe that just look at the last 4 years and how the R’s STILL get the blame for the economy.
How have you been?
Dream on if you think those bozos are going to give up their "hard earned" money.
The thing is - they can't stop thinking about spending. Even if they get more money they are going to spend it and therefore our deficit will still be in the trillions of dollars.
Wall Street will tell them to “just agree to anything so we can continue trying to inflate the bubbles”. And they will.
I think I tend to agree with you. If the bulk of the populace is so brain-dead as to still be blaming Bush after four years, they’ll still be blaming him after 8. Or 48. Or 148.
This is a false axiom.
An analogy: you go to a bank to make a deposit. While you are there, a bank robber decides to rob the bank. After he gets money from the teller, however, a policeman enters the bank and arrests him.
The policeman demands that the robber give the money back to the teller, but the robber complains, “Hey! He (that being you) was in line as well, so I should only give back half the money, and he should give back the other half.”
Except this analogy goes further. Obama, the bank robber, is demanding that you, the depositor, has to give back all the money, based on his promise that sometime, he *may* decide to give back the money too. In a year or a decade or two.
“Because it’s only fair!”
Obama is spending money as fast as he can, in frivolous, stupid and destructive ways. Yet he has the gall to demand higher taxes, so he can spend even more money.
The Republicans are saying no *new* taxes, you’ll just have to be satisfied with the Bush tax cuts ending, to give you more money.
And somebody, anybody, is even suggesting that the Republicans should meet him halfway? Ridiculous!
The only proper response is to *stop* Obama, the bank robber, from continuing to rob the bank. Unfortunately, we can’t get the money back that he has already destroyed, but facilitating future bank robbery out of some weird idea of “fairness”, is just buncombe.
Talked this AM with a person I know who is moderately wealthy. Not a Bill Gates, but not a pauper.
He clearly said that people he knows are buying residences in other places & moving out of the USA for a remote place to operate from. Not all are selling what they currently have, except for the Californians. Those in California realize that changing Prop 13 will hammer them with a MUCH higher property tax. Combine that with a $25,000 limit on deductions, and you have a position between a rock and a hard place. They also are tired of the tax increases that have passed there by the parasites, which again punishes the successful.
Talent can MOVE.....
Money can move.....
Assets can move...
Splitting up companies into smaller parts can happen....
They all didn’t get as successful as they are by being stupid.
My friend basically said he will do NO further investing in ANYTHING and will just dive under the radar. He is a ‘holding position’ for as long as it takes.
I know for a fact that he is a decent investor in companies which are trying to expand, etc. I also know that he does NOT feel that he should be punished by Obama for doing so. He won’t pay this kind of tax structure.
My friend is a small player in the arena of the wealthy. He has lots of company in his thoughts.
You don't do stuff like this-cut spending not add higher taxes to a person/business already suffering. In 2013, whether Romney or Obama won, taxes are going up so why give them the aok to increase it even more to grow the government madness.