While this cliff is not nearly as high as the other cliffs that we are rapidly approaching, the debt cliff and the entitlement cliff, the effects of driving off of this cliff without taking real steps to address our spending, debt, and entitlement liabilities will be very painful in an economy that is continuing to stagnate except for massive government spending.
Every single taxpayer will get a 10% across the board tax increase as we go off the cliff. On top of this, the 2% temporary payroll tax reduction pushed by Barack Obama (and touted as his 'tax cut' for 95%) will end. The estate tax will resume - at a punitive level. The tax rate for Dividend income will soar from 15% to 43%, while the tax rate for Capital Gains will jump from 15% to 23%. Hundreds of thousands of the middle class will find themselves trapped by the Alternative Minimum Tax - paying substantially higher income taxes as the AMT once again is not adjusted for inflation. On top of these tax increases will come nearly a dozen new taxes designed to fund Obamacare.
Between now and the end of the year - we're also going to hit hard up against the debt ceiling which will prevent new government borrowing to fund the greater than $1 trillion annual budget deficit that has become the new normal.
And that brings us to the other major effect of our fiscal irresponsibility - the massive spending, the massive expansion of the size and scope of the federal government, and the unprecedented expansion of government entitlement programs.
Like the Dependency Agenda...
...which has transformed the US into a different country...
Which brings us here...
One would think with the near immediate effect of the January 1, 2013 'Fiscal Cliff', or the $16.4 trillion in national debt (and growing by more than $1 trillion per year), or the $86 trillion in unfunded liabilities related to the three largest elements of government spending - Medicare, Medicaid, and Social Security - the President would be focused on ensuring that we do not just rush headlong off these cliffs at full speed.
One would also think that with the economy killing effects of new tax increases, the burden of Trillion dollar plus annual deficits, the massive expansion of government entitlements (in both costs and numbers of people dependent on the government), the rapidly approaching insolvency of the three largest entitlement programs, and the one-third growth in spending - the President and his supporters, if they really feared taking the nation over these cliffs, would be looking at reducing spending, reforming the tax code, and getting people off of government dependency as their primary solution to the problems we face.
Unfortunately, we now live in a universe where normal logic has been replaced by political expediency - and the definition of many words have been quietly re-defined to fit the combination of political expediency and ideological agenda.
Despite Election Day being a little over three weeks ago, the newly re-elected President has declined to lead and instead continues to campaign and plot the demise of his political enemies, the GOP. This agenda is being supported and enacted by the same media allies who helped facilitate his election win. These allies, despite the President's reelection win, continues to focus on attacking the GOP as sexist, racist, and fiscally evil putting partisan ideology before what is best for the country.
They combine to hammer the GOP position that one of the key fiscal challenges we face are not our revenues, which are nearly pre-recession 2008 highs, but the irresponsible and excessive spending of the federal government. They continue to focus on the importance of new revenues for the federal government irregardless of the damage done to the economy by touting the need for 'fairness' and 'balance'.
We're told that we need to have 'balance' - addressing the fiscal challenges by a combination of tax increases (new revenues) and spending reductions. We're also told that we need to balance out these tax increases in the name of 'fairness' - by putting the burden of new taxes on the wealthy who can afford to pay more in order to reduce the national debt.
But rarely are we told how specious these terms really are - or that for the President and his progressive allies, going over these cliffs are necessary steps to facilitate their "fundamental change" of America.
Various pinheads spew forth the fallacy that the reason we had a large economic expansion from 1995 to 2000 was because of the 'Clinton-era tax rates' which were 10% higher than the rates we've paid for the last 10-12 years. But where is the balanced approach to match these 'Clinton-era tax rates' with Clinton-era spending levels - and the acknowledgement that the reason why 1999-2000 ended up in budget surpluses were because of strong private sector economic growth and reduced levels of federal spending?
Or where is the balanced approach towards addressing spending by including the three largest elements of federal spending, Medicare, Medicaid, and Social Security with Defense spending and all of the other elements of federal spending? Do we really need to spend over $300 billion in farm subsidies, rural electricity subsidies, ethanol subsidies, and other entitlements funded by either borrowing or yanking more funds away from the private sector where they fuel growth?
How about the fallacy around 'fairness' - were the President wants to focus on the 'wealthy' to pay their 'fair' share in order to reduce the debt?
Where's the fairness when half pay no taxes whatsoever - or that the top 5% of tax filers, who account for 32% of the nation's total income, already pay 59% of all the taxes?
In the President's 'solution' to our problem - we're told that the 'wealthy' have to pay more taxes, 10% higher, in order to reduce the deficit. But one has to wonder just how far $40 billion in additional revenues from taxing the wealthy their 'fair share' will go into an annual federal government deficit of $1.2 to $1.4 trillion? And that $40 billion of 'new revenues' is assuming that 'taxing' the 'wealthy' will not damage the private sector...which would be the case despite the misrepresentations of the President to the contrary...
All of this debate, however, pales in comparison to the actual offer that the President made towards the GOP Congressional leadership earlier today [Nov 29th] as their solution to prevent the nation from plummeting off this first cliff.
The offer, made by SecTreas. Tim Geithner to senior GOP members of Congress, including Speaker John Boehner and Senate Minority Leader Mitch McConnell, clearly demonstrated that the President could care less not only about taking the nation over the cliff, but in achieving a compromise with the GOP. He seems firmly convinced that if the country goes off the cliff, the blame would rest [courtesy of media propaganda] entirely on the GOP - and the more dire the conditions become, the more likely he will be able to get what he wants along with more 'fundamental change'.
The offer focused on several key demands. First was the demand for $1.6 trillion in new taxes. Second was the demand for a new round of stimulus spending - to the tune of several hundred billion dollars per year. Third was for Congress to completely surrender their oversight of the national debt ceiling - effectively ending the ceiling. Finally to 'balance' these, the President agreed to some vague spending reductions - in amounts far less than the amounts of the new spending levels demanded - which would need to be negotiated over the next year and be non-guaranteed. In other words, if an agreement couldn't be reached on which programs to cut - no programs would be cut.
In fact, the President has no real plans for any significant spending cuts...
The offer was so one-sided and absurd that Senator McConnell's initial response was to laugh out loud at it.
I seem to recall in 1986, Democrats approached the President and made a solemn promise - if President Reagan would agree to several tax increases in order to boost revenues, the Democrats would guarantee to respond by supporting spending cuts so that the compromise would result in deficit reductions.
Ronald Reagan is still waiting for those promised spending cuts...as are the rest of us. I don't think they're coming.
I think we need to factor this into whether or not we believe the current promise for spending cuts tomorrow if we give them tax increases today.
The saddest part is that this is not the limit of the absurdity around the fecklessness of the Obama Administration or the Progressive agenda or the anti-Western Agenda. Over the next several days we'll look in more detail at:
- Susan Rice
- Reports of California's Economic Turnaround
- Time Magazine's Person of the Year
- UN General Assembly granting the so-called Palestinian state official status as a non-observer member
- Eurozone Crisis - Our Future?
- Media Bias
Hold on - as the ride will not be getting any smoother....