This seems so gigantically irresponsible that I can’t believe either side is contemplating it.
At the turn of the new year, a slew of tax cuts enacted by the Bush administration will expire while at the same time, sequestration will occur and $1.2 trillion in spending will be cut. There will also be a need to raise the debt ceiling.
Congress can avoid this disaster by working toward a compromise. Alas, observers from both sides of the debate think this will be too hard to accomplish and there appears to be a chance that the lame duck session following the November election will avoid the issues altogether.
Neither Democrats nor Republicans claim this is their preferred option, as it could rattle global financial markets badly and anger their constituents.
But as they circle each other in an ever-more partisan atmosphere they see little prospect for a settlement acceptable to both parties in the lame duck session of Congress after the November 6 election.
That is when they confront the wave of fiscal cliff decisions including how to handle expiration of temporary tax cuts that originated during the presidency of George W. Bush, $1.2 trillion in automatic spending cuts and the need to raise the debt ceiling again.
Some members and partisan strategists are concluding that they might be better off doing nothing.
They would come back in January with a new Congress relatively flush with cash – at least on paper – from the impact of the tax hikes; hit reset and start over to structure a new series of tax cuts. Call them the “Obama tax cuts” or “Romney tax cuts,” depending on the victor in the November election.
The risk of shaking the markets is always there. But they could mitigate that by telegraphing to voters and Wall Street in advance that they definitely intend to write some new tax cuts into law. It could take a couple months, or maybe even all of 2013 and beyond, but they promise they will do it and they promise they will make the tax cuts retroactive to January 1, 2013.
“My preference would not be to accept a lesser solution than you could get in February and March just to say that you got it done before the end of the year,” Senator Roy Blunt, a member of Republican leadership and congressional liaison to Republican presidential nominee Mitt Romney, told the 2012 Washington Reuters Summit last week.
Representative Chris Van Hollen of Maryland, a member of the Democratic leadership in the House of Representatives, said that if Republicans continue to demand a tax plan with breaks for the wealthy, Democrats should “take the question to the American people” in January by allowing historically low rates from the Bush years to expire.
So, because both sides are unable to play in the same sandbox without tearing each other apart, taxpayers, the economy, the markets, and the country take a gigantic whop upside the head.
This is worse than gridlock which, an argument can be made, is not all bad. It borders on negligence. What are we paying these people for if they’re not going to do their jobs?
Perhaps we should withhold their pay — “retroactive to January, 2013″ of course.
It is already over. Anything they do will merely postpone the inevitable and make it worse.
Do you really think we can just borrow unto infinity? And wherein lies this sandbox they should play in? At the junction of “I want all your money” and “leave us the Hell alone”? That’s where we’ve been now for 80 years, and it aint workin’. They simply refuse to stop. We must make them, no matter what.
The engine block is worn out. The connecting rods are bent. The cylinders are blowing oil. There is only 10 lbs of compression in each cylinder. Changing the oil filter and buying new spark plugs will not fix this problem.
We need to rebuld from scratch, because we’ve loaded so much on our car, driven it hard and done absolutely no maintenance, and it has now died.
You’re proposing we give it a good car wash and maybe some wax. So it might last just a bit longer.
In a bad fire, they destroy the houses next to the burning one to create a fire break. Noone wants their house torn down when it’s not burning, but, if they don’t, the whole town will go up.
The house is on fire, and everyone in Washington is against tearing down the houses next door because they’re tiny little girly man weenies. They’re not too worried because their house is in another town.
(See John Roberts, Jerk; or John Boehner, Wuss).
I’m 55, which means I’m old enough to remember previous grand compromises on the budget. The Democrats will promise that they’ll cut spending to match tax rate increases and the Republicans will agree. Only the spending never gets cut. It happened under Reagan and again with Bush ’41. Why should anyone believe it’ll be any different this time?
How about this for a change – cut the spending first. I mean real cuts across the board in every government agency’s budget. Not any of this “reductions in the rate of growth” but actual cuts. While you’re at it, why not eliminate departments that are redundant or have outlived their purpose?
Next, enact a freeze on new government regulations and start a systematic review of existing regulations to elinimate those that are outdated or can’t pass a cost/benefit analysis. If an emergency arises that requires new regulations, make them in Congress, not in the bureaucracy.
Do those thing first and then we can talk about tax rates.
The Real Tax Burden
The real, current tax burden is government spending. Government spending directs current, real resources into wasteful or useless projecs, and denies a flow of resources to businesses which would like to produce more useful products with more employment.
The timing and amount of tax collections or imposed inflation is only how it distributes the burden of that spending. Government borrowing and delayed taxes are merely settling the bill.
A government may even distribute tax rebates. But, real taxes are higher if it increases the size and spending of government. Government is taking a bigger share of current, real resources, leaving less for private use, investment, and private employment. Production is immediately lower, and future collections of production (taxes) will have to be higher. A double whammy. Whatever government is providing had better be worth the large cost.
Respected economist Milton Friedman pointed out that the burden on the private sector is bigger when the government grows as a percentage of the economy. We must reduce government spending.
Consider as an extreme case what our lives would be like if government spent 80% of national production (GDP). Government would be directing 80% of all activity. It would not matter what parts were collected in taxes, were borrowed, or were taken by the Federal Reserve through inflation. Taxes would explicitly apply the burden. Borrowing would somewhat hide and delay the burden. Creating money would apply the burden as a decrease in the value of all dollars, effectively and silently levying a tax on anyone saving or being paid in dollars.
State and Federal spending will be $5,799 Billion from a GDP of $14,660 Billion in the year ending September 30, 2011 (fiscal year 2010). That is 40% of all production in the US. You have a right to feel squeezed by this massive transfer of wealth to the activities of the government.
NO, the reason is as simple as it is terrifying – There is NO INCENTIVE to get the spending under control until full blown collapse is under way.
Even then the damage to political parties is usually short term. Argentina suffered hyper-inflationary collapse in 2001 due to print and spend Obamanomics, by 2008 the socialists were back in power with majorities.
Today that country is about to go over the cliff again. Guess who is still in power…
Business as usual WILL CONTINUE… until armed revolution forces it to end and no a second before…
The United States of Mexetina – Change your getting…
The proposition that congress will agree to cut taxes and then cut spending has been proven wrong so many times in the past that I’m mildly surprised anyone would even mention it. No, spending must be cut first. We can do without the Departments of Education, Energy, and Homeland Security. TSA can be privatized and the remaining police functions [Coast Guard, Secret Service, Immigration] returned to their original agencies. Let’s cut every Cabinet Department by 30% and require that at least 75% of the cuts come from their administrative budgets. Cut every independent agency by 40%, no exceptions. Then we can look at taxes and balancing a budget.
#2, 3, 4- my thoughts exactly.
As if our country had much, if anything, to do with consent of the governed.
It’s just marketing. Come on, people.
Political ‘debt’ money now reflects the value in influence networks.
It’s different from capitalist money as a medium of exchange.
The very nature of money and it’s purpose has changed.
Besides, these are BUDGETS.
They can be changed with a pencil eraser.
Governments, state and federal, are sitting on tons of cash-
and preparing to use their assets to take even more of yours.
That’s the game, after all.