Fiscal Cliff: Democrats Fiddle While Nation Burns

As the days dwindle down to a precious few, the political posturing with respect to the fiscal cliff has kicked into high gear. Thursday revealed the latest machinations, with House Speaker John Boehner (R-OH) insisting the president had “done nothing” in return for his concession on allowing tax rates to rise on wealthy Americans, even as he scheduled, and then cancelled, a vote on a pair of bills known as “Plan B.” Senate Majority Leader Harry Reid (D-NV) warned that Plan B would not even be brought up for a vote in the Senate, even as he sent his colleagues home for Christmas. And White House Press Secretary Jay Carney reiterated the president’s insistence that Plan B would be the latest Republican effort vetoed, if it actually got to Obama’s desk. While such theatrics may be politically necessary, they are nothing more than a short-term diversion obscuring America’s real problem: an unsustainable level of spending, driving the nation inexorably towards bankruptcy. The president has no answers, doesn’t care about finding them, and is only winding down the clock until the bomb explodes and he can pick up the pieces.

Despite good-faith Republican efforts, the nature of the negotiations remains mired in largely meaningless — but politically useful– measures, namely, the incessant wrangling over raising taxes on the “rich.”  Keeping the national conversation focused on this topic accrues to the president’s interest, not only because it allows him to posture as a crusader against the alleged depredations of the wealthy, but because it distracts from his reckless stewardship over fiscal matters during his first term — in particular, when the Democrats had absolute control over the House, Senate and presidency and refused even to pass a budget, but continued to spend, spend, spend. By drawing out negotiations over a singular issue and appealing to the worst of the voting public’s worst instincts — class hatred — the Democrats needn’t worry about explaining how their tax hike talisman will magically address the massive federal deficit. As Senator Rand Paul recently noted, if the president’s proposal to tax the top two percent of earners were realized, it would fund current government spending for all of eight days.

For perspective’s sake, Americans should note the U.S. Treasury reported in October that the deficit for fiscal 2012 was $1.09 trillion. In both 2010 and 2011, it was just under $1.3 trillion, and in 2009, it was $1.42 trillion. As a result, the national debt has increased more than $5 trillion in just four years under Obama, compared to $4.9 trillion during eight years of the Bush administration. Prior to Obama, America had never run up an annual deficit even approaching one trillion dollars. We have now surpassed that mark four years in a row. Some Americans consider such an irresponsible debt increase “unpatriotic.” One of them used to be Obama himself, who in 2008, said that “driving up our national debt from $5 trillion dollars to $9 trillion is irresponsible. It’s unpatriotic.” We have now amassed over $16 trillion of national debt–and counting.

Patriotism and irresponsibility aside, the president has said many times he wants a “balanced approach” towards bringing the nation’s fiscal problems under control. Yet once again perspective becomes the necessary ingredient to understand the difference between political balance, which is what the current impasse regarding the fiscal cliff is all about, and the fiscal balance critically necessary for the long-term health of the nation.

From 1998-2012, revenue collected by the federal government increased from $1.7 trillion to $2.4 trillion, representing a slight increase over the rate of inflation, at around 2.9 percent a year. Federal spending, on the other hand, rose almost twice as fast at 5.7 percent, from $1.6 trillion to $3.5 trillion over the same period, even exceeding the increase in the population. If spending had been limited simply to increases in inflation and population growth, the federal government would have spent $2.6 trillion in FY2012, and our $1.09 trillion deficit would have been a very manageable $157 billion.

The Cato Institute’s Dan Mitchell reveals what a majority of Americans, if election results are any indication, don’t want to hear. “If you are on a path where government spending grows faster than the private sector of the economy, which is your tax base, then in theory there is no level of taxation that will be enough to stabilize the system,” he states.

In other words, spending is the problem. Yet here too, a paradox exists. Because the federal government has grown so big, a sudden and overly large cut in spending would create a temporary economic headwind. Thus, there would have to be something to counterbalance that headwind; for starters, lowering tax burdens. What they have tried in Europe is cutting government spending and raising taxes, due to the obstinate belief that the EU is in the midst of a debt crisis, as opposed to a spending crisis. Yet raising taxes causes further stagnation, because it discourages the one element that is critically necessary to reinvigorate any economy, namely growth. As Greece so clearly demonstrates, this approach has produced five years of depression, and an unemployment rate that has more than doubled over the last two years to over 25 percent.

Across the pond, Democrats are not as ready as the socialist Europeans to come to terms with the need to cut spending, save for signing on to massive cuts to defense. Thus, we are reduced to politics that amount to nothing more than nibbling around the edges. Obama wants taxes raised on people making $400K per year, and Boehner insists on a $1 million threshold. The president has insisted he’s open to spending cuts, but even the New York Times is forced to admit that the “one element missing from the debate” are the details surrounding those spending cuts.

