Monday, July 11, 2011
In all the back and forth over whether there will be new federal tax increases for the rich, or not, let us all remember that the Obama Administration has already pushed through massive tax increases, most of which will fall on the "rich," that go in to effect in 2013 and thereafter. The Wall Street Journal has a nice summary of them here. So the question is not whether the "rich" will pay new and more taxes, but whether there will be another round of increases on top of those already legislated.
Don't forget the tax on tanning salons, despite the disparate income it has on us pale people!
(Repost from below, as it fits here)
I had Obama's press conference on in background. As it ended and Obama walked out, a reporter asked "will we see you everyday?"
Obama wants to create the impression that he's fair and balanced and an honest broker. But what came out of today is that he won't agree to any extension past August 2, and that he won't agree to anything that doesn't have "revenue enhancements". He was careful to say nice things about Boehner, but had to acknowledge that Boehner may not have the votes for even a token amount of revenue enhancements.
Obama just made it harder for Boehner to seize the initiative by having the House pass something and then put it back to the Democratic-controlled Senate and Obama. Boehner might still do that anyway.
Obama pointed out that the revenue enhancements he wants wouldn't apply until 2013. But he wants an immediate extension of the payroll tax cut. I suspect that Obama's spending cuts are also heavily back-end loaded.
Here's the big problem: Even the $4 trillion "big deal" isn't a "big deal" if back-end loaded, spread over a decade and subject to the whims of later Congresses. Not when we're running a permanent annual structural deficit of well over a trillion, where the USA is borrowing over 40% of what it spends.
Don't forget (1) that the official projections already assume that the Bush tax cuts lapse, (2) that the White House budget already assumes greater than 4.0% growth for the foreseeable future, and (3) that we'd only need a small increase in general interest rates to wipe out the effect of even the "big deal".
This is really a fight over the size of government. Obama & Co want to negotiate after having raised the share of federal government to over 25% of GDP, when we can only afford 18% on a good day. It's unsustainable. Tim Geithner is starting to acknowledge this.
So the game of chicken continues. If I'm Boehner I pass my House bill and stop. If I'm Obama, I mail checks to seniors in late July and then when they bounce in early August, I blame Boehner ... and by extension all the Republican candidates. I still wouldn't rule out Obama using the 14th Amendment "silver bullet" to blow through the debt ceiling, despite what Larry Tribe thinks and Tim Geithner now says.
Can it really be true that wise, benevolent, kind President Obama, the politician who so recently lectured us that tax increases in a recession are terribly destructive (which, notwithstanding the NBER declaration, the majority of Americans still think we are experiencing), now has switched to the extortionate Chicago Democrat side of his personality and thinks the taxpayers should cough up some more money, right quick, or else.
"Nice country you got there...pity if something happened to it!"
Yes, apparently the hold-up note reads "unless America agrees to a suicidal tax increase I will force us into default."
Why, he's just like Dominique Strauss-Kahn (or at least like the IMF)! Tax increases right now, Democrats demand, regardless of what it does to the economy.
Even Austan Goolsbe can tell him this is bad economics and even David Plouffe can tell him this is bad politics-- you cannot hold an entire country hostage and expect to get reelected. Stockholm Syndrome ends well before that point, and this debacle should convince many an unsure voter to vote the rascals out.
The President is indeed promising huge new taxes on top of those already passed, so, TH, your question is answered by the man himself:
"“So, when you hear folks saying ‘Well, the president shouldn’t want massive job killing tax increases when the economy is this weak.’ Nobody’s looking to raise taxes right now. We’re talking about potentially 2013 and the out years.” (emphasis added)
As Instapundit and Bryan Preston put it, "Re-elect me to get massive job killing tax hikes when I’m a lame duck and you can’t do a thing about it."
On further review:
The "negotiation" will go nowhere.
In a week Boehner will have the House approve a debt increase of $2 trillion, cuts of $2.5 trillion, and no "revenue enhancements". Then he'll go play golf. He won't eat peas. Maybe creamed spinach, with a nice steak.
The Senate Republicans will approve. Reid-Obama will get a dozen Senate Democrats to go along.
Obama has no BATNA to Boehner's making this move, without "going nuclear" by using the 14th Amendment "silver bullet".
So the daily grind of negotiations is just posturing by the Organizer-in-Chief. Boehner has to play along, lest he be painted as intransigent.
Obama will try to blame the cuts on Republicans not wanting to have the rich share the sacrifice.
$2.5 trillion in cuts over ten years is next to nothing. Entitlements are still sacrosanct, for the moment.
The open question is whether this deal will include an extension of the payroll tax holiday. Tricky politics, awful precedent.