Obama’s asking for it; maybe the GOP should give it to him

It appears more and more likely that Washington’s new favorite drama, the fiscal cliff, will run as long as possible.

Passing new legislation before Christmas to avoid the cliff — the doomsday nickname given to the combination of across-the-board spending cuts set during last year’s debt-ceiling negotiations and the total expiration of income-tax rates that have prevailed since since 2003 — now seems unlikely. House Majority Leader Eric Cantor on Wednesday said lawmakers can expect to be in Washington during December’s final days.

The fatal conceit in this debate is that the economy will somehow be well-served, or at least survive, if it takes only a half-dose of what Democrats consider poison (spending cuts) and a half-dose of what the GOP deems deadly (tax increases).

If either party is correct, we are in for a rough 2013 at the very least. If both parties are correct, we could be heading for another recession. The irony is that we’re trying to avoid the fiscal cliff in order to prevent … a recession.

Only President Obama has proposed a pure version of his preferred course: A $1.6 trillion tax hike on upper-income earners over the next 10 years, recently reduced to $1.4 trillion, with no guarantee of net spending cuts. The House GOP’s opening salvo had much more of the “balance” Obama insists on.

Many observers have dismissed the president’s proposal as a mere negotiating stance. Perhaps they’re right. But one presumes he wouldn’t have made a proposal he wasn’t ready to accept.

That is, one presumes Obama really believes taking an extra $140 billion out of the economy each of the next 10 years — remember, he says the money is for deficit reduction, not to fund new government spending — would not be harmful to businesses, workers or the unemployed.

Members of Congress are supposed to do what they believe to be in the best interests of the country and their constituents. But if House Republicans cannot persuade Obama to agree to meaningful entitlement reforms, which along with more rapid economic growth are the only way to bring our fiscal house in order, they should consider giving Obama what he wants.

This is not a decision to be taken lightly. But Republicans might not win this policy argument in the long run if Obama can pin the blame for economic damage on GOP spending cuts, while continuing to demagogue the rich for not paying their “fair share,” without consequences.

And there would be consequences for following his plan. Today, $140 billion equals almost 1 percent of gross domestic product. When the economy is struggling to grow by an annual rate of even 2.5 percent, taking another 1 percent of GDP out of the private sector will not help matters.

But what about the 1990s? Didn’t Bill Clinton raise taxes back then, only to watch the economy boom?

Yes, but there are major differences between then and now. Clinton raised taxes as both the U.S. and world economies were stronger than now. He did it when state taxes were broadly lower than they are now. He did it when oil was closer to $20 a barrel than $90 a barrel. He did it before a record housing boom, not after its bust. He did it at the onset of the IT boom, which doesn’t figure to be replicated anytime soon. And before revenues really grew, he cut the capital-gains tax rate, rather than raising it as Obama desires.

Worse, Obama wants to get most of this $140 billion in part by raising marginal tax rates on “the rich” whether their earnings come from their labor or their investments. This has a significant impact on decision-making. For just one current example, look at the growing number of companies paying their anticipated dividends for 2013 out to shareholders now to beat a potential tax hike.

Some of these companies, Costco for example, are even borrowing money to pull off this switcheroo — committing themselves to pay back billions they only hope to earn as profits in the future. Talk about distorting economic behavior.

Obama says the people voted for these higher taxes. While I believe Obama’s proposal would be very harmful economically, congressional Republicans might find themselves with little choice but to allow his policies to prove him wrong in practice. Obama could hardly blame them for letting him entangle himself with the rope he’s demanding.

– By Kyle Wingfield

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504 comments Add your comment

William Reed

December 13th, 2012
5:33 am

I agree, we should follow the President’s lead. It is what we voted for and for good reason. The economy only grows in a consumer one like ours when people have money to spend, that is the middle class who in fact spend their money. When working class folks got paid well for their labor they spent and the economy boomed. Now the wealthy in truth already directly own or control the majority of the wealth, and they aren’t investing it here because we don’t have enough money to buy the products they produce for relatively low cost and can sell to the emerging middle classes in developing countries. This process leaves our economy in serious trouble and the solution isn’t to give the wealthy more money.

southpaw

December 13th, 2012
6:00 am

“A $1.6 trillion tax hike on upper-income earners over the next 10 years, recently reduced to $1.4 trillion”

Look for that to be called a $200 billion tax cut. Only in Washington-speak. Also look for the government to do in 2013 what it did in 1993. New laws will be negotiated and enacted, and they will be made retroactive to January 1.

