Topic: fiscal cliff

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Happy New Year, America

John Steele Gordon 12.31.2012 - 12:05 PM

If you’d like to have your New Year’s Eve thoroughly ruined, I’d suggest taking a look today at Mortimer Zuckerman’s piece over at USNews.com, “Brace for an Avalanche of Unfunded Debt.”

It’s so depressing because it’s true. The federal government keeps its books not in ways that most clearly reveal the true financial picture, but in ways designed, quite deliberately, to obscure that picture. This is for the short-term benefit of politicians and nothing else, the country be damned. And, as Zuckerman notes, unless something is done about this, and soon, that is exactly what the country will be.

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The Times’s Idea of “Tax Reform”

John Steele Gordon 12.30.2012 - 5:15 PM

The New York Times has a lead editorial today called “Why the Economy Needs Tax Reform.” It starts off briskly enough:

Over the next four years, tax reform, done right, could be a cure for much of what ails the economy. Higher taxes, raised progressively, could encourage growth by helping to pay for long-neglected public investment in education, infrastructure and basic research. More revenue would also reduce budget deficits, helping to put the nation’s finances on a stable path. Greater progressivity would reduce rising income inequality, and with it, inequality of opportunity that is both an economic and social scourge.

Higher and more progressive taxation, in other words, is just the medicine the economy needs to begin to flourish again for the first time in six years. If the Times can produce even a single instance in history where higher and more progressive taxation led to economic prosperity I will eat my hat. The Times’s formula is precisely what FDR tried in the Great Depression. It didn’t work; the depression lingered on and on. But I can give you numerous instances where tax cutting produced near-instant prosperity (the 1920s, the 1960s, the 1980s, the 2000s in this country and many another instances in other countries; see this from Power Line).

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The GOP’s Weak Hand

Peter Wehner 12.29.2012 - 9:00 PM

In her Wall Street Journal column, Kimberley Strassel writes about two lessons the GOP should take from the fiscal cliff negotiations. One is that President Obama is not, and will never be, a serious negotiating partner. The second is that a house divided is a losing house. Ms. Strassel goes on to counsel the GOP to internalize these recent experiences, since the political dynamic won’t change much. In the future, she writes, Republicans “can continue the folly of believing this president will compromise” — or they can “realize that [Obama] will never be reasonable on taxes — and so they can’t give anything away.”

Ms. Strassel is always intelligent and always worth reading. But in this case there are some elements to the story that may complicate her analysis. It could be House Speaker John Boehner, based on his previous negotiations with Obama, went into the talks with the president hopeful but unconvinced he would get a deal this time. Still, Boehner may have made the calculation that he had to offer a plan that was viewed by the public as reasonable and flexible. Why? Because many Americans have (unfortunately) bought into Obama’s critique of the GOP as being obstinate. That is, even if Obama was not intent on compromising with Republicans, Boehner felt like he had to offer a deal that demonstrated the GOP was not being obstructionist and unyielding. So the speaker first offered raising $800 billion in revenues and then offered a second plan raising taxes on those making a million dollars or more.

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Cliff Deal Could Shift Public Opinion

Jonathan S. Tobin 12.28.2012 - 2:30 PM

If reports filtering out of Washington are to be believed there is a fair chance that a compromise will be reached sometime over the next three days that will head off the most unpopular aspect of the impending financial crisis: across the board tax increases for all Americans. That’s the good news. The bad news is that the compromise which may be crafted between the White House and the leaders of the House and Senate will avoid dealing with the spending cuts mandated by the sequestration process including devastating decreases for the nation’s defense.

President Obama and Senate Majority Leader Harry Reid have given every indication that they think it is in their interest to see the nation head over the fiscal cliff making any sort of compromise appear like a last minute rescue no matter how unfortunate its terms might be. Most Americans are of the opinion that any deal that would limit the scope of a tax increase is better than no action at all. They are right about that but the fact that it appears impossible to do anything about spending either in the short term or the long right now represents a massive failure on the part of the government. While up until now much of the public still appears to be blaming the mess on recalcitrant Republicans who oppose any tax increases, the unwillingness of the president and Senate Democrats to budge on entitlement spending even in the shadow of potential disaster may eventually lead to a shift in opinion.

