Monday, November 28, 2011

US Tax Mess & Fiscal Responsibility

Saturday's edition of The Wall Street Journal featured a detailed report for the American consumer that tried to highlight the taxation mess that our Federal Government has brought to us. 

The American taxpayer is facing some significant changes in our tax obligations over the next several years.  This is because of not only the failure of the Congressional Supercommittee, but the overall failure of both Congress and President Barack Obama to address the fiscal challenges that we face.

President Obama likes to accuse the 'Republican Congress' for the gridlock and failures to address the fiscal challenges we face.  This is as disingenuous as the accusations that the Republican members of Congress are preferring to put partisan politics ahead of the needs of the country.  The 'Republican Congress' doesn't exist.  While the Republicans hold a substantial majority in the House of Representatives, the Democrats of President Obama's party, hold a 53-47 majority in the Senate (when we count the 2 Independents who caucus with the Democrats as Democrats).  The Democrat Senate Majority Leader, Harry Reid, has a major role in defining and detailing the direction and attention of the Senate.

Over the next 13 months, because of the Democrats, in particular President Obama's interest to use a 'do-nothing Congress' as a political campaign strategy, we are looking at some substantial tax increases that we are going to have to absorb even as we still stagnate in a weak economic recovery of over 9% unemployment (about 17% real unemployment) and ~2% economic growth.

Scheduled to expire 12/31/11
  • 2% Social Security Payroll Tax Cut
  • A fix for the Alternative Minimum Tax to protect middle class families
  • IRA charitable contributions for those older than 70 1/2
Scheduled to expire 12/31/12
  • Bush Tax Cuts from 2001 and 2003 for all taxpayers
  • Top tax rate for individuals will reset from 35% to 39.6%
  • Top capital gains tax rate will reset from 15% to 20%
  • Special 15% rate on dividends
  • Estate tax provisions
  • 10 million taxpayers who currently pay no taxes will return to the tax rolls
Come 2013 and 2014, we're going to see even more tax increases resulting from current legislation that will limit the deductions available to high income earners, in addition to those related to healthcare reform.

Yet all of this does little to address our fundamental problem and lack of fiscal responsibility.  This Administration and Democrat Congress have added more to the national debt since January 2009 than not only the previous President did between 2001 and 2008, but more than the first 42 Presidents have done.  On top of this we are still adding $1.5 trillion of debt every year - and appear to be doing so for the foreseeable future as we spend $4 trillion per year..over $1 trillion more per year than we spent in 2007 - the last 'Republican' federal budget.

The countries in Europe that are on the verge of default all share a national debt to GDP ratio of greater than 115% - Greece, for example is at about 145%.  As the US stands today, with it's National Debt Clock, we are at about 100%.  Within the next decade, unless some fundamental changes are made, we will surpass the Greek levels in this ratio.

The President and Democrats are blaming the Republican's in Congress for the inability to address the fiscal challenges - specifically the GOP refusal to endorse and support major tax revenue changes - tax increases above and beyond those which we see detailed in the WSJ Tax Report.  They see class warfare / tax the wealthy as the solution - but the revenues, if we ignore the Laffer Curve, fall far short of what is needed to address deficits that we are now experiencing or projected to have.  At best they are just more efforts to kick the can down the road while the 'social justice' efforts continue.  As Europe is seeing now, we can't kick the can far enough down the road to avoid the ramifications of bad economic policy decisions.

Some may dismiss this as just a partisan argument being made by a conservative against the progressives.  That this is an effort to misrepresent the causes of the challenges and point the finger of blame at the progressive Democrats rather than 'compromise' to 'fix' those economic challenges by embracing a 'fair' solution.  BS!

We're being asked as to what we are to believe, our own 'lyin' eyes' or what the Democrats, the President, and their Media cheerleaders are trying to shovel feed us.  To me, what I am seeing is a complete lack of fiscal responsibility from the President and Democrats.  When was the last Federal Budget actually passed?  Not a series of continuing resolutions, but an actual budget as required by Federal law? 

Still not following?  How about this incriminating timeline...
January 25 – In his State of the Union address, President Obama proposes freezing “annual domestic spending for the next five years.” This freeze would lock in elevated spending levels (24 percent non-defense discretionary, not including stimulus) and produce an estimated $3.8 trillion in deficits over the period in question. Subsequent analysis revealed that, because the White House shifted and hid new spending, non-defense discretionary spending would actually increase even further next year.

February 14 – President Obama proposes a budget with $8.7 trillion in new spending (CBO’s re-estimate actually finds $9.6 trillion in new spending).

February 15 – The House of Representatives begins debate on a bill that would cut spending by $61 billion. President Obama promptly issues a veto threat.

April 11 – Press Secretary Jay Carney: “We should move quickly to raise the debt limit and we support a clean piece of legislation to do that.”

April 13 – President Obama delivers a speech where he lays out a “framework” that he claims will lead to $4 trillion in deficit reduction over the next 10–12 years. In reality, using OMB’s own numbers, deficits under the “framework” are $3.2 trillion higher than the president’s own fiscal commission.

April 15 – The Republican-controlled House of Representatives passes its budget, which cuts $6 trillion in comparison to the President’s budget.

April 19 – S&P assigns a negative outlook to the U.S. credit rating, signaling at least a one-in-three likelihood that the agency will lower the nation’s long-term rating.

May 1 – Total federal spending since President Obama took office reaches approximately $8 trillion.