According to CNN, “Obama’s latest offer includes $1.2 trillion in revenue increases on individual income and $1.22 trillion in spending reductions, though Boehner’s office says the math adds up differently.” Even if one assumes the math is correct, and that raising taxes will not affect economic growth even one iota, a total of $2.42 trillion in deficit “mitigation” over ten years amounts to $242 billion per annum. Even if one believes a more optimistic report by Fox News, citing a “senior administration official” who believes “both parties are still extremely close on a massive $4 trillion debt deal,” such “massiveness” amounts to $400 billion dollars per year over ten years–or less than half the deficit we ran in 2012 alone.

If no deal is reached, Americans will see an average tax increase of $2000 next year. Perhaps they ought to. Nothing makes the politicians in Washington, D.C. shirk the nation’s fiscal responsibilities more than the knowledge that the public’s appetite for entitlements has increased exponentially–along with their appetite to have “someone else” pay for them. A $2000 bite would not completely eliminate the “free lunch” mentality that apparently now infects a majority of the electorate, but it might be a good start.

But it would only be a start, and as revealed above, it would amount to a pyrrhic victory at most. The federal government has a monumental spending problem. It is so massive that the Congressional Budget Office (CBO) reveals if lawmakers do nothing about entitlement spending, public debt would reach 109 percent of GDP by 2026, and nearly 200 percent of GDP by 2037.

And make no mistake: at the heart of the spending problem is an entitlement problem. As Dr. Merrill Matthews and actuary Mark E. Litow point out in a publication titled “The Coming Entitlements Cliff,” current spending on entitlements amounts to $2.2 trillion, which is only $200 billion shy of the aforementioned $2.4 trillion in total revenue collected by the government in 2012. Furthermore, they reveal that an astonishing 108 million Americans live in households where at least one person participates in a means-tested program. Furthermore, even that number is increasing.

Thus, one may be forgiven for not getting caught up in the largely manufactured drama surrounding the so-called fiscal cliff. It is tantamount to haggling over whether bailing out a sinking Titanic using a thimble or a bucket is the better course of action. Sen. Rand Paul has the proper perspective. “There’s a lot of talk right now about an impending fiscal cliff,” he writes. “But we already went over a cliff economically in this country a long time ago.” If Americans wish to raise themselves out of the abyss, they must accept economic reality, no matter how unpleasant. The late Herbert Stein, chairman of the Council of Economic Advisers under Richard Nixon and Gerald Ford, reveals the gut-wrenching alternative. “If something cannot go on forever, it will stop,” he warned.

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  • κατεργάζομαι

    Hey, Washington, – IT'S NOT YOUR MONEY! dammit.

    We did not elect you to office so you could tell Worker Bees how much of OUR HONEY you will allow us to KEEP! You are not BEE KEEPERS.

    If ever there were a time to drive a stake for Liberty, and impale politicians' insolent redistribution racket!

    Obama, Pelosi, Boehner & Reid can go "fiddle" with themselves.

  • Looking4Sanity

    To say Democrats are "fiddling" is to make the assumption that "going over the cliff" isn't something they want.

    The fact is, they are stonewalling because it is PRECISELY what they want! Taxes will go up on EVERY American…and they've (Simpson-Bowles super committee) tricked Republicans into putting their fingerprints all over that regardless of whatever they do at this point.

    Defense will be cut Draconianly…again…GOP prints all over that.

    The entitlement cuts will never happen and we all know it. The Democrats certainly did when they made this Faustian agreement with Republicans. But…even IF they did cut entitlement spending, who do you suppose is going to take the blame for THAT? It sure won't be Democrats! Everyone knows they're the Party of Santa Claus.

    The basic problem is that the GOP can not come to terms with the fact that they are dealing with a pack of lying Ba_tards embodied in the Democrat Party. Perhaps the GOP is the Party of morons. Everything they've done in the last ten years points to that being the case. As they say…"with friends like that, who needs enemies?".

  • R.C.

    Of course the Marxist democrats are fiddling while the economy and culture burn–they want this destruction–so they can remake America into a workers paradise–like in Cuba!

    How's that hope and change working out for you now?

    • R.C.

      I knew Barack Obama was a Marxist and hated America in the summer of 2007–I've never been fooled by him!

    • AdinaK

      R. C. exactly!

      And when the destruction of the economy through deconstruction is one main goal, and the other devil is gun control, to gain total control, why shouldn't the Dems fiddle –

      As the little ones often say, easy peasy.

