Monday, December 3, 2012

Quick Hits - December 1-3, 2012

Treasury Secretary Tim Geithner took to a number of the Sunday morning talk programs to continue the PR push for Barack Obama's plan to avert rushing over the fiscal cliff - Taxmageddon - that we face in less than 30 days.  The message of the SecTreas continued by focusing on the importance of increasing tax rates for the 'wealthy', those earning over $250,000, in order to reduce the deficit and achieve 'fairness' - points that the President made on Friday at a toy manufacturing plant outside Philadelphia, PA.
President Obama took to the road Friday to sell his plan to avoid a looming series of tax increases and spending cuts, using a campaign-style event to accuse Republicans of holding the middle class “hostage” during deadlocked negotiations.

“It’s unacceptable for a handful of Republicans in Congress to hold middle-class tax cuts hostage,” Obama said at a toy manufacturing plant in a suburb of Philadelphia. “Let’s give families all across American the sense of security they deserve this holiday season.”
Middle class tax cuts?  There weren't any middle class tax cuts offered in the 'solution' offered by the White House to the GOP Congressional leadership.  KEEPING THE TAX RATE THE SAME AS IT HAS BEEN FOR THE LAST DECADE IS NOT A TAX CUT.  Preventing the tax rate from rising 10% is NOT AN EFFIN' TAX CUT.

But this and similar lies and misrepresentations are now standard operating procedure from Barack Obama and his sycophantic shills within the Administration - and within the mainstream media.

The appearance by SecTreas Geithner on Fox News Sunday hosted by Chris Wallace offered another one of  the standard lies and misrepresentations offered by the President in their proposed 'solution' to our fiscal crisis - the bogus and ludicrous claim that 'war savings', savings from ending military operations in Iraq and Afghanistan, count as part of their spending reductions - efforts to reduce the massive spending of the Federal Government.

Finally, a journalist / host calls this for the scam that it is...

As noted on HotAir's commentary - why not add another $200 billion to the 'savings' category that will come from the $200 billion we aren't spending to invade..... [name any country here].

The tax dodging Secretary of the Treasury, while on Fox News, also drew a new line in the sand in front of Congressional Republicans, by insisting that no deal will be done unless tax rates increase for the 'wealthy'.

All of this posturing by the Obama Administration, in the name of 'fairness' and 'balance', is part of their claim that the fiscal challenges we face today are the result from inadequate revenues - tax rates that are too low to fund the government that 'we need', ensure 'social justice', and make certain that those who became wealthy in this country pay their 'fair share'.

What is being ignored, because of the ideological blinders the President and his supporters wear, is that the fiscal challenges are not related to the 'unfairness' of our progressive income tax system, the lack of 'social justice', and tax rates that are too low.

Our fiscal challenges today are the direct result of one simple problem - WE SPEND TOO MUCH.  In fact, we spend way beyond our means / revenues.  SPENDING IS THE ROOT PROBLEM we have to address. 
When Bill Clinton so famously "balanced the budget" with the Internet boom and all the taxes from those stock sales, the GOP and Newt Gingrich passed a budget (yes, Congress used to do that) of $1.7 trillion in expenditures. Adjusted for inflation, our federal government would be spending $2.3 trillion today and collecting $2.5 trillion in "revenues," resulting in a $200 billion surplus. But instead of increasing government spending in line with normal inflation, under Bush and Obama we are spending $3.8 trillion today. Democrats, who believe we have a "revenue" problem instead of a "spending" problem, must also think they have a bartender problem, not a drinking problem.
Let that sink in for a moment.    If we maintained the spending level of the Federal Government as it was under those 'boom' years of President Bill Clinton, adjusted only for inflation, we would have an annual budget of $2.3 trillion today.

In Fiscal Year 2007, the last year of the GOP control of Congress, Congress and President Bush approved a budget that called for $2.7 trillion in spending.

Yes, President George W. Bush was a spender.  That was one of his biggest challenges with conservatives - he started us down the path of spending too much.  But, he also undertook steps to increase the revenues for the Federal Government - via his tax cuts.  Under President Bush (43), we had record setting revenues for the Federal Government.  FY2007 had a budget deficit of $161 billion.  We've had MONTHS since 2009, where the monthly deficit exceeded $161 billion.  On Black Friday of this year, just the one day, the Federal Government borrowed nearly $25 billion - about 16% of the entire 2007 annual deficit.

But while President Bush (43) was a spender, President Barack Obama has taken that crown and dramatically increased our spending  by a THIRD (!) - resulting in four (soon to be five) consecutive years of an annual deficit of over $1 trillion.

This is where our debt and fiscal crisis comes from.  We anticipate this year's federal government receipts will be about the same as they were in 2004 - perhaps a little higher.  Receipts are down largely because of the continued stagnating economic conditions that we face.  But rather than running a FY2004 level budget deficit (about $400B), the massive overspending undertaken by President Obama will add about $1.1 to $1.2 trillion to the national debt.