Joel Edge

December 13th, 2012
6:08 am

I would agree if you can figure out to keep the MSM from pinning the resulting depression on conservative and Republicans.

Joel Edge

December 13th, 2012
6:09 am

figure out how…should have been.

Aynie Sue

December 13th, 2012
6:22 am

Kyle, you describe the “great divide” incompletely. Both Democrats and Republicans favor extending the tax cuts for the middle class.The Republicans want to extend the tax cuts for high-income Americans, as well, but the Democrats want to allow the tax rates of high-income Americans to revert to the Bush-era levels.

Since both parties agree on extending tax cuts for the middle class, why don’t they do that now, and quarrel over the tax rates for high-income Americans later?

Both parties agree on entitlement reforms, and a compromise between the competing demands should be a simple matter.

So, the issue is whether the US economy should be sabotaged if the tax cuts are not extended to high-income Americans.

Stephenson Billings

December 13th, 2012
6:32 am

While I mostly agree with your post, Kyle, I’m not too enthusiastic about either going over the cliff and/or just giving Obama what he wants to “teach them a lesson” only because “they” have not learned anything over the last 4 years. If anything, they wanted to double down on failure. So I don’t anticipate much harm to the Dems if we give them what they want and the economy tanks (again). If there was a lesson to be learned regarding Obama’s failed policies it would have been revealed this past November.

GT

December 13th, 2012
6:33 am

A republican and common person sat down with 10 cookies, a democrat walked in and the
republicn said,WATCH OUT, he`s trying to steal your cookies. When the turned around 8
cookies were missing.

clem

December 13th, 2012
6:44 am

gt, i am little slow this morning. i did not quite get your post as i tink something is missing?

clem

December 13th, 2012
6:48 am

kyle, i read your postings and enjoy them, but could you refresh my memory on your solution to the income/wealth disparity divide which seems to be growing wider?

Willis

December 13th, 2012
6:50 am

We don’t have a revenue problem. We don’t have a spending problem. We have a Congress problem and Boehner and McConnell are most of the problem.

DeborahinAthens

December 13th, 2012
6:54 am

Stephenson Billings, please list Obama’s failed policies. Is it bringing unemployment from 10% down to 7.7%? Is is saving our economy from a prolonged recession? Is is ending one war and winding down a second war–both of which has caused 26% of our deficit spending, both of which were not warranted? Was it finally getting a start on breaking the massive double digit inflation in our healthcare spending? If Repigs had left the Obamacare bill alone we would have a single payer healthcare system instead of Frankenstein-Obamacare. Is one of his failed policies saving (however it was done, it was done) the automobile industry with it hundreds of thousands of jobs in the factories and around the factories (stores, restaurants, clothing stores). More drilling permits have been issued in his administration than Repugs admit–the permits just aren’t on public lands like National Parks. Is one of his failed policies trying to keep Repugs from voucherizing Medicare? Know how we, The People, know when we are getting the shaft? When a politician finds a weird name for a bad thing. Notice how many weird, inaccurate phrases Paul Ryan came up with to keep from saying he wanted to give senior citizens a $6000 a year voucher to purchase health insurance from the “free market” . We aren’t stupid. We seniors know that the free market is why our healthcare system sucks. We know that, armed with out voucher we can try to get insurance. We know that if we have Parkinson’s or Alzheimer’s it ain’t gonna happen, no matter how big the voucher. So please, tell me which policy of President Obama is a failed policy. And don’t you dare start your sputtering with deficits. Only about 6% of today’s deficit comes from President Obama’s policies, 22% comes from the wars, most come from past entitlement commitments which must be paid–things passed over the past fifty years. So, come on, big boy, you with e big mouth. To which failed policies do you refer?

