Big Red Car here.
So yesterday, we learned that the Fiscal Cliff is not a new bar in South Austin. But, really what the Hell is it? What’s really going on here?
Tax increases and a few small spending cuts
Sure we know it’s a bunch of expiring tax rates which create tax increases while defense and non-defense discretionary spending is going to have to be cut and then there is the AMT business and the “doc fix” and the wind tax expiring and the Social Security payroll tax rate going back up by 2%. And capital gains and dividends and the new Obamacare taxes.
And somewhere in there there is supposed to be a splash of entitlement reform.
But at the end of the day, it’s just about taxes going up and the tiniest bit of spending being cut. And, maybe, some entitlement reform but don’t hold your breath.
Oh, yeah, the debt ceiling has to be dealt with again in February or March and the Secretary. The Secretary of the Treasury has been filling out a lot of credit card applications looking for one with an unlimited credit limit. He tried to get Speaker Boehner to co-sign a couple of credit card applications but Boehner said — no way, Jose.
I think I am right about that. But what the Hell, I’m just a Big Red Car.
So here’s what’s really going on — this according to a big long black Mercedes, owned by a lawyer, which was parked across from the Capitol. We had a nice chat while The Boss had a couple of lattes.
Taxes are going up (for the richest Americans)
The White House wants to increase taxes on the wealthiest Americans and the Republicans in the House of Representatives do not. Both the White House and the Republicans want to continue the Bush era tax rates for everybody making less than some number — generally $250,000.
Reality is a heartless hand maiden — taxes are going up on the rich and the only issue is going to be — who is “rich” and how much are those taxes going up?
Top 1% income break point was $344,000 in 2009. Top 1% is only 1.4MM tax returns.
The top 5% income break point was $155,000. Top 5% is 6.9MM tax returns.
Total tax returns (with positive AGI) are 138MM,
The Republicans couldn’t hang together on this if their lives depended on it. Stop wishing for a big Christmas gift and start smelling the coffee. The Republicans don’t have that kind of grit or sand or whatever the hell you want to call it.
Increased taxes (revenues) v spending reductions
The Republicans want to reduce spending to cut the deficit and the President does not. Oh, you can see his lips moving but he’s not really saying anything. And everyone looks like around they are peeing in the ocean — you know that distracted look little kids get — when the issue of cutting entitlements is mentioned. Everyone knows it has to be done but it is political suicide to be the guy with the knife when the lights come on.
Before the election — which President Obama won — the White House wanted $800B in new revenue and Republicans were willing to consider new revenue to the tune of $400B but only if there were substantial spending reductions.
Now after the election, the White House wants $1.6T (that’s trillion) in new revenues and the Republicans are willing to consider $800B (that’s billion) but, again, only if there are some very substantial spending reductions.
Now last night, the White House has reduced its demands to $1.4T making the first concession — $200B — from a number which is twice what it was before the election.
I wonder if the White House went to the Chester Karass Negotiating Seminar?
The debt ceiling
Oh, yeah, I forgot to mention that the White House also wants no limit on the Federal debt ceiling. They consider this a serious proposal. I am not kidding, folks.
The Executive branch of our government wants the Legislative branch of our government — two theoretically co-equal branches of the same government but with wildly different roles — to abrogate its core responsibility, the appropriation and control of spending.
You may recall the game of chicken that was played last time around on increasing the debt ceiling was exactly what precipitated the Fiscal Cliff. This was the huge Kabuki theater in which the White House threatened “defaulting” on the Nation’s debt. An idle threat really, it would just have precipitated some meaningful spending cuts. Perhaps a diet we should look into.
Looking at the preceding video, would it be fair to say that the President has changed his views on the national debt?
Fool me once
In the end, the White House got what they wanted in return for a pocket full of promises including creating the mythical Supercommittee which failed to get its work done thereby kicking the can down the road. That road would be Sequestration Boulevard. That can being kicked toward the cliff we are now approaching.
So the White House now has a reputation of being the guys who say — hey, give us what we want now and we will “work with you” at some mythical point in the future to get you yours.
The White House is really that bold and the Republicans in the House are really that stupid. Sorry. Truth hurts.
The Obamacare tax increases
The implementation of Obamacare is going to be more costly for everyone. Obamacare is a program funded by — guess what — “enhanced” revenues — higher taxes for everyone who actually pays taxes. That would be the top 50% of the taxpaying segment of America.
We have not even begun to understand the taxes which are secreted in that program. They are many and they are big.
What does this have to do with jobs and the economy?
Nothing. The real issue we are dealing with and which is being ignored is the anemic state of our economy and the weak job creation performance.
In this entire debate about the mythical Fiscal Cliff have you heard anyone say that resolving the Fiscal Cliff issue will actually create jobs or jump start our economy?
I have not and neither have you.
The dueling banjoes
The White House, in my view, has the better side of this issue. Nobody is going to be particularly sympathetic to the tax rates of the top 1% — the top 5% is a different issue to be sure.
So as the White House advances its campaign expect to hear a lot more about “fair share” and the millionaires and billionaires.
The Republicans are unlikely to even keep the strings on their banjo intact. By Christmas the Republicans will be singing soprano.
But, hey, what the hell do I know anyway? I’m just a Big Red Car.
Be kind to yourself.
