President Obama has been out campaigning for his tax hikes on the rich. If you took a drink every time he has said “balance” since he’s been talking about this you’d be in the hospital with alcohol poisoning. He never defines balance. He just says we need it. But all he talks about is raising taxes. He doesn’t mention cutting spending. So, what’s this balance he talks about – raising taxes on everyone, or only raising taxes on the rich? How is raising anyone’s taxes without cutting spending a balanced approach?
It’s like a family with a gross income of $60,000 per year spending $90,000 per year plus interest on the debt they’re racking up. A balanced approach would be to cut spending and looking for ways to bring in some more income to pay off the debt. An unbalanced approach would be taking cash out of the 401K to pay the interest on the debt while continuing to spend $90,000 per year. Using the unbalanced approach, how long would it take the family to go bankrupt?
As for the tax increases on the rich Obama is so insistent on, Doug Ross made a chart so you can visualize the impact the additional revenue (assuming there would be additional revenue, which certainly isn’t a sure thing) on the budget.
The pie represents federal outlays. The red part is the debt and interest that has to be repaid. The blue part is all other spending, and the teeny tiny little green sliver is the impact of the tax hikes Obama wants. That doesn’t look balanced to me.
In related news, White House spokesman Jay Carney doubled down on the demand for tax hikes.
White House press secretary Jay Carney said Thursday there will be no deficit deal unless Republicans agree to raise tax rates on the wealthiest households.
“There can be no deal without rates on top earners going up,” said Carney, who reiterated that the president will not sign legislation that extends the Bush-era tax rates for the wealthy.
House Speaker John Boehner and Senate Minority Leader Mitch McConnell both pretty much said “no way,” and they’re still looking for those elusive cuts the Democrats don’t want to talk about.
“We’re insisting on keeping tax rates where they are, first and foremost, to protect jobs and because we don’t think government needs the money in the first place,” McConnell said on the Senate floor.
“The problem, as I’ve said, is that Washington spends too much. But if more revenue is the price that Democrats want to exact, then we should at least agree to do it in a way that doesn’t cost jobs and disincentivize rates, as we all know raising rates would do,” he said.
McConnell’s comments came a day after Speaker John Boehner (R-Ohio) shot down a proposal by a senior GOP lawmaker, Oklahoma Rep. Tom Cole, to agree to extend tax rates only for families earning below $250,000 and resume the battle against higher tax rates on the wealthy next year.
Boehner said President Obama and Democrats should focus on finding ways to cut spending and reform entitlement programs.
So, who will blink first? Conventional wisdom tells us the Republicans will fold like a cheap suit. On the other hand, Larry Kudlow argues that Obama has far more to lose by not compromising.
Now, some people argue that Senate Democrats, and perhaps the president, should just let all the tax cuts expire this year. That of course would bring on a recession, or at least an even more anemic economy. Just blame the Republicans, it is said.
But I don’t buy this. Why? Because the president does not want a second recession during his watch. Herbert Hoover Obama is not the legacy he’s after.
And that’s why Republicans should hold firm to their principles on spending and tax rates. Then, next year, new efforts for deeper tax and entitlement reforms can proceed in an orderly way.
Kudlow has a point. The only problem is the assumption that Obama isn’t truly on some sort of Marxist mission to simply extract as much money from the wealthy as he possibly can, consequences be damned. He obviously has no understanding of basic economics, but he does understand the power of the pulpit, especially with a friendly media. Look at all of the terrible things FDR did to the economy, yet he was elected to four terms and the history books have been exceedingly kind to him.
Update: Treasury Secretary Timothy Geithner met with Mitch McConnell to lay out the administration’s “balanced” approach to solving the nation’s fiscal problems. It was so absurd, McConnell burst out laughing.
Mitch McConnell, the Senate Republican leader, says he “burst into laughter” Thursday when Treasury Secretary Tim Geithner outlined the administration proposal for averting the fiscal cliff. He wasn’t trying to embarrass Geithner, McConnell says, only responding candidly to his one-sided plan, explicit on tax increases, vague on spending cuts.
Geithner’s visit to his office left McConnell discouraged about reaching a “balanced” deal on tax hikes and spending reductions designed to prevent a shock to the economy in January. “Nothing good is happening” in the negotiations, McConnell says, because of Obama’s insistence on tax rate hikes for the wealthy but unwillingness to embrace serious spending cuts.
Geithner suggested $1.6 trillion in tax increases, McConnell says, but showed “minimal or no interest” in spending cuts. When congressional leaders went to the White House three days after the election, Obama talked of possible curbs on the explosive growth of food stamps and Social Security disability payments. But since Geithner didn’t mention them, those reductions appear to be off the table now, McConnell says.
No wonder Geithner had so much trouble with his taxes, he’s as bad at math as his boss. The tax increases on the top two tax brackets don’t even come close to $1.6 trillion.