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Obama’s Gesture Just for Show

Jonathan S. Tobin 12.26.2012 - 11:20 AM

The spin coming out of the White House is that President Obama cut short his annual Hawaii vacation to head back to Washington to help nudge Congress towards a deal that would prevent the nation from heading over the fiscal cliff. If so, this act of sacrifice will allow the president to show his leadership skills and craft a compromise tax and spending bill that will pass both houses of Congress. But with only a few days left before a massive across-the-board tax increase is imposed on the American people while devastating cuts in defense are put into effect, it’s much more likely that the president’s gesture is just for show.

If the president really wanted to avoid the fiscal cliff, he might have spent the weeks before his family headed to Oahu for Christmas making a good faith effort to make a deal with Congressional Republicans rather than digging in his heels on his own plan to raise taxes while refusing to substantially address the real issue at the heart of the fiscal crisis: entitlement spending. Most Republicans rightly suspect that he’s quite content to see the deadline expire. So why come home?

The answer is simple. The optics of more days of presidential golf while the country heads closer to an economic disaster would damage Obama’s image and make it clear that he views the impact of the fiscal cliff as being more to his liking than a reasonable compromise.

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Democrats Can’t Avoid Fiscal Cliff Blame

Jonathan S. Tobin 12.24.2012 - 10:55 AM

For the past few days, the focus of coverage of the budget negotiations has been on the House Republicans who torpedoed Speaker John Boehner’s Plan B proposal. The hardliners determined to fight any tax increases, including those on millionaires, have helped create a situation where the deadline may well expire before Congress and the president can agree on a deal that will avoid an across-the-board tax increase as well as devastating spending cuts. Though their argument that the country’s problem is about spending, not taxes, is right, allowing the country to go over the fiscal cliff is irresponsible and will cost the GOP dearly in terms of public support. But now that the House has failed to advance Boehner’s compromise measure, it is up to the Senate to act and that means the media needs to turn its attention from the intransigence of a minority of House Republicans to the equally unproductive behavior of the majority of Democrats in the upper house.

For all of the country’s justified concern about the inability of the Republicans to make a deal, the fact remains that the Democratic-controlled Senate is even more of an obstacle to an accord. For Majority Leader Harry Reid and his party to act to avoid the fiscal cliff, he will have to do something that he has failed to do in the last three years: pass a budget plan of any kind. The Democrats have sat back and enjoyed the brickbats thrown at the GOP for their dysfunctional behavior, but have done nothing themselves to make a deal other than to play the role of cheerleaders for the White House’s class warfare rhetoric. With only days left for action to avoid the automatic enactment of measures that could potentially devastate an already weak economy, it’s time to for Reid and his caucus to put forward a bill that could actually pass. If not, their reliance on public opinion only blaming Republicans for the impending debacle may ultimately wind up a colossal misjudgment.

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America Edges Ever Closer to the Fiscal Cliff

Peter Wehner 12.21.2012 - 3:00 PM

Some thoughts on the Republicans pulling their Plan B tax bill from the House floor last night:

1. Speaker Boehner was embarrassed and is badly weakened. He may not be deposed since Majority Leader Eric Cantor and other key Republicans were by his side during negotiations, and they supported Plan B. Mr. Boehner is also generally well liked within his caucus. There’s no obvious person who could challenge him and win. And everyone knows the speaker was forced to play a bad hand. Still, this was a humiliation for Mr. Boehner. He may not recover from this vote of no confidence from his own members.

2. It’s possible that a new deal emerges – but it would probably have to come from the Senate. And even if Harry Reid and Mitch McConnell were to find common ground – which is far from certain – a new plan would also need to pass in the House. And as last night showed, that simply may not happen.

3. House Republicans have now managed to put themselves into a situation in which if we do go over the “fiscal cliff,” early next year President Obama will propose tax cuts for somewhere around 98 percent of the American people. If House Republicans go along with Obama, then it may dawn on them that Plan B was a significantly better deal from their perspective, since it limited tax increases to those making a million dollars or more rather than whatever lower figure Obama will propose.

