Saturday, November 19, 2011

The Supercommittee will fail and taxes will go up 

That is a prediction, of course, but the signs are pointing that way. The Washington Post reports that this morning, just a few days before Wednesday's deadline, the "Supercommittee" is at an impasse. Republicans are offering a deal that Democrats just will not take -- small tax increases that nonetheless offend the Tea Party stalwarts in the House in exchange for the permanent extension of the "Bush" tax cuts.

This nifty article in Salon explains how the Democrats outmaneuvered the Republicans, in part because George W. Bush himself gamed the CBO process when he enacted the cuts ten years ago.

The smarter course for Democrats, it would seem, is to do nothing and let the automatic spending cuts triggered by a supercommittee failure go into effect and then hope that Obama is reelected and the Bush tax cuts go away once and for all at the end of next year. That would have a more meaningful impact on deficit reduction than any realistic compromise with the GOP now would, and it would spare the sort of deep social safety net cuts that Republicans are also after. More and more voices on the left have been making this case in recent days....

And Democrats on Capitol Hill seem to be hearing it. Thursday began with plenty of buzz about the GOP’s sudden openness to new revenues. But it ended with Democrats offering a clear response: There’ll be no deal as long as you want the Bush rates extended.

So, basically, Republicans will have to choose between substantial tax increases and deep cuts in defense spending.

There is a growing awareness among the "rich" that higher taxes are on the way, either through a last-minute Republican collapse (unlikely, given the thunder in the House) or by deadlock (the Bush "cuts" will expire at the end of 2012, and they will not get reinstated unless the GOP has both the White House and 60 solid votes in the Senate, which seems very unlikely).

Therefore, higher taxes on the 1% are coming almost regardless of the Supercommittee's negotiations.

Therefore, the Republicans should try to get something good for the higher taxes.

I believe that a very large number of the "rich" would support higher taxes in return for large and demonstrable cuts in entitlements.

The only way to do that without inflicting immediate pain on voters is to extend the retirement age substantially, on a sliding scale, starting now. My proposal for doing just that is here. We simply must get out of the business of subsidizing retirement (as opposed to disability, whether or not that disability is caused by geriatrics).

Therefore, Republicans should propose a wholesale repeal of the Bush tax cuts -- all of them -- in return for a substantial and permanent extension of the retirement age under all federal entitlement programs.

That would be a trade worth taking, and it would send a very positive signal to the financial markets that we will not go the way of Italy, Greece, and other irresponsible countries. That would give our economy huge room to maneuver.

Otherwise, Republicans will achieve no sustainable deficit reduction, the defense budget will be slashed massively, taxes will go up substantially but the government will spend the increase on entitlements, and the press will ensure that everybody understands it is the fault of the GOP.

Bad deal.


By Anonymous Anonymous, at Sat Nov 19, 10:58:00 AM:

You didn't think it would actually accomplish anything, did you?
But, while taxes WILL go up, the dems will NEVER agree to any real cuts in spending. And that is a major blunder. With a "budget" of about 4 trillion dollars, you'd think they could come up with cuts in something (other than the military). But they won't/can't and, thereby, prove that they are the obstructionists.
Sure, it'll be close but I think there is a chance that the good guys will win everything next year including 60+ seats in the Senate.
Here's a prediction: the stupidest (non-captive media) comments following the Super Committee failure will come from Kerry.  

By Anonymous Anonymous, at Sat Nov 19, 03:53:00 PM:

Job #1: get rid of this incompetent administration and salt the earth where their remains lie.

Job #2: Rid ourselves of the useless government appendages like EPA, DOE, DOE, etc.

Job #3: look seriously at the minor reforms you suggest in your June proposal; I'll bet your #3 won't be necessary.


By Anonymous Ignoramus, at Sun Nov 20, 12:58:00 PM:

Echoing Leatherneck: Oorah!  

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