      Adina Kutnicki, Israel –

  • pierce

    He, Barack Obama, and the Democrats in the Senate, led by Harry Reid, are trying to make it look like all Republicans, led by Mitch McConnell, and John Boehner are the guilty culprits. They are not! At least they have a budget, you have not seen fit to even submit a budget, perhaps because you do not want to rein in your reckless spending habits. You just do not want to admit you are out of control. Barack covered up Benghazi, and now he is trying to cover up a lust for spending moneys he does not have.

  • @USnavy1967

    I believe that what is needed is the $2000 tax to be allowed to happen and then maybe the nation will see that the Democrat's are wrong. It is a painful way to show the nation the problem is spending, not taxing. One household does not go out and spend spend spend and never NEVER put money in their account to pay for the spending. This whole thing is political and nothing more.

    • Roger

      The media distracts and distorts.
      Do you really think they will allow the masses to think of things the way you just laid it out?

      They will do anything to make sure no one thinks of it in the way you just presented it.

      • 1gandydancer

        "The House has already passed legislation to stop all of the January 1 tax rate increases and replace the sequester with responsible spending cuts that will begin to address our nation's crippling debt." (Press Release, Boehner, Dec 20, 2012)

        Hard to believe Boner actually did anything so sensible. He's certainly not emphasizing it much. But that's the way to go. Attach it to everything sent to the Senate and force the Dems to keep stopping the tax decrease.

    • JasonPappas

      I think Obama wants the Bush cuts to expire. The tax on the rich will only bring in about 5% of the deficit. He needs to tax the middle class but he doesn't have the guts to say so. He is playing hardball with the Republicans because he wants to blame them when the Bush cuts expire on everyone. He gets his tax increases on everyone and blames it on the Republicans.

      Boehner should call him on it. Obama needs and wants the Bush tax cuts to expire on everyone. Let him deny it and then explain how the puny revenue from the rich solves the funding problem. Make him look stupid … accuse him of wanting to tax the middle class and doing everything possible to avoid extending the Bush tax cuts. To argue economics … accuse Obama of insuring tax increases on the middle class … he needs it and wants it. Period.

  • Roger

    Boehner deserves the blame for this.

    He knew what Obama wanted and allowed the borrowing limit increase knowing all this was a possibility.

    Boehner is a fool, and needs to resign in disgrace. Failure is not an option where I come from, and if it is where he's from he needs to go back home.

    • Love, R N

      Hmmm, you seem to be the only person with a working encephalon on this HATE site Roger. Your comments come from reality/common sense rather than EMOTION and delusion about the US economy.

      What in the HAYell are "entitlements" supposed to be anyway?
      If they are referring to Social Security, then I don't call that an entitlement but the contract that I signed with the US government when I worked THREE JOBS to support my family and they diligently took taxes without me looking for LOOPHOLES other than work uniforms and the house I eventually lost due to bank & mortgage ponzi schemes.
      One "entitlement" they can eliminate IMNSHO, is the billions in aide to the Middle East – including Israel – since they have a tendency to backstab the USA right after they get the money, then thumb their noses at us until next year.
      What say you AdinaK? Think that would help the US economy if we didn't give billions to Israel, Egypt, etc. for a couple of years? At least while Obama is POTUS anyway, since you don't like him anyway….ROTFL!!!

      • Roger

        Entitlements are programs that are paying money out without any way to collect funds to begin with.

        Social Security had a lock box with a trust fund, so it's not an entitlement. Same with Medicare, since it's collected from payroll and put away for spending later.

        On foreign aid, that's a whole big can of worms an entire thread could address much better than just one comment.

        And as for Obama, I 'didn't like' Clinton. But at least I didn't think he was a traitor that wanted to bring down the country into collapse. With our marxist president of muslim heritage It looks like he might.

        • patron

          No lock box. Democrats raided that years ago for welfare spending. Treasury states that Social Security in no way is a personal savings account, but a tax and spend state welfare program. Medicare is the same and the tax rates do not reflect the ever increasing amount of money it pays out.

          The housing bubble, and the tech bubble before that carried a lot of dead weight in government waste. Those popped, new ones for energy and medicine have been over regulated by the Democrats, and now they just run debt to keep their scams going.

          "I eventually lost due to bank & mortgage ponzi schemes. "
          I highly doubt tat happened. It would happen if you took a low money down adjustable rate, and left the house in the middle of foreclosure. The DoJ has mortgage refinance and there is bankruptcy protection.

          Even still, Barney Frank and Chris Dodd oversaw the fraud on Fannie Mae and Freddie Mac for years, and passed a bill that put a larger share of the money into too big too fail.

          • Roger

            Patron, I can only respond to the parts you seemed to aim at me.

            I was explaining entitlements and nothing more. Social Security was raided by LBJ a democrat that loved to spend everyone else's money. But you earn your benefits by what you pay in. It's many things, but not a classic example for entitlements.