May 11 – Austan Goolsbee, chair of the president’s Council of Economic Advisers, says it is “quite insane” to tie spending cuts to the debt limit increase.

May 17 – Chairman Conrad continues to delay the unveiling of his latest secret budget, announcing that “I’ll say something later — not today, probably… There are a lot of conversations under way.”

May 18 – Majority Leader Reid says it would be “foolish” for Senate Democrats to offer a budget.

May 19 – Chairman Conrad announces he will not reveal a budget to the public until after the Gang of Six produces a proposal.

May 25 – The Senate rejects President Obama’s budget by a vote of 0-97.

May 23 – Senator Schumer, when asked why there is no alternative to the House-passed budget, answers, “To put other budgets out there is not the point.”

May 26 – GOP Senators join Ranking Member Sessions in asking Reid not to break for the Memorial Day recess until Senate Democrats bring forward a budget so the Senate can fulfill its duty.

June 7 – Even some Senate Democrats become anxious about their party’s lack of a budget.

June 29 – Chairman Conrad tells Politico, “Senate Democrats have reached an agreement on a plan — just now — and we’ll be putting that out sometime soon.” (Note: the plan was never made public, but a leaked outline revealed that it contained as many as $2 in tax hikes for $1 in spending cuts.)

June 29 – Sessions renews call for the Senate to remain in town to deal with its budget and debt ceiling work.

July 1 – Sessions and Finance Committee Ranking Member Orrin Hatch ask the president to reveal, in detail, what his deficit reduction plans actually are. No response is received, and the president’s February budget remains the only plan he has ever put on paper (thus the only plan that can be estimated by CBO) and shared with Congress or the American people.

July 8 – On the 800th day since Senate Democrats passed a budget, the unemployment rate rises to 9.2 percent (the third straight month above 9 percent).

July 19 – Amid continuing calls for the president to reveal what spending cuts he actually supports, Carney says that “leadership is not proposing a plan for the sake of having it voted up or down…”

July 22 – At a press conference discussing his position on negotiating a debt limit increase, President Obama declares, “The only bottom line that I have is that we have to extend this debt ceiling through the next election, into 2013.”

August 2 – Following passage of the debt limit increase package in the Senate, President Obama calls for America to “live within our means” immediately before advocating a further increase in government spending, framed, as usual, as “investments.”

August 3 – Government borrowing tops 100 percent of GDP as the U.S. accumulates $4 trillion in gross debt under President Obama, well above the 90-percent threshold identified by economists Rogoff and Reinhart as when debt harms economic growth and brings down job creation.

August 5 – S&P downgrades the U.S.’ credit rating from AAA, the first time the nation has had less than the top rating since receiving it in 1917.

September 8– Shortly after the passage of the debt limit deal and the spending cuts that went with it, President Obama announces a second stimulus bill that would cost $447 billion. CBO later admits that stimulus spending depresses long-term economic growth.

September 18– President Obama unveils a deficit reduction plan that he claims will reduce deficits by $3 trillion through a combination of tax increases, war savings, and other spending cuts. But a Budget Committee analysis reveals that, thanks to a number of budget gimmicks, the plan would reduce deficits by only $1.4 trillion and would rely entirely on tax increases.

October 14900 days pass since Senate Democrats last offered a budget plan.

November 7– The Congressional Budget Office reports that total federal spending increased in Fiscal Year 2011 by $145 billion over the previous year’s level.

November 9– House Minority Leader Nancy Pelosi claims that Democrats didn’t pass a budget when they controlled both chambers of Congress because “Republicans would have filibustered it,” but as she should know, budget resolutions can’t be filibustered.

November 11– As the supercommittee continues its tense negotiations, President Obama departs for a nine-day trip to Bali, Indonesia, and Australia.

November 13– Supercommittee member James Clyburn, the House Assistant Democratic Leader,says that a draft Democrat proposal has been outlined. A Budget Committee analysis estimates this outlined proposal to contain a dramatic tax increase-to-spending cut ratio of 4:1.

November 16– On the 931st day since Senate Democrats offered a budget, the U.S. gross national debt tops $15 trillion.

November 18– In search of common ground, Republican Sen. Pat Toomey puts forward a draft proposal with both spending cuts and tax revenue. Democrats summarily reject the offer.

November 21– New York City Mayor Michael Bloomberg chides President Obama, saying that “It’s the Chief Executive’s job to bring people together & provide leadership. I don’t see that happening [with the] #SuperCommittee”

November 22– President Obama places multiple calls, over the course of the month, to European leaders regarding their countries’ debt problems. Meanwhile, Jay Carney says it was “absolutely not” a problem for “him not to have been as involved” with the supercommittee negotiations.

There is no serious interest or efforts by the President or his fellow Democrats to make any fundamental changes in the fiscal policy of the Federal Government even though it is unsustainable. 

The President, and his fellow Democrats, are the one's actively putting partisan politics before the best needs and interests of the country.  This is the 'fundamental change' that the President and progressive Democrats promised in 2008.  A country that is charging down the road to default at 1,000 mph - and they want to hit the afterburner hoping to remake this country before their fiscal irresponsibility catches up to them.  They don't believe that there will be a day of fiscal accountability - that government can do what it needs to do to avoid default....not understanding that this accountability cannot be dodged.

We need to highlight this information.  The Democrats think that 2012 will show 2010 as an outlier...but if we can highlight the facts of the situation, 2012 will be for the Democrats what they hoped 2008 would be for the Republicans....

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