Here's another way to look at this issue -

As the Investors Business Daily noted, using the Federal Government (Obama Administration's) own data, the claim by Barack Obama that President George W. Bush's tax cuts in 2001 / 2003 were the cause of the massive deficits we've experienced over the past 4 years is nothing but a base canard.  The economic stimulative effect of the Bush tax cuts, 10% across the board for every single taxpayer regardless of income level, reduced the budget gap that was forming from the increased spending of the Bush Administration and Congress.
Kicking off fiscal cliff negotiations last month, Obama said: “What I’m not going to do is extend Bush tax cuts for the wealthiest 2% that we can’t afford and, according to economists, will have the least positive impact on our economy.” During the White House press conference, he added, “If we’re going to be serious about deficit reduction, we’ve got to do it in a balanced way.”

Obama argued voters made it clear in the election that they don’t want to go back to Republican policies that “cost” the Treasury revenues and “blew up the deficit,” as he told them repeatedly during the campaign.

The Washington media by and large share these assumptions. And they’re driving the debate over what to do about the federal budget crisis before Jan. 1, when the tax cuts and spending programs are set to expire.

But the assumptions are faulty, based largely on political demagoguery rather than hard numbers — including ones certified by Obama’s own fiscal policy advisers and bean counters in the White House. . . . Based on Bush fiscal policies, the nonpartisan Congressional Budget Office projected budget deficits of 0.7% to 1.5% of GDP for the years 2008 through 2011. The CBO even predicted surpluses for the subsequent years through 2018. . . . Obama’s economic report shows that the average deficit-to-GDP ratio during the entire Bush administration — 2001 to 2009 — was 2%, which is well below the 50-year average of 3%. During the Obama years, in contrast, the same deficit ratio has averaged 9.1%.

The Bush tax cuts did not "cost" the Treasury revenues. Nor did they increase income inequality.

When fully implemented, they increased the portion of the income tax burden that fell on the wealthiest Americans.

The top 1% of taxpayers went from paying 38.4% of overall taxes to 39.1%, while the bottom 50% saw their share drop from 3.4% to 3.1%.

And as a percentage of the economy, deficits shrank to historically low levels. Record red ink flowed much later as the housing market toppled and government spending shot up.

New spending on welfare programs and Obama's $1.9 trillion national health care entitlement threaten only to compound the budget crisis.
I suspect that these facts are the primary reason why the President does not want any of the fiscal cliff / debt reduction talks with GOP Congressional leaders to be made public as the GOP leaders are insisting.  If they were public, and outside the spin control of the WH / Mainstream media shills for the President's progressive agenda, the American people would be able to see which side is lying about their agenda and which side is actively trying to address the challenges the country is facing.

As Mark Steyn noted in his column on Friday, if the American people want a Euro-style government based around 'social justice', 'fairness', and massive entitlements, then the American middle class will have to pay Euro-style taxes...
Obama now wishes "the rich" to pay their "fair share" - presumably 80 or 90 percent. After all, as Warren Buffett pointed out in the New York Times this week, the Forbes 400 richest Americans have a combined wealth of $1.7 trillion. That sounds a lot, and once upon a time it was. But today, if you confiscated every penny the Forbes 400 have, it would be enough to cover just over one year's federal deficit. And after that you're back to square one. It's not that "the rich" aren't paying their "fair share," it's that America isn't. A majority of the electorate has voted itself a size of government it's not willing to pay for.

A couple of years back, Andrew Biggs of the American Enterprise Institute calculated that, if Washington were to increase every single tax by 30 percent, it would be enough to balance the books - in 25 years. If you were to raise taxes by 50 percent, it would be enough to fund our entitlement liabilities - just our current ones, not our future liabilities, which would require further increases. This is the scale of course correction needed.
Throughout the Presidential campaign, Barack Obama and his key spokespeople repeatedly hammered the fiscal / taxation plans of Mitt Romney and Paul Ryan saying that the only way that those plans could work is if taxes were massively increased for the middle class.

This was nothing but another case of projection by the President and his allies - as well as smear campaigning.  The Romney / Ryan plan would have avoided massive tax increases on the middle class - because the plan focused on reforms and reducing the massive overspending of the federal government.  The plan that does need massive tax increases on the middle class is the Obama plan that we are currently enacting.  Only via massive tax increases on the middle class can the US avoid becoming Greece.

What should the position of the GOP Congressional leadership team be regarding their response to the President's ludicrous 'offer' to avoid the fiscal cliff?

Should we go over the cliff with the hopes of being able to pin the ownership of the resulting economy on the President and his allies?

We couldn't pin the President's stagnant economy on him for the past election - so what makes us think that we will be able to do this in 2013 / 2014?

I'm beginning to think / agree with a number of other conservative commentators that the best response might be to take some action in the GOP led House before the Christmas break and pass / send some bills to the Senate - demanding the Senate / President act on those bills.