Ronnie Raygun

December 13th, 2012
6:56 am

Just continue the tax cuts for income under $250,000 and the payroll tax cut. There are already around $1 trillion in budget cuts in the sequestration. That way everyone gets what they want. Tax increases for high incomes and massive budget cuts. What’s the problem?

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
7:06 am

Aynie Sue: Both parties agree on entitlement reforms, and a compromise between the competing demands should be a simple matter.
———————

So why not start with entitlement reform, pass that, then move on to taxes?

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
7:09 am

clem: could you refresh my memory on your solution to the income/wealth disparity divide which seems to be growing wider?
———————-

You’ll first have to explain why that’s a problem.

One response might be to suggest that the lower income/poorer folks should stop doing the things that made them low income/poor.

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
7:11 am

Obozo’s commitment to entitlement reform is about as strong as his former belief in the traditional definition of marriage.

One suspects he will “evolve”.

Aesop's Fables and other Lib Economic Theories

December 13th, 2012
7:13 am

If the libs aren’t able to blame the recession they know they will trigger on Congressional Republicans, then they will blame it on Bush. Or possibly Reagan. Or maybe even Fox News. When your voter base is as historically stupid as the democrats are, they’ll mob up against whomever pmsnbc tells them to, barking and baying and babbling in unison.

In other words, you are awfully ill this morning thinking that there is any way that the libs will EVA except responsibility for the disasters they wrought. eva. Even 3 year olds fess up before democrats do.

Let obama do whatever he wants to do, Republicans need to abstain from all voting, let them pass this through the Senate with a 54-0 vote. Tell Boehner and McConnel to shut up. Launch a giant national ad campaign It’s obama’s economy now, enjoy it!

Ronnie Raygun

December 13th, 2012
7:13 am

Lil’ Barry Bailout: So why not start with entitlement reform, pass that, then move on to taxes?

———————————

Because while the President is specifically stating what taxes he wants to increase, the GOP refuses to detail what “entitlements cuts” they are demanding. If they don’t even know (or are too afraid to say in public) what they want to cut, how serious can they really be about budget cuts?

clem

December 13th, 2012
7:18 am

lil barry, clean up aise 5

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
7:21 am

Ronnie Raygun: the GOP refuses to detail what “entitlements cuts” they are demanding
————————–

Wrong.

“McConnell told the Wall Street Journal the White House had to agree to structural changes—like including means-testing in Medicare, raising the eligibility age for Medicare, or slowing cost-of-living increases in Social Security payments—in exchange for more tax revenue.”

http://www.ijreview.com/2012/12/23811-hard-line-gops-senate-minority-leader-mitch-mcconnell-demands-structural-entitlement-reform-for-tax-hikes/

Why not do entitlement reform first?

Your excuse just went poof.

Aesop's Fables and other Lib Economic Theories

December 13th, 2012
7:25 am

DeborahinAthens

December 13th, 2012
6:54 am

please list Obama’s failed policies. Is it bringing unemployment from 10% down to 7.7%? Is is saving our economy from a prolonged recession?

See what I mean about the libs? If it plopped out of their mouths and splattered all over the floor, then it must be true, right? History begins with each and every new day!

When obozo came to office the unemployment rate 7.8% and he proposed an 800 Billion dollar stimulus to keep it below 8%. Not only did it not stay below 8%, it rose to 9.9%, they workforce shrunk as the population has grown and I dare anyone to show us where the 800 Billion went.

Debbie just skips over all the pertinent facts.

Progressive Humanist

December 13th, 2012
7:29 am

Taxes are going up one way or another. Real Americans voted for it.

