Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Both Sides Must Give Ground To Avoid Fiscal Cliff
Townhall.com ^ | November 17, 2012 | Michael Barone

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?


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS:
Navigation: use the links below to view more comments.
first previous 1-2021-4041-53 next last
To: Christie at the beach

“If they wimp out and increase the taxes....”

Taxes will increase automaticaly. There is nothing the Pubs can do to stop it.


21 posted on 11/19/2012 4:02:45 AM PST by Hugin ("Most times a man'll tell you his bad intentions, if you listen and let yourself hear."---Open Range)
[ Post Reply | Private Reply | To 4 | View Replies]

To: Kaslin

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.


22 posted on 11/19/2012 4:04:51 AM PST by Dragonspirit (Always remember President Token won only by defecting on his CFR pledge.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: urbanpovertylawcenter

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.


23 posted on 11/19/2012 4:24:43 AM PST by EQAndyBuzz (George W. Bush is the Emmanuel Goldsten of the modern era.)
[ Post Reply | Private Reply | To 19 | View Replies]

To: Kaslin
STFU mikey... your arse was wrong about the election and you are wrong about this... or you are just another paid liar for the two party ruling junta.

LLS

24 posted on 11/19/2012 4:27:07 AM PST by LibLieSlayer (I AM JOHN GALT)
[ Post Reply | Private Reply | To 1 | View Replies]

To: silverleaf

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).


25 posted on 11/19/2012 4:33:36 AM PST by FerociousRabbit
[ Post Reply | Private Reply | To 14 | View Replies]

To: FerociousRabbit

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.


26 posted on 11/19/2012 4:41:42 AM PST by bert ((K.E. N.P. N.C. +12 ..... Present failure and impending death yield irrational action))
[ Post Reply | Private Reply | To 25 | View Replies]

To: Kaslin

We can go over the cliff or slide down the cliff slowly. Either way we end up at the bottom.


27 posted on 11/19/2012 4:43:18 AM PST by Venturer
[ Post Reply | Private Reply | To 1 | View Replies]

To: FerociousRabbit

I really like that idea. The Democrats’ entire wealth envy argument would collapse.


28 posted on 11/19/2012 4:44:47 AM PST by dinodino
[ Post Reply | Private Reply | To 25 | View Replies]

To: Kaslin

Anything bad that happens will be blamed on the Republicans.


29 posted on 11/19/2012 4:47:09 AM PST by I want the USA back
[ Post Reply | Private Reply | To 1 | View Replies]

To: Kaslin

I already give too much as it is.


30 posted on 11/19/2012 4:49:55 AM PST by jospehm20
[ Post Reply | Private Reply | To 1 | View Replies]

To: Kaslin

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?


31 posted on 11/19/2012 4:52:53 AM PST by sport
[ Post Reply | Private Reply | To 1 | View Replies]

To: I want the USA back

I wished people would wake up and see the truth


32 posted on 11/19/2012 4:53:33 AM PST by Kaslin ( One Big Ass Mistake America (Make that Two))
[ Post Reply | Private Reply | To 29 | View Replies]

To: Kaslin

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.

Check mate.


33 posted on 11/19/2012 4:57:55 AM PST by PJammers (I can't help it... It's my idiom!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Kaslin

Some have.As the election results demonestrated, most ,as longas they still receive their freebies, don’t give a damn.


34 posted on 11/19/2012 5:00:08 AM PST by sport
[ Post Reply | Private Reply | To 32 | View Replies]

To: Kaslin

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.


35 posted on 11/19/2012 5:21:59 AM PST by Daveinyork (."Trusting government with power and money is like trusting teenaged boys with whiskey and car keys,)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Kaslin

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.


36 posted on 11/19/2012 5:22:08 AM PST by Daveinyork (."Trusting government with power and money is like trusting teenaged boys with whiskey and car keys,)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SatinDoll

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.


37 posted on 11/19/2012 5:27:54 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
[ Post Reply | Private Reply | To 8 | View Replies]

To: mosesdapoet

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.


38 posted on 11/19/2012 5:30:40 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
[ Post Reply | Private Reply | To 12 | View Replies]

To: Kaslin

How does Michael Barone have any credibility at this point?


39 posted on 11/19/2012 5:40:17 AM PST by Arm_Bears (The MSM lies about liberals, and it lies about conservatives.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Kaslin
“Both Sides Must Give Ground To Avoid Fiscal Cliff”

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?

40 posted on 11/19/2012 5:56:02 AM PST by Nip (BOHEICA and TANSTAAFL - both seem very appropriate today.)
[ Post Reply | Private Reply | To 1 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-2021-4041-53 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson