A Day Late and a Trillion Dollars Short

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A Day Late and a Trillion Dollars Short

Postby COWBOI777 » Fri Jan 04, 2013 7:50 pm

Waiting until after the U.S. technically plunged over the so-called fiscal cliff on Jan. 1, Congress and the White House finally reached a "deal" on taxes and some spending. Call it the fiscal bluff, or perhaps the farcical cliff, but whatever its name, neither political party is happy with the terms. It also sums up what Ronald Reagan once said: "Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other."

Bipartisan majorities in the 112th Congress held their noses to pass the bill without even knowing what was in it. Senators received it about three minutes before voting. House Minority Leader Nancy Pelosi (D-CA), who before ObamaCare passed said, "You have to pass it to find out what's in it," called it "a happy start to a new year." That tells us an awful lot. Barack Obama's autopen signed it Wednesday while he was back on vacation catching a wave in Hawaii.

The bad news -- and there's plenty -- is that the deal contains $10 in tax increases for every $1 in spending cuts. In fact, the deal increases spending by $330 billion over 10 years while deferring sequestration cuts for two months so the 113th Congress can fight that battle again, along with raising the debt ceiling. Democrats call this a "balanced approach," but it leaves the U.S. facing yet another trillion-dollar deficit this year. Unfortunately, that pales in comparison to the looming crisis of $48 trillion in unfunded liabilities for Social Security and Medicare.

Congress raised taxes for the top bracket, which includes hundreds of thousands of small businesses, during what might as well be a recession. The Left's favorite target, the "rich," consisting of "millionaires and billionaires," now officially includes individuals earning $400,000 and couples that earn $450,000 (that's quite a marriage penalty, if you ask us). Capital gains and dividends taxes on these same taxpayers will rise from 15 percent to 23.8 percent (including the new ObamaCare surtax of 3.8 percent), and deductions will be limited for individuals earning more than $250,000 and couples at $300,000. The death tax also will increase from 35 percent to 40 percent, with a $5 million exemption. Obama wanted 45 percent, and it would have gone to 55 percent without a "deal."

Even as Democrats gouge the "rich," however, they offered numerous favors to their flush corporate friends. From a long list, the starving artists in Hollywood get a $248 million tax break, NASCAR track owners get $78 million, rum distillers can toast to $222 million and the wind-energy sector can blow through $12.1 billion. In the end, Democrats gave away much of the new taxes they will extract from the top bracket, while further complicating an already bloated tax code. Yet Obama had the chutzpah Tuesday to call for "further reforms to our tax code so that the wealthiest corporations and individuals can't take advantage of loopholes and deductions that aren't available to most Americans."

The deal doesn't just hit the "rich," either. Taxes will increase for 77 percent of taxpayers because the temporary payroll tax cut was not extended. This undoubtedly will surprise many middle-class and poor people when they see smaller paychecks next payday. The average family earning $50,000 will be gouged with a tax increase of about $1,000. And it's highly unlikely that Obama is finished trying to raise taxes.

The effect on the already stagnant economy almost certainly won't be good. The 155,000 jobs added in December are barely enough to account for population growth. Headline unemployment rose to 7.8 percent (which matches November's new upward-revised number), U-6 held steady at 14.4 percent and labor-force participation stayed at 63.6 percent, just above the 31-year low of 63.5 percent.

Despite all this, there is a small silver lining. The Bush tax rates are now permanent for all but the top bracket. Their temporary status was a significant GOP failure when the cuts were first passed a decade ago. We wish rates were even lower, but their new permanence means that any tax hike in the future will be transparently just that -- a tax hike. The Alternative Minimum Tax (AMT) is now indexed to inflation, making unnecessary the annual ritual of passing a "patch" to spare the middle class the extra tax. Obama did not (yet) achieve his desired tax increase on families earning $250,000 and had to settle for a higher threshold.

Perhaps best of all, House Speaker John Boehner (R-OH), who was narrowly re-elected as speaker Thursday, stated his intention never again to negotiate with Obama behind closed doors because the president has shown his true red colors. Republicans may find they have more leverage on spending and the debt ceiling, as well, but we're also not holding our breath for Obama to agree to real spending cuts.

On balance, settling for this steaming pile isn't as bad as it could have been, but it's hardly satisfying. That's the consequence of losing the presidential election by running a weak candidate against a vulnerable incumbent, which is itself a consequence of failing to sell a majority of the electorate on the virtues of Liberty and constitutionally limited government.

The Patriot Post
]"Never give in, never, never; in nothing, great or small, large or petty,never give in except to convictions of honour and good sense. Never yield to force; never yield to the overwhelming might of the enemy."Sir Winston Churchill
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