Wednesday, December 5, 2012

Quick Hits - December 5, 2012

Last year, during the Debt Ceiling / Budget negotiations between Barack Obama and the GOP Congressional leadership, a deal in principle had been reached between the President and Speaker John Boehner where $800 billion in new revenues would be raised in conjunction with about $3.2 trillion in spending cuts over the next decade.  But before the deal could be finalized, Barack Obama reneged on the deal, demanding that the Speaker accept $1.2 trillion in revenues.  Angered by the bait and switch conducted by the President, the Speaker torpedoed the deal.

Barack Obama took to the airways to complain about the action by the Speaker - noting that the entire $1.2 trillion of new revenues would not increase anyone's tax rates - but was achievable via eliminating deductions and loopholes in the tax code.

Secretary of the Treasury, Tim Geithner, in his negotiations with the GOP Congressional Leadership this week, staked out two absolute 'Red Lines' for the President.  The first is that any reform of Social Security is entirely and completely off of the table.  Even though Social Security is one of the three largest drivers of the fiscal spending challenges we face, the President and SecTreas contend that Social Security is not a 'driver of the deficit' - and that the negotiations will only address the 'drivers of the deficit'.

Drivers of the deficit?  Here's a simple graph that reflects what will happen if we really address the 'drivers of the deficit' that include Medicare, Medicaid, and Social Security - and that happens if we do not.

This country is the SS Titanic - and we're speeding at top speed, blindly, into the path of the 'entitlement iceberg'.

[Side observation - one of the groups that turned last month's election to Barack Obama was the youth vote - those under the age of 29.  They overwhelmingly voted for Obama and his 'gifts' and promises courtesy of the government.  Yet, these are the one's who will be screwed the most by the President's irresponsible and ideological driven policies.  They voted to let Obama spend their inheritance, the wealth they hope to earn and accumulate in their lifetimes, today.  They will be the one's that will be holding the bill if we don't take action today.]

The other 'Red Line' - that any deal has to have a tax increase on the income tax rate paid by the 'wealthy' - those Americans who earn over $250,000.
Between Obama’s fiscal cliff proposal and subsequent vacation, and Carney’s and Geithner’s comments, the Administration is finally making its intentions clear: tax the so-called “rich,” cut next-to-nothing from the budget, and claim that this will bring back the glory days of the Clinton era. Never mind that the entire argument ignores at least seven major Clinton-era fallacies, and that a return to the Clinton-era tax rates on the “wealthy” only raises 1.88% of the next decade’s expected spending.

Spending cuts, entitlement reform, and tax reform are the three major keys to economic recovery and preventing the transformation of America into today’s Greece. Unfortunately, Obama’s opening negotiations on the fiscal cliff are not hopeful signs that he takes any of them seriously.
This 'Red Line' was reinforced by an unnamed 'Senior White House Official' who set the President's position, 'If GOP doesn't agree to higher rates for the top 2 percent, we'll go over the cliff and the American people will hold them responsible."

It is the fear of being held 'accountable' that seems to be driving the actions of the current GOP Congressional leadership - and in particular Speaker John Boehner.  He seems more concerned about his own reputation and the possible smearing of himself and other GOP leaders by the feckless Obama sycophants in the mainstream media than with addressing the immediate needs and best interests of the country.

His counteroffer to the President's ludicrous initial offer for $1.6 trillion in new taxes and a vague promise of $400 billion in spending cuts was to effectively move directly to what the President and he originally agreed to last year - with the $800 billion in new revenues coming from not higher tax rates, but from closing loopholes and limiting deductions for the wealthiest Americans.

This is a major concession by the Speaker - and one that is very troubling even though he is appearing to hold the focus on revenues being derived from tax code reform.

First, he has positioned himself to accept a 'compromise' revenue increase of at least $1.2 trillion over the next decade by immediately going to the $800 billion of the 'last deal'.  The issue we face, as I've covered, is not a shortage of revenues - but too much spending.  Lower tax rates and other efforts to stimulate economic growth actually result in higher government revenues as we've learned from the Kennedy, Reagan, and Bush (43) tax reduction programs.

Second, in his fear of confrontation, he has made some incredibly bad decisions that call into question his suitability to serve as the Speaker of the House.  It's asinine to be concerned about the media.  He's a Republican and supposed to be a conservative - he'll never get a fair shake by the mainstream media.  Even if he agrees to give Barack Obama everything he wants - he'll not get fair treatment by the mainstream media.

Another is related to what seems to be a purge underway of Tea Party Conservatives from crucial House Committees - in order to remove them from having a position of influence to argue for a stronger conservative negotiation position or case.  This is what the Democratic caucus does to enforce groupthink and groupspeak.  This is what the Soviet Union and other tyrannies did to punish those who would not tow the 'official' line.  This is not what the GOP stands for.

Finally, the Speaker also issued his 'response' to the President's absurd offer without sharing it or discussing it with the GOP caucus in the House.  It was done entirely outside of the caucus - all in an effort to avoid debate.  Again, this is not how the GOP should operate...and reflects the insecurity and arrogance of the Speaker.

While many conservative bloggers and commentators have been focused on the near instant dimissal of Boehner's offer by the President - particularly around their continued use of the buzzwords 'balance' and 'fairness' - which is fair game, others are not taking a hard look at the actions of the Speaker and raising questions about them or the Speaker's proposal.