          • JacksonPearson

            "Democrats raided that years ago for welfare spending."
            I often wondered how exactly the congress critters that borrowed, or as you say raided social security funds would ever pay it back, and if so, how? Where would the payback money come from? I understand, that they "raided' close to four trillion dollars

      • tagalog

        Everyone here has a working encephalon, i.e., a brain. If we didn't we'd be unable to write anything here, much less breathe, move, etc. As an R.N., you probably know about anencephalic babies. They don't live long.

        Maybe you mean "cerebrum," the thinking part of the brain.

        Gotta watch those big words.

        On the issue of how "entitled" we are to the Social Security money we salted away all those years in obedience to FICA tax requirements, see the U.S. Supreme Court case of Flemming v. Nestor (1960). Specifically, you don't have either a contract right or a property right to that money you put into Social Security. Once you pay the money, the government can do whatever it wants with it, including icing you out of Social Security and they don't have to give the money back.

  • Arlie

    There is NO way out of the hole this spending corrupt government has gotten into.

    how long is "just" 1 Trillions seconds = 31,688.7 YEARS

    The "cliff" is imaginary and illusion a political tool, a sound bite. We are so far gone it boggles even the educated mind. The average person does not even come close to understanding what's been done.

  • tagalog

    All of what's said in the commentary to the contrary notwithstanding, it's the Republican Party that's going to get the blame for the country going over the "fiscal cliff." The Obama administration and the MSM are going to push that spin on things, and the majority of people are going to believe it. Furthermore, that's what's going to go into the history books.

    I don't know if the Republican Party is finished, but it's certainly in for a period in the wilderness at minimum.

    If Republicans want to win elections, they'd better come up with a political theory that the majority of the people can align themselves with, else they're going to continue losing. If the party can't do that, they're going to disappear.

    I can't believe that, with the nation on the verge of what's been characterized as a financial crisis that could plunge us into another three years of recession, Congress has gone on Christmas vacation. I can't comprehend that; what kind of minds do these people have? And WE ELECTED THESE WORTHLESS CLOWNS!!!! AND PAY THEM FOR SOME MYSTERIOUS REASON!!! Why didn't they attend to this threat a year ago? They certainly knew it was coming. Why aren't the Republicans staying in Washington and making a fuss about the Democrats abdicating their responsibilities?


  • clarespark

    The only winner in this debacle will be the Popular Front politics that has joined "anti-imperialists" and "antifascists" in the New Deal relalignment. Not much any Republican can do in the welfare state solution to class conflict that now looks to be collapsing. Perhaps the populists in both parties should take responsiblity for the present emergency. See…. "Perceptions of the enemy: the left looks at the right and vice versa."

  • daniel metz

    the democraps are all about destroying the nation and turning this into a welfare state of blacks and muslims blacks have every advantage in the world and they want more and more and we keep giving them the affirmative aciton until it is not fair for the white man anytime you favor one race you hurt others

  • pierce

    I was curious about how many people who follow FPM think that our President is irresponsible when it comes to the budget and taxation. Now you all know where I stand, and I pay taxes, but I can't stand this hypocrite.
    He should be abiding by a budget, but he and his buddies, i.e. Harry Reid, et al can't find the time to submit one. Now I would say that is criminal behavior. Sometimes the Republicans aren't much better, but at least they have a budget.

  • Civilus Defendus

    The House holds the purse strings – USE THEM. Hey, Zero, bring me itemized $500B per year reductions or we start defunding government employees, starting with everyone you have hired in 4 years. Confiscating all the "rich folks" wealth will only destroy America. Oh, now I see your vision..

    Psst, Boehner, ever hear of 'balance of powers'?

  • BillG

    Leading Republicans are apparently too interested in keeping their jobs. Otherwise, they wouldn't blink when playing chicken with the Debt Ceiling. Along with Civilus Defendus suggestion, they simply need to block any increase in the limit. That would mandate living within our income, meaning a huge cut in spending.

  • Mary Sue

    They're willing to plunge off the Fiscal Cliff if it means they can take the Republicans out along with it.

  • Barbara Griffith

    Hate to tell you guys but Boehner left DC for the holidays and Obama split out of town and took Air Force One to Hawaii for his holiday. You won't see either one of them until Jan 1, 2013.

  • RedBaker

    The national debt increased by $1.369 trillion during FY 2012. Not the $1.1 trillion quoted here. Don't believe anyone about debt or deficit, even conservatives, because they are quoting the BS which is all-pervasive.

    Go to the US Treasury website feature "Debt to the Penny" and look up the debt on exact dates, and do your own math to find out the borrowing in any given fiscal year. BTW, the amount borrowed in FY 2009 was $1.796 trillion, in 2010 $1.690 trillion, and 2011 $1.179. Not the lower figures also quoted in this article. So the borrowing for this year increased $180 from last FY.