But Kyle thinks that’s bad for the nation. After his recent (and long term ) track record of predicting various political and economic outcomes, forgive me if I disregard his warning. Good rule of thumb: If a Republican says it’s bad for the country, then make sure it gets done ASAP. If a Republican says it’s good for the country, then we’re going to be in a cluster&$(# if it happens. If a Republican says “X” will win the election, you’d better bet on “Y”. If Republicans say that the majority favors it, you can be sure the majority of Americans oppose it. As long as everyone understands that Republicans live in opposite world and we act accordingly (like on Nov. 6), this country will be just fine.

middle of the road

December 13th, 2012
7:30 am

I am not sure that the tax increases and spending cuts contained in the “cliff” are such a bad thing. The bad part is dropping off the cliff all at once. Why not just put an interim plan in place that the “cliff” changes will take place over the next four years. That takes the pressure off (yes, by “kicking the can down the road”) and gives Congress more time to come up witha COMPROMISE solution. There really should never have been an attempt to settle this before the end of the year – it is much too complicated a subject to address between the election and January 1st. Push it out and get down to some serious negotiatin’.

HDB

December 13th, 2012
7:34 am

Lil’ Barry Bailout – OBAMAPHONE!!!

December 13th, 2012
7:09 am
clem: could you refresh my memory on your solution to the income/wealth disparity divide which seems to be growing wider?
———————-

You’ll first have to explain why that’s a problem.

One response might be to suggest that the lower income/poorer folks should stop doing the things that made them low income/poor.”

LBB…when wealth/income is concentrated in one particular level, the economy becomes a zero-sum game!! The economy stagnates, economic downturns occur, and…as you’d call it…class warfare increases. Tax base constricts, therefore tax increases….particularly on that strata WITH the wealth is mandated! Remember what Willie Suttin said as his reason to rob banks: “That’s where the money is!” Remember: 10% of the populace controls almost 90% of the wealth and income!! When income and wealth are SPREAD throughout the economy…it becomes no longer a zero-sum game!! Tax base is dicersified…and spread, therefore taxes can decrease due to the increased earning capability of the middle class….and national wealth is increased across all strata because the wealth is not concentrated in one economic level.

To answer your statement (lower income/poorer folks should stop doing the things that made them low income/poor)….maybe if the wealth were spread among ALL classes, the motivation NOT to be poor would be increased…..and class mobility would reoccur! When you believe that you’ll always be stuck….and economic conditions reinforce that belief…why try!!!??

middle of the road

December 13th, 2012
7:37 am

“McConnell told the Wall Street Journal the White House had to agree to structural changes—like including means-testing in Medicare, raising the eligibility age for Medicare, or slowing cost-of-living increases in Social Security payments—in exchange for more tax revenue.”

I agree with some of that – like slowing COLAs for SS. But I think that we should listen to what the American people want. If 80% of Americans say they want medicare eligibility to stay the same, we need to look at the second option in any budget resolution – raise Medicare taxes. If you poll Americans and 80% STILL say they want the eligibility age to stay the same, even if it means a 1.5% increase in Medicare taxes, then that should be an indication of what should happen. I don’t like paying taxes, but I sure don’t want to have to try to buy insurance on the open market when I am eighty. So we have to decide what we want to pay for.

HDB

December 13th, 2012
7:40 am

Aesop’s Fables and other Lib Economic Theories

December 13th, 2012
7:25 am

“When obozo came to office the unemployment rate 7.8% and he proposed an 800 Billion dollar stimulus to keep it below 8%. Not only did it not stay below 8%, it rose to 9.9%, they workforce shrunk as the population has grown and I dare anyone to show us where the 800 Billion went.”

We all know that the unemployment rate is a LAGGING indicator as to the effectiveness of the economy…..anywhere from 3-36 months behind the actual economy!! When the economy fell off the table in 2007-8, it was the Bush policies that got us there! Much of the pre-Obama stimulus was directed at the banks and insurance companies (TARP…remember??).

About the $800B…..why don’t you ask those Republican congressmen that posed in front of signs lauding the projects financed BY the stimulus while simultaneously voting AGAINST it?? Why don’t you ask Paul Ryan about HIS REQUEST for stimulus funding for Janesville?? That’s be the beginning to answering your query……….

Aesop's Fables and other Lib Economic Theories

December 13th, 2012
7:49 am

HDB – 4 years later we are back to the 7.7% we started at, we have a 4 Trillion dollar spending binge we have to pay for and there are 8 million fewer workers participating in the economy.