Here's some hard facts for the Speaker -

  • The Obama Administration is not interested in a negotiation or a compromise.  They only want a surrender.
  • The press will castigate the GOP and defend Obama regardless of the results - as long as Obama does not surrender.  And if he does surrender, they will stop castigating him within weeks.  Furthermore, if the economy turns around - Obama will get the credit for the turnaround.
  • Obama is not interested in what is in the best interests of the country.  He's only interested in what is in the best interests of his hard left progressive agenda - and destroying the viability of the GOP.
  • 'Fairness' is not about fairness.
  • 'Balance' is not about balance.
  • The Obama Administration does not see spending as an issue - and have no interests in reducing spending or reforming the major entitlement programs.  They see any resulting crisis as an opportunity to advance their agenda and increase the size / scope of government.

Just because the media will castigate you - and your policies, doesn't mean that you do not take to the bully pulpit and make your case.  You can't assume that the American people will learn from their 'pain'.  They've been feeling pain from the President's feckless economic policies for the last 4 years - and they've not learned anything.

Mr. Speaker, since the President does not want to return to the Clinton-era tax levels - across the board, or the Clinton-era spending levels - across the board - both of which he and his economic advisers said delivered the 1995-2000 economic boom that was so much better than the 2004-2008 economic boom, and since the President will also ignore the recommendations of his own blue ribbon commission [Simpson-Bowles] to solve the fiscal challenges we face all in favor of hiking taxes on those earning more than $250,000 which will cover about 7% or less of our annual deficit - and has no plan to find the other 93% other than from more taxes [capital gains, dividend, corporate, and inheritance] - then you can either surrender or hold to our core values.

We know that if the President seizes 100% of the assets of the top 1% (or even 2%) - he barely covers the scope of this year's annual budget deficit.  But with those [formerly] wealthy now without 1 cent of assets - how will he cover his massive spending plan for next year or the one after that?  He can't - without massive taxes on the middle class.  

Spending cuts and entitlement reforms are needed.  Social Security is 70 years old.  Medicare is nearly 50 years old.  These programs need to be reformed / modernized to reflect the new demographics and new realities. 

But you, Mr. Speaker and your fellow GOP leaders, have to also make the commonsense argument for the American people.... 

But what we cannot stomach is all the sermonizing about “fair share” and “play by the rules” and “the one percent” from those who seek to be exempt from their own rhetoric. Can’t Warren Buffett keep quiet and just leave his $50 billion to his heirs — and let the wonderful federal government do what it must with a $30 billion estate tax on his earnings? Can Bill Gates’ people really manage the Buffett $50 billion better than HUD or HHS? And if so, why a HUD or HHS? His estate will dodge more tax liabilities than what millions of his proverbial overtaxed secretaries pay. Why isn’t George Soros one of the despised money speculators of the sort that Occupy Wall Street was enraged about? Isn’t trying to break the Bank of England a bit too much money-grubbing? So weird what constitutes good and bad riches!

I guess the rub is not big or small money, or what you must do to get it and keep it. No, the lesson instead is what you say when you get it.
Look at California - which has been running the progressive agenda since Jerry Brown's first term as Governor in the mid-1970's....

Today, 144,000 HOUSEHOLDS in California, account for 50% of the State's income tax receipts.  With the passage of Proposition 30, the Governor's plan to 'fix' the state's fiscal challenges, the top 10% of wage earners in California will account for 80% of the total income tax receipts.  This is also the state where middle class wage earners, those earning $48,000 per year (state median income is $54,000), pay a 9.3% income tax rate - a rate higher than the TOP income tax rate in 47 other states.

There are about 12 million households today in California.  Even with these tax increases - or the excessive dependence of tax payments on a shrinking number of people - California's structural fiscal problems are not being solved - but exacerbated.

How many of these 144,000 households or top 10% will remain in California despite it's great weather and natural resources?  How many have to leave before this collapses?  And leave many will as the other policies of the state, the fecklessness around cap and trade, water management, illegal immigration, identity politics, and the power of the public sector unions all drive up costs and push businesses out of business.  At what point is the value of the great Californian weather offset by the pain of all of the other factors?  For thousands of businesses and hundreds of thousands of people - we're already at that point.  California's population is barely growing - as illegal immigrants, dependent on low wage jobs or government entitlements, flood in numbers that barely offset the exodus.

This is what the US will look like if the GOP does not hold to its core principles.  

The GOP has more to fear from its abandonment of its core principles and values than it has to fear from the castigation from the progressive mainstream media or the baseless attacks and campaigning conducted by the Obama Administration.  We're already in a 'Gimme' electorate - where the majority of people who cast their votes last month want something from the government and are willing to sacrifice their rights to get something 'for nothing'.  

That is the mindset we have to change.  That's not the mindset that made this country great.  That's the mindset, shared by over 50% of Democrats and 25% (!!) of Republicans, that embraces socialism and fascism over capitalism and freedom.  That's the mindset echoed by the failed progressive city leadership of Detroit - now bankrupt after four decades of implementing the progressive agenda - when they demand their 'quid pro quo' from the President - reminding him that since they overwhelmingly voted for him on Election Day, he OWES them billions to bail the city out. Not so the city can change its approach - but so the city can continue down the same path that bankrupted it.  

Yes, it is Einstein's definition of insanity in action.

My fear is if my hope that the GOP leadership will get smart is also an example of Einstein's definition of insanity?  Doing the same thing again and again while expecting a different result.

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