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The GOP Really Hits Bottom

Jonathan S. Tobin 12.21.2012 - 9:30 AM

Those Republicans who thought their party hit bottom on Election Day were wrong. Mitt Romney’s defeat was a blow, but the pitiful collapse of House Speaker John Boehner’s Plan B legislation on the budget showed that heading into his second term, President Obama’s opposition is so divided as to be rendered useless.

The importance of Boehner’s failure to keep his caucus relatively united, so as to strengthen his hand in negotiations to avoid having the nation go over the fiscal cliff, is not a minor story or one that will be soon forgotten in the 24/7 news cycle world. It is a signal to the Democrats that though they do not control the lower house of Congress—a not inconsiderable obstacle to President Obama’s hopes of implementing the liberal wish list of programs and legislation in his second term—neither do Boehner and the GOP leadership. That will not just make it easier for Obama to face down the Republicans in any confrontation. It leaves the Republicans prey to an ongoing dispiriting civil war between establishment types and Tea Partiers that will enhance the chances that the president will get more of what he wants in the next two years.

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If Plan B Failed, How is a Deal Possible?

Jonathan S. Tobin 12.20.2012 - 9:15 PM

The collapse of the House Republican leadership’s “Plan B” legislation this evening is being viewed first and foremost as a humiliating defeat for Speaker John Boehner and Majority Leader Eric Cantor. The proposal was supposed to be a clever tactic that would increase the pressure on President Obama and the Democrats since it would, at least theoretically, take the GOP off the hook for the country going over the fiscal cliff in the absence of a deal with the White House on spending and taxes. But Boehner didn’t have enough votes from his own caucus to back Plan B, even though it limited tax increases to those making over $1 million rather than the lower limits offered by the president in negotiations.

There are those who will argue that the collapse of Plan B will force Boehner back into negotiations with the president and create a situation where a grand budget deal would be possible. But the question that must be asked now is: if Boehner and Cantor could not whip up enough Republican votes for their own proposal, how is it possible that they could muster their support for an accord that would by definition be even less attractive to conservatives?

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The Right’s Latest Meaningless Purity Test

Bethany Mandel 12.20.2012 - 4:45 PM

In a strange about-face today, FreedomWorks has decided to withdraw its support of House Speaker John Boehner’s “Plan B” a day after declaring its support for the plan. Yesterday Dean Clancy, legislative counsel for the group, wrote “Speaker Boehner: Congratulations, you are moving in the right direction. You woke up and realized you have the power to say No to the Left. Stay the course. Go all the way to the FreedomWorks plan, and you’ll have it made in the shade.” This comes as the Heritage Foundation continues to beat the drums against Boehner’s plan, calling it, “the latest unsatisfactory proposal put forward by Speaker John Boehner (R-OH) to avoid the fiscal cliff. Boehner’s plan would protect most Americans, except for millionaires, from a tax hike. But even this is a poor fix because it ignores the real problem: spending.” Heritage’s more flexible legislative arm (due to tax restraints on the non-profit Heritage Foundation), declared, “Heritage Action opposes ‘Plan B’ and will include it as a key vote on our legislative scorecard.” Club for Growth has also been forceful with its opposition to the plan, joining smaller Tea Party groups.

While conservatives are eating their own over the plan, Senate Democrats have announced that they have no plans to vote on Boehner’s “Plan B,” even if it passes a House vote, as many are promising it will. The bill will therefore be dead on arrival, despite the fact that Senate Democrats voted for a similar plan almost exactly two years ago. There are no other plans under discussion from congressional Republicans, who are spending as much time fighting with conservative groups as they are with their Democratic counterparts.

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Heading Over the Cliff With Plan B?

Jonathan S. Tobin 12.20.2012 - 3:25 PM

With the House Republican leadership sticking to its plans to push through a Plan B tax and spending bill today, it’s an open question as to whether House Speaker John Boehner is really bluffing about his proposal as the party’s final answer to the White House in the fiscal cliff negotiations. Considering that there is no chance that the Democrats will allow the GOP plan to pass in the Senate and that reportedly even the staffs of the two sides are not talking, right now it is entirely possible that the standoff will result in there being no deal in place prior to the Christmas holiday next week. Or is it?