What does Bush have to do with this?

HDB

December 13th, 2012
7:53 am

Reality

December 13th, 2012
7:57 am

@Kyle -

Slowly (very slowly) it seems that you are starting to ‘get it.’

Yes, the GOP should stop being obstructionist. Yes, the GOP should go with what the voters CLEARLY supported in the last election. Yes, the GOP should go with what even the current polls show that the American people want today.

@Aesop’s Falbes – Bush has a lot to do with the US deficit. How can you not see that? Under Clinton, there was a surplus. When Bush came into office, almost immediately the tables turned and the US had a deficit. Under Bush’s ‘leadership’ the economy tanked. So, once President Obama came into office, he had to spend to try to stop the economy from getting even worse. Was Obama perfect – doubtful. But yes, it all started with and all fingers point to Bush. You have to be dumb, blind, and stupid not to see that.

HDB

December 13th, 2012
7:58 am

Aesop’s Fables and other Lib Economic Theories

December 13th, 2012
7:49 am
HDB – 4 years later we are back to the 7.7% we started at, we have a 4 Trillion dollar spending binge we have to pay for and there are 8 million fewer workers participating in the economy.

What does Bush have to do with this?

MUCH!! Name a President that advocated going to war WITHOUT a tax increase to PAY for it?? Name a President that created a policy without FUNDING it (Medicare Part D, NCLB)? Name a President to CUT taxes during war time, therefore shifting the national wealth to those who already had wealth!! When you shift the funding DOWNWARD, you don’t get as much money because the lower economic classes don’t have it!! When you give a tax break to those who already have wealth, money isn’t spread throughout the economy!! These were Bushisms…….

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
7:58 am

HDB: why don’t you ask those Republican congressmen that posed in front of signs lauding the projects financed BY the stimulus while simultaneously voting AGAINST it?
————————

So, Republican congresspeople who voted against the failed “stimulus” were supposed to allow their constituents to pay taxes to fund the stimulus, but get nothing from it?

Do you even think before posting such nonsense?

clem

December 13th, 2012
7:59 am

hdb, thanks for answering for lil barry dumarse. he’s just bitter because he got his clock cleaned last election.

for aesop, speaking of fables, do you think trickle down is working? should we be in a race to the bottom to match our foreign cheap workforce competition? if so, any idiot could lead a corporation almost. why should mike duke make 12m yearly when avg hourly wage at walmart is around 9 bucks? couldn’t you do his job for say 1m?

Reality

December 13th, 2012
7:59 am

@Aesop’s Fables – sorry, my above message was to HDB, not you!

JohnnyReb

December 13th, 2012
8:00 am

Each day the lunecy of the Left becomes more and more unbelieveable.

The Left spouts of Obama helping the middle class. They could not be more wrong.

Raising taxes on the wealthy – you know, the people who make things and set consumer prices – will result in prices going up. The makers can do that. Everyone pays more and more for something. The wealthy can afford it, the middle class cannot.

Result? Fewer and fewer middle class. Answer? Government payments to the so-called poor. And, since the Government can only give what they take away, you guess it, prices go up again.

Obamanomics is by far the most disasterous economic policy the living have seen. And they think he is their saviour.

If we all make it through the next four in-tact it will be a miracle.

Reality

December 13th, 2012
8:00 am

@Lil’Barry – How dumb are you? Would you have preferred for our President to have done nothing and allow the Bush’s failed economy to continue to tank without any action? Really?

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
8:01 am

HDB: Name a President that created a policy without FUNDING it
—————–

Obozo. Stimulus.

Not to mention Obozocare, which is now projected to cost 2-3 times the original estimate.

Reality

December 13th, 2012
8:02 am

@JohnnyReb – Wow. You have really swallowed what FOX News is selling hook, line, and sinker.

Maybe you should rewrite the theory of economics. Because what you say is totally contrary to not only economics, but also to what history has taught us.

