Skip to comments.Larry Kudlow: Donít Blame Boehner. Plan B was the least-bad option with this President and Senate.
Posted on 12/21/2012 3:13:14 PM PST by SeekAndFind
When you lose an election you get frustrated. When youre sitting in a subpar 2 percent economy, and are faced with tax hikes rather than marginal rate reductions, you get even more frustrated. And when youre staring at $47 trillion in spending over the next ten years, and $8.6 trillion in deficits, your frustration levels climb even higher.
These are among the frustrations that led a number of House Republicans to pull back from Speaker John Boehners so-called Plan B. Nobody looked good on the Republican side when Thursday nights vote fell through. But you have to understand their frustrations. Losing an election is no fun.
I dont blame John Boehner. His idea is the best compromise currently available. Or put another way, its the least-bad option out there. It was even backed by Paul Ryan and Grover Norquist.
There was the million-dollar threshold for letting the top tax rate expire and moving it back to 39.6 percent. All the other Bush tax rates remained the same. Capital gains and dividends would rise from 15 percent to only 20 percent. The estate tax would go to 35 percent, not 55 percent. And everything would be made permanent, unless and until real flat-tax reform by lowering rates and broadening the base took place.
No, there were not enough spending cuts in Plan B. But a couple hundred billion in spending cuts were inserted at the last minute.
Boehner figured that if the House passed Plan B, it could put pressure on President Obama and the Senate Democrats to raise taxes less and cut spending more. A couple dozen House conservatives wouldnt buy it. I understand that. But I still think Boehner was on a noble mission in very difficult post-election circumstances.
The demise of Plan B almost certainly will prolong the fiscal-cliff negotiations, which will spill over into the new year. But I still believe this is a game where all the players are bluffing. Washington lawmakers will not risk a recession by allowing all the Bush tax cuts to expire, thus pulling $500 billion out of the economy, and by rolling back important economic-growth incentives. I just dont believe it.
And if the negotiations go well into January, the Treasury Department and the IRS can stall any changes in withholding rates. Then a deal can be worked out that will extend the middle-class tax cuts up to a threshold of $250,000 to $400,000. Patching the AMT will be thrown in there, too. So will the so called doc-reimbursement fix, some kind of unemployment insurance, and some small leftover sequester spending cuts.
This will make no dent in our spending, borrowing, and debt problem. But at least it will avert a recession.
For the Republicans, the sooner they can get out from under this mess, and move on to tax, spending, and entitlement reform, the better off theyll be. And for Heavens sake, lets finally cut the corporate tax rate. But for now, its time for a strategic retreat, as the economy teeters over the cliff.
One final thought: In a post January 1 scenario, after Washington has temporarily gone over the cliff and all the tax rates have gone up, any bill that restores the Bush tax cuts actually becomes a bill to cut tax rates, not raise them or stop them from rising. Thats a much better dynamic for the GOPs strategic retreat.
But alas, real reforms for taxes, spending, and entitlements, and real fiscal solvency, and real economic-growth prosperity, still seem very far away.
Larry Kudlow, NROs economics editor, is host of CNBCs The Kudlow Report and author of the daily web log, Kudlows Money Politic$.
I propose plan D - tax those above $1M income based on net WORTH
Then watch the howling
It was a (<1M tax cut) trick to try to beat O at his own game. But it wasn’t very well planned and the R party is totalty fractured and more interested in fighting each other than beating O. Boner is weak and slow but he has a no-win job so NO_ONE will challenge him.
One side cares about symbolic actions, like 33 symbolic repeals of O-care, the other side cares nothing for symbols as they are out to win and take it all, to get what they want.
So in 2015 and 2016 when Pelosi takes back the House and Reid gets back his 59 or 61 Obama will finish the job,.
Piss off Larry!
He failed to bring along the guys who vote on whatever deal he makes. He failed to get his message and plan out to the public. He’s not a dictator. He’s a poor leader.