There are many observers in Washington and around the nation who are convinced that Plan B is merely an elaborate bluff designed to smoke more concessions out of an administration that for all of the president’s bluster is as desperate to avoid the ruinous tax increases and spending cuts that a failure to make a deal will bring as any Republican. But considering the enormous difficulty that Boehner is having in lining up the 218 votes from his own caucus that he will need to pass his legislation, imagining him going back to Republicans in the next couple of weeks to ask for their support for what is certain to be an even more unpalatable compromise deal seems a stretch. That means that it is entirely possible that Boehner and Majority Leader Eric Cantor mean what they say about putting off any further efforts to resolve the crisis until January. In other words, like it or not, both parties may actually be heading over the fiscal cliff with Plan B.

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Boehner’s Bluff Not Impressing Dems

Jonathan S. Tobin 12.18.2012 - 1:15 PM

This morning’s press conference by the Republican House leadership was supposed to give the impression that Speaker John Boehner is prepared to go to the brink on the fiscal cliff negotiations with the White House. The GOP has finally coaxed President Obama to budge a bit from his previous hard-line position on raising taxes on all those who earn more than $250,000 (the president has upped the total to $400,000) leading many journalists to write yesterday as if a deal between the two sides was a foregone conclusion. But Boehner knows he needs more than the minimal spending cuts offered by the Democrats if he expects his caucus to back a gut-wrenching compromise that will require them to sign on to tax increases that they think will hurt the economy as well as offend their principles. Thus, the speaker was in front of the cameras today insisting that he would pass a version of his own current position on the fiscal cliff that would only raise taxes on those earning more than $1 million and more drastic spending cuts than those envisioned by the White House that has zero chance in the Democrat-controlled Senate.

But Boehner’s problem is that Democrats are no more impressed by his Plan B bluff than his Tea Party colleagues are by the president’s slight movement toward a deal. With polls continuing to show that the public blames the GOP more than the president for the impasse over the budget, no one in the White House or the Democratic caucus thinks the speaker’s move is anything more than the negotiating tactic of a party that knows it is in a vulnerable position.

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The Difference Between a Concession and a Confession

Peter Wehner 12.14.2012 - 7:00 AM

One of the arguments some intelligent conservatives are making is that if Republicans agree to increase rates on the top earners in America, it will do irreparable damage to the GOP. The basic case goes like this:

If Obama succeeds and ends up getting a confession from Republicans that tax cuts are the problem, tax cuts are the cause, what happens to the next Republican who campaigns on tax cuts? Not going to have a prayer.

Now it may well be that raising tax rates will do significant damage to the Republican Party. It may be substantively unwise. And I’m certainly sympathetic to Republicans not wanting to play a role in something they think is bad policy.

But here’s where I think this analysis is wrong.

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The High Cost of Dems’ Cheap Populism

Seth Mandel 12.13.2012 - 11:55 AM

Last week, I wrote about the fact that President Obama’s approach to taxes as part of the “fiscal cliff” negotiations is billed as taxing the rich but would end up hurting the poor and possibly deepening inequality. Policies built on the flimsy populism of “fairness”–at least as modern Democrats define it–are quite often devoid of economic common sense. What’s more, the Democrats seem to know this.

The New York Times offers a “News Analysis” today in which it is revealed that the Republicans are right on the merits of most of the arguments, but Obama and congressional Democrats have boxed themselves in by relentlessly demagoguing the issue. Here’s the Times:

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Nearly Half of Republicans Say Obama Has “Mandate” on Taxes

Alana Goodman 12.12.2012 - 1:45 PM

Another day, another bad “fiscal cliff” poll for the GOP. Bloomberg finds that nearly half of Republicans agree that the presidential election has given Obama a mandate to raise tax rates on the top income bracket:

The president goes into talks with Republicans amid broad public sentiment that his victory is a sign the electorate has spoken in favor of his positions on taxes and entitlements.

Sixty-five percent of Americans say the Nov. 6 results gave Obama a “mandate” on his proposal to raise tax rates on income over $250,000 and “to get it done.” Forty-five percent of Republicans agree.

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A Clash of Mandates

Seth Mandel 12.11.2012 - 12:05 PM

All throughout the debate over Obamacare, polls showed the public opposed to the bill. That did nothing to stop Democrats from pushing the legislation through Congress, of course, and voters responded by staying true to their word: they voted out congressional Democrats in historic numbers in the next election. Democrats and the national media generally ignore inconveniences like voters when the opportunity arises to pass far-reaching legislation, but that instinct has kicked in on other matters as well.