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
8:03 am

Reality: Would you have preferred for our President to have done nothing and allow the Bush’s failed economy to continue to tank without any action? Really?
——————-

Our President Bush fixed the CRA/Dodd/Frank housing meltdown (TARP) and the recession ended in June 2009.

Yes, I would have preferred Obozo do no harm to the economy, but the moochers and parasites prevailed.

@@

December 13th, 2012
8:04 am

The GOP should abstain by voting present. They should stand on principle. Let the dems stand on quicksand.

The consequences of failure are long overdue.

clem

December 13th, 2012
8:07 am

thought that is why repubs lost last election

saywhat?

December 13th, 2012
8:08 am

aesop and lil barry-

There is a reason you think the way you do, but with a little more effort, you might see the error of your ways.

http://psp.sagepub.com/content/early/2012/03/16/0146167212439213.abstract

Cherokee

December 13th, 2012
8:09 am

Kyoe I wonder why you include the fiction that Obama is ‘taking’ $1.4 billion ouit of the eoncomy? If he uses that to pay down the debt, it would go back to the owners of that debt, who, by and large, are Americans. They will spend it, or invest it, as they see fit.

You’re smarter than that.

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
8:09 am

@@, it’s disappointing that one party, the GOP, tries to do the responsible thing on fiscal policy to save the long-term future of the country and prevent it from imploding, only to be blamed for a little short-term pain. If they stand their ground and do what’s right by their country, Obozo gets the credit. If they cave and the economy tanks anyway, they’ll no doubt get the blame.

The residents of this country (I hesitate to call them Americans) have voted for “all Santa Claus, all the time”. Any responsibility for paying the bills–well, that’s somebody else’s problem.

saywhat?

December 13th, 2012
8:11 am

” when effortful, deliberate thought is disengaged, endorsement of conservative ideology increases”

Aesop's Fables and other Lib Economic Theories

December 13th, 2012
8:11 am

Reality

December 13th, 2012
7:57 am

Bush has a lot to do with the US deficit. How can you not see that?

HDB

December 13th, 2012
7:58 am

What does Bush have to do with this?

MUCH!! Name a President that advocated going to war WITHOUT a tax increase to PAY for it??

Reality

December 13th, 2012
7:59 am

@Aesop’s Fables – sorry, my above message was to HDB, not you!

Dude can’t even keep his bloggers straight.

obama has had a chance now for fours to 1) pull out of Afghanistan, 2) raise taxes to pay for it. He hasn’t done either. You keep blaming Bush.

Do you suck your thumb much?

Georgia , The "New Mississippi"

December 13th, 2012
8:12 am

Kyle,

J -Bo needs to man up and state the cuts he wants so the public will know what he values and what he is willing to sacrifice. When President Obama asks department and agencies to submit their proposal for 10 % across the board spending reductions the rubber will hit the road fast. Naturally, it is good politics to let the cuts be in GOP Johnny Reb led states and then go from there.

Lil' Barry Bailout - OBAMAPHONE!!!

December 13th, 2012
8:13 am

Cherokee: If he uses that to pay down the debt
———————–

That’s not what Obozo plans to do with any increased tax revenue. But thanks for the laugh.

GB101

December 13th, 2012
8:13 am

The argument that the 140 billion per year in increased taxes will slow economic growth is important. Equally important is the fact that the taxes proposed barely touch the deficit. We spend 140 billion in less than two weeks.

Georgia

December 13th, 2012
8:15 am

How the right despises the president. “….letting him entangle himself with the rope…….”. Very thinly veiled contempt.

Aesop's Fables and other Lib Economic Theories

December 13th, 2012
8:15 am

saywhat?

December 13th, 2012
8:08 am

aesop and lil barry-

There is a reason you think the way you do, but with a little more effort, you might see the error of your ways.

saywhat – If alcohol is keeping me from wanting to have sex with another guy and become a lazy parasite, then I say Bottoms Up! baby.

curious

December 13th, 2012
8:16 am

Kyle,

Good thing you have Lil Barry posting, otherwise you’d only get a few dozen comments per article.

At least he keeps his comments civil. Right?