Since the GOP has already laid out their key factors around a deal (House FY2013 budget - the Ryan plan) - and they have been utterly rejected by the Administration and their allies, let's try a slightly different approach that represents a real 'compromise' in the GOP position.   Pass the full recommendations of the Simpson-Bowles Commission  regarding taxation and spending and send that onto the Senate / President saying that they are adopting the plan of the President's own blue ribbon commission as the best compromise program to put the country back on a path towards fiscal responsibility.

While Simpson-Bowles isn't perfect in terms of tax and spending, in particular around the tax increases advocated and the lack of real reform to the major entitlement spending programs (Medicare, Medicaid, and Social Security), it is a compromise - and should be the 'best and final' offer from the GOP leadership.

At the same time, the GOP Congressional leadership should announce that they will be sending forth by the end of January 2013 bills for the reform of those three massive entitlement programs in order to ensure their continued viability.

Within that announcement, let's also remind the American people of the President's past positions regarding debt / spending solutions - where he's gone from demanding $2.50 of spending cuts for every $1 in new taxes (September 2012 during the Presidential campaign) to pushing now for $4 in new taxes for every $1 in spending cuts - and asking how that is 'fair' or 'balanced'?

Just how focused is the President and his Congressional allies in trying to prevent us from going over not only this first cliff, but the debt and entitlement cliffs that follow?

Think about this.... Barack Obama, via Tim Geithner, is pushing for the extension of the 2% temporary payroll tax reduction that has been the cornerstone of his 'tax cuts for 95%' campaign line.  But in order to achieve the appearance of supporting a 'tax cut', the President is also taking Social Security into immediate insolvency - unable to fund its current liabilities with the payroll taxes collected and forcing the need for even more borrowing.  The purpose of this temporary step was to 'stimulate' the economy by putting $480 more into each worker's pockets.  Yet, the economy remains stagnant because this is an unproductive tax cut and offers a very little stimulative effect when income taxes and other taxes (Obamacare) are increasing.

Another aspect about the President's plans where the math doesn't work (to use one of the President's favorite pejoratives towards GOP fiscal plans), is on the investments that the President wants to make / expand on the 'War on Poverty'.

We've been fighting a war on poverty for nearly 50 years - since President Lyndon Johnson's 'Great Society' launched us down this path.  Hundreds of billions of dollars, if not multiple trillions, have been spent on programs and people to end poverty in this country.

In the private sector, one of the key measurements of success on a program is to calculate the ROI - return on investment - for that program.  Did we or will we get a viable and acceptable return on the investment we've made or are being asked to make?  If yes, then it was a good program - or we should proceed.  If not, then it was not a wise investment or is an investment that should not be made - or the program should be looked at to try to modify it so we can get an acceptable positive return on the investment.

In 1975, the poverty rate in the US was 26%.  That means 26% of the US population was at or below the 'poverty' rate.  Today, 37 years and hundreds of billions later, we are still at a poverty rate of 26%.  Was all those billions worth the investment?  Did we end poverty?

How about education spending - another favorite topic / target of the progressives.  We're told that we need to funnel more billions, tens of billions, perhaps hundreds of billions towards education in order to 'fix' our educational system.  What has our ROI been on our past massive investments into Education?

Our spending has shot up dramatically, but our children aren't getting the benefit of these investments.  Their test scores aren't improving.  But the teacher's unions are getting more powerful and wealthier.

Continuing the tax and spend mentality - HHS is now proposing a new tax to be imposed as part of the Obamacare healthcare reform.  This new tax is being called a 'user fee' of 3.5% which is being put on the premiums collected by health insurers who offer their policies in the new federal exchanges coming in 2014 as part of Obamacare.  This 'fee' or tax, is going to result in higher health insurance premiums, already soaring,  as insurers who participate in the exchanges pass their higher costs on to the consumer.

But since the economic rule around taxes is - the more tax something, the less you get of that something - is the intent for this new fee going beyond just taxing the insurers- and creating an environment where the private insurers choose to avoid participating in the exchanges - creating a planned failure of the exchanges?

We've seen this in Europe as well as in the US - deliberately creating a failure so as to build a case for an even greater power / regulatory grab than would be available if the program worked or wasn't even in place?  Never letting a crisis go to waste - even if they have to create the crisis in the first place?

Wrapping up today, 2 more quick items about the economy.

In NYC, the famed Stage Deli in Manhattan is closing its doors after 75 years in business.  It is unable to remain open and compete with the higher costs that it is facing - with a major rent increase being the final straw that broke the eatery's back.

Providing a harsh contrast to the economic message coming out of DC just prior to the Election - and in its immediate aftermath that the economy is recovering, the manufacturing sector has dropped to its lowest level of productivity since July 2009 - actually reflecting a contraction in what is a common precursor for a recession on the immediate horizon.  The contraction in manufacturing will also increase downward pressure on GDP - and making the 3rd Quarter estimate of 2.7% growth a real outlier - boosted entirely by massive federal spending pre-Election Day.

We could be looking at another recession in early 2013 even if we do not go over the cliff- thanks to the economic policies of the President.

Hows that Hopey Changey thingy working out 2.0?

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