For example, the New York Times has discovered that the current “fiscal cliff” negotiations pose something of a problem for democratically elected representatives whose constituents don’t want them to raise taxes. It turns out that Democrats are right when they say “elections matter”–though not only the presidential election. Now that the push for some tax increases as part of a final deal is gaining momentum, Republicans elected by voters who oppose such tax hikes are caught between representing the will of their electors and what liberal editorial boards tell them is the good of the country:

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Gallup: Americans Want Fiscal Cliff Compromise

Alana Goodman 12.11.2012 - 11:05 AM

The latest Gallup poll has two interesting, and seemingly contradictory, findings:

President Barack Obama and Speaker of the House John Boehner met at the White House on Sunday, but there has yet been no announcement of a negotiated agreement to avoid the mandated sequestration of government funds for defense and other federal spending, and the increase in tax rates for most taxpayers.

Seventy-three percent of Democrats want their leaders to compromise, little changed from 71% last week. But Republicans and independents express more widespread interest in compromise than they did last week — with Republicans moving from 55% to 67% in favor of compromise, while independents moved from 61% to 70%.

So Americans seem to want compromise — in theory. In reality, President Obama is still getting much higher approval ratings than Republican leaders in congress in the same Gallup poll (48 percent compared to 26 percent), even though he has been the party most unwilling to compromise.

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What If Conservatives Have Lost the Argument?

Peter Wehner 12.10.2012 - 6:25 PM

The debate over the “fiscal cliff” is an important tactical one and could have widespread political ramifications. There are complicated issues to consider. Should the Republicans give in to Mr. Obama’s demand that we raise the top tax rates? If so, what should they demand in return? If they don’t get it, is it more prudent to retreat in order to fight another day on more advantageous ground for the GOP? Or should Republicans be willing to go cliff diving with the president, confident that in the end Obama will own any future recession?

Whatever the answer to these tactical questions, the fiscal cliff raises a broader question for conservatism: What do you do when you’ve lost an argument, at least for now? In the post-election ABC News/Washington Post poll, for example, 60 percent of respondents said they support raising taxes on incomes over $250,000 a year. That’s not surprising, since to the degree that there was a centerpiece to the president’s economic argument during the 2012 election, it was to do just that. Mr. Obama was not only re-elected on that platform; he won by a comfortable margin. In the Senate, Democrats gained two seats while in the House they gained eight seats.

So here’s something to consider. Assume for the sake of the argument that this debate has been engaged and adjudicated by the public–and the public prefers the liberal solution (raising taxes on the “rich” in the name of “fairness”). Does the conservative movement, in order to maintain its strength and appeal, make peace with the public’s view? Or attempt to change it? And if so, how?

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RE: Poll: 60% Support Tax Hikes on the Wealthy

John Steele Gordon 12.10.2012 - 2:15 PM

I certainly agree with Alana that the Republicans are in a tough spot. But I’m not sure how valid any of these polls about public opinion on the issue are. Unlike when the choice is either A or B, as those are the only two candidates in an election, polls on public issues depend crucially on exactly how they are worded. And even when worded in a neutral manner (not an easy thing to achieve even when the pollster is trying to be honest), I’m not sure they mean that much in terms of political consequences down the road.

No matter what the Republicans do, the permanent Obama campaign—sorry, I mean the mainstream media—will hammer them. So they might as well do what’s right.

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Poll: 60% Support Tax Hikes on the Wealthy

Alana Goodman 12.10.2012 - 1:25 PM

More bad fiscal cliff news for Republicans, from the Politico/GWU Battleground Poll today:

A new POLITICO/George Washington University Battleground Poll finds that 60 percent of respondents support raising taxes on households that earn more than $250,000 a year and 64 percent want to raise taxes on large corporations.

Even 39 percent of Republicans support raising taxes on households making more than $250,000. Independents favor such a move by 21 percentage points, 59 to 38 percent.

Only 38 percent buy the GOP argument that raising taxes on households earning over $250,000 per year will have a negative impact on the economy. Fifty-eight percent do not.

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