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Grab Your Parachute
Posted By Matthew Vadum On December 31, 2012 @ 12:58 am In Daily Mailer,FrontPage | 27 Comments
Thanks largely to President Obama’s intransigence, America is poised to fall over the potentially treacherous “fiscal cliff” tomorrow. Top policymakers in Washington appear no closer to reaching a deal than before they left town for the Christmas break.
The outgoing 112th Congress is meeting in a high-stakes lame duck session to decide whether Bush-era tax rates should be extended and if $1.2 trillion in scheduled spending cuts –falling largely on the Pentagon– will be avoided. If current tax rates are not renewed, the already fragile economy will suffer.
President Obama’s critics say he wants America to go over the cliff so he can blame the consequences on Republicans — and he’s given those critics plenty of ammunition.
Instead of trying to deal with the problem, President Obama has been busy framing Republicans as the villains, arguing that they are being unreasonable because they want to cut spending and maintain current tax rates.
With bags under his eyes an exhausted-looking Obama disingenuously claimed on NBC’s “Meet the Press” that his offers to Republicans “have been so fair that a lot of Democrats get mad at me.”
Obama has been acting genuinely amazed that Republican negotiators have failed so far to be suckered by his worthless proposal to cut government spending in exchange for tax rate increases. The president said Republicans have “had trouble saying yes to a number of repeated offers.”
Of course anyone who has followed Congress in recent decades knows that when political dealmakers couple tax rate increases with less-than-specific promises to cut spending at some indefinite point in the future, those spending cuts never actually happen.
Commentator Charles Krauthammer said yesterday that Obama could have done much more to resolve the current situation. “The president has never gone to the nation and made a serious speech about debt,” he said.
“He ignored it the first two years. He appoints a commission that he studiously ignores for the next two years. That’s why we’re at the cliff now. He’s not serious about the debt — none of his proposals. You raise the taxes on the rich, it’s eight cents on the dollar on the deficit. It reduces it a trivial amount of money and he’s never put any political capital in entitlement reform or tax reform. Oh, we’ll talk about it here and there — never invested any capital in it.”
The national debt now stands at $16.39 trillion, up from $10.6 trillion on Inauguration Day 2009. But that $16.39 trillion figure is misleading. Government accounting tricks keep another $86.8 trillion in unfunded liabilities related to Medicare, Social Security, and federal employees’ future retirement benefits off the books and out of the public eye. Add the two figures together and you arrive at the more accurate, unimaginably large sum of $103.1 trillion.
As intense negotiations took place Sunday on Capitol Hill, Sen. Lindsey Graham (R-S.C.) moved from cautious optimism to hopelessness in a matter of hours. On his Twitter account the senator said bluntly, “I think we’re going over the cliff.”
Earlier in the day Graham said on “Fox News Sunday” that he was optimistic some kind of deal could be reached at the eleventh hour. “I think people don’t want to go over the cliff, if we can avoid it,” he said.
“Whatever we accomplish, [it's a] political victory for the president, hats off to the president,” Graham said grudgingly on TV. “He stood his ground. He’s going to get tax rate increases, maybe not at [$250,000 in annual income] but on upper income Americans.”
But in parts of official Washington hope springs eternal.
Sen. Joe Manchin (D-W.Va.) introduced legislation Sunday that he said would “soften the landing” if the country goes over the figurative cliff.
His new bill, the Cliff Alleviation at the Last Minute Act (CALM Act), would gradually phase in tax rate hikes and allow the Office of Management and Budget (OMB) to recommend changes to the spending cuts scheduled to take effect.
Even if the Democratic-controlled Senate signs off on a last-minute deal with the president, it is far from clear whether the GOP-controlled House would go along with it — even if it bore the imprimatur of House Speaker John Boehner (R-Ohio).
Many Republican House members, especially those associated with the Tea Party, don’t trust Boehner to do what they consider to be the right thing. Earlier this month he tried to push through a measure that would have raised taxes on those earning more than $1 million a year. Conservatives rebelled, reasoning that Republicans shouldn’t go along with President Obama’s class warfare-driven “soak the rich” policies. Groups like American Majority Action are pressing GOP lawmakers not to reelect Boehner as Speaker when the new Congress convenes on January 3. It is not yet clear if that movement will gain traction.
Regardless of whether the fiscal cliff is averted, tomorrow Americans will be hit with $1 trillion in new taxes to support the perennially unpopular Obamacare. The taxes will be fully phased in from 2013 through 2022, according to the Congressional Budget Office.
The five major Obamacare-related levies taking effect on January 1 are: a new 2.3 percent excise tax on gross sales by medical device manufacturers;a new cap of $2,500 on currently uncapped pre-tax Flexible Spending Accounts; a new 3.8 percentage point surtax on investment income for those households making at least $250,000 (or $200,000 for unmarried individuals); the raising of the threshold for medical itemized deductions from those expenses exceeding 7.5 percent of adjusted gross income to 10 percent of AGI; and an increase in the Medicare payroll tax from 2.9 percent to 3.8 percent for all wages and profits above $200,000 ($250,000 for married couples).
Meanwhile, if the nation tumbles over the proverbial cliff at midnight, markets will be disrupted. Workers who hadn’t been paying attention to the fiscal cliff debate will get a rude shock when a greater portion of their paychecks is suddenly withheld. Public pressure could force lawmakers to make some kind of a deal, perhaps retroactively extending current tax rates from January 1.
Lawmakers could also vote to maintain the status quo and kick the can down the road for another few months or more.
Or they could do nothing — which would be fine by President Obama.
With the assistance of the mainstream media, Obama reckons he will continue winning the public relations war against his Republican opposition indefinitely.
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