Liberty on Tap since 1984
On this day, Monday, November 26, Congress, returned from its week-long Thanksgiving holiday at which time lawmakers and President Obama will attempt to avert a looming fiscal crisis which very will could send the US economy plunging into another recession.
There are just 36 days left in the Lame Duck session as of today, the time between Election Day 2012 and January, 2013, for a solution to be found that stops taxes from going up on 450 million American families and help reduce our nation's deficits in a smart and responsible way.
All sides claim to want to avoid the automatic one-two-punch of expiring cuts and major across-the-board spending cuts (Sequestration) to the Pentagon and domestic programs which came about because of the failure of Congress and the White House to deal with the government's out-of-control debt and a much needed overhaul of its unwieldy tax code. Sequestration calls for $55 billion, 9 percent cut to the Pentagon next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.
Knowing the penchant for the Congress and the White House to wait until the last minute to act, Curtis S. Dubay, a senior analyst in Tax Policy at the Heritage Foundation, urged back of April 4 of this year that President Obama and Congress should start working without delay to avoid having the American people awaken on New Year's Day 2013 facing a huge tax increase called "Taxmageddon" by the Washington Post. A tax increase of $494 would result from the expiration of seven long-standing tax policies at the end of 2012. It is also on January 1, 2013, that five of the 18 new tax hikes from Obamacare will go into effect.
Besides the worrisome expiration of the Bush-era tax cuts on income, investments, married couples and families with children and inheritances, other troubling tax policies include:
1. The expiration of unemployment benefits for the long-term jobless and a sharp cut in reimbursements for doctors participating in Medicare.
2. The expiration of Obama's temporary 2 percentage point cut in payroll taxes.
3. The imposition of the alternative minimum tax on some 26 million households, which would raise their taxes by an average of $3,700.
The major sticking point in negotiations so far remains over the expiration of tax cuts enacted in 2001 and 2003 and extended two years after Obama's drubbing in the 2010 midterm elections. Republicans want a temporary renewal of all the Bush tax rates, while Obama wants to hike the top rates to Clinton-era levels of 39.6. Presently top tax rates are 35 percent.
Obama has further concluded that any deal would have to include an increase in taxes on those he defines as wealthy: Individuals making more than $200,000 per year and families with an income of over $250,000. Obama also wants to implement a 3.8 percent surtax on investments and close additional loopholes and limit deductions to increase further the tax burden on the wealthy.
Even if Obama gets his way on all his tax hikes for the wealthy, it won't make a dent in our $16.3 trillion national debt. Should Obama's tax increases on the wealthy be realized, once he has squandered all of this new revenue with spending increases and goes back to what Obama perceives as the same bottomless pit of the wealthy for yet more revenues, will the media allow Obama to once more get away with claiming the wealthy aren't paying their fair share without specifying what fairness means? I don't think so!
If the top 5% percent already pay 40% of taxes, what is their 'fair' share?
Republicans, until recently, insisted that "raising taxes on the wealthy would be counter-productive and only serve to slow economic growth and ensure that the country continues to be plagued by economic stagnation." Also, "that higher taxes would dampen spending and hiring and investment by business owners."
Now there is a new wrinkle. 38 Senators and 219 House members have signed Grover Norquist's anti-tax "Taxpayer Protection Pledge. Norquist heads his Americans for Tax Reform advocacy group and is a powerful political player in the US budget debate. Over the span of two decades Republican lawmakers signing Norquist's pledge have vowed never to vote for tax hikes, brought about when George H.W. Bush broke his "read my lips" no-new-taxes promise and then lost his bid for a second term. The pledge was successful. Since 1993 there hasn't been a major tax increase in Washington with the exception of the 2010 ObamaCare law, which not a single Republican voted for.
With Obama insisting that he now has a mandate to raise taxes, there is pressure from the White House, the media, and even many on Wall Street for Republicans to abandon their anti-tax principles to avoid a "fiscal cliff." Establishment Republican Bill Kristol, Weekly Standard editor, has called on Republicans to cave on holding the line on tax increases. Senator Saxby Chambliss (R-GA) indicated on Wednesday, November 21, that he would not abide by the pledge during the upcoming fiscal cliff negotiations.
Other Republicans are beginning to feel hamstrung by the pledge and are rethinking their positions. Lindsey Graham of South Carolina could be next. Both Senators Chambliss and Graham are up for election in 2014. House Majority Leader, John Boehner, has already put revenues on the table, presumably even if tax rates don't decline!
Grover Norquist had the following to say about Republicans who are thinking of reneging on their no-tax pledge: "Republicans who think Mr. Obama or Senate Majority Leader Harry Reid are ever going to agree to cut domestic spending or reform entitlements are chasing imaginary unicorns."
Katie Pavlich, news editor, Townhall.com, suggest three scenarios that could take place:
1. House Republicans will cave on raising taxes, so long as significant spending cuts are made or if there are serious promise made to reform entitlements. (This seems like a no brainer to me, but Republicans are easily duped and then burned in the process.)
2. House Republicans don't cave on taxes, but in return give Obama and Democrats an increase in the
debt ceiling which will be reached as early as December.
3. Both parties will make a deal to stop sequestration.
According to John Tamny, a Forbes staff member, "We're never going to reach it (the fiscal cliff) given the incentives that drive politicians. That said, Tamny doesn't buy all the hysteria about what's over the cliff, as "government spending reduces real growth, while tax cuts only work if they're paired with a strong dollar." This said Tamney goes on to say, "Both sides miss the point."
Might it be a foregone conclusion that Republicans who do break their Norquist pledge will face political fallout? It's like they are saying, "I was elected under false pretenses because I misled you about what I would do."
Explaining why tax increases are bad for the economy should be child's play for Republicans. It is time for Republicans to stand on principle, lest the Republican Party be relegated to the wilderness as it has been here in Illinois.
Let Obama own the economy and pay the price for once in his life!
Posted originally at Illinois Review on Monday, November 26.