The Fiscal Cliff Draws Near

Emboldened by his class warfare-fueled reelection victory, President Obama is demanding $1.6 trillion in tax hikes as congressional leaders scramble to prevent the country from falling over the so-called fiscal cliff.

In this high-stakes game of poker, Obama is holding fast to his original budget blueprint, which includes $1.6 trillion in new revenue generated by raising taxes on households earning more than $250,000. Obama’s progressive preening comes as the outgoing 112th Congress meets in a lame duck session to deal with unfinished business. At the top of the list are whether the Bush-era taxes rates should be extended and if the $1.2 trillion in automatic cuts approved by the congressional “super committee” on fiscal affairs will be avoided. If current tax rates are not extended, the already fragile economy will almost certainly nosedive.

Together the tax rate expirations and the spending cuts constitute the fiscal cliff, a term coined by Federal Reserve chairman Ben Bernanke, whose protracted cheap money policy has contributed to the nation’s economic doldrums. Unless Washington comes up with a solution, taxes will skyrocket on New Year’s Day and the planned spending cuts will take effect.

Although the stock market has been rising since Obama took office, buoyed artificially by the Federal Reserve’s protracted easy money policies, market participants have been signaling that the growing national debt is a huge problem. It now stands at $16.2 trillion and climbing, upon from $10.6 trillion on Inauguration Day 2009.

The U.S. dollar is slowly collapsing, eroding Americans’ purchasing power, and the price of gold, historically a barometer of economic anxiety, has doubled since Obama took office, rising from $853.25 an ounce to $1,710.00 as of yesterday.

But President Obama remains as determined as ever to raise taxes. During a Wednesday press conference, Obama said he will not “extend Bush tax cuts for the wealthiest 2 percent that we can’t afford, and according to economists, will have the least positive impact on our economy.”

In a scene perhaps anticipated by the 1979 book, Drunk Before Noon: The Behind-the-Scenes Story of the Washington Press Corps, Obama called on one of the many friendly reporters in the White House audience, CNN reporter Jessica Yellin.

She threw this class-warfare softball at the president: “Mr. President, on the fiscal cliff, two years ago, sir, you said that you wouldn’t extend the Bush-era tax cuts, but at the end of the day, you did. So, respectfully, sir, why should the American people and the Republicans believe that you won’t cave again this time?”

Of course they’re no longer tax “cuts.” They were enacted a decade ago in 2001 and 2003. They are current law, but journalists like Yellin prefer to call them “cuts” in order to de-legitimize them.

President Obama reassured the doe-eyed Yellin that he would hold fast, explaining that his previous support for extending the Bush-era rates “was a one-time proposition.”

“We cannot afford to extend the Bush tax cuts for the wealthy,” he said. “What we can do is make sure that middle-class taxes don’t go up.” Obama may as well have patted Yellin on the head for a job well done.

At the end of the relatively brief media event President Obama showed off for his adoring fans. To the obvious delight of the White House press corps whose members can be heard laughing in a Politico news video, the president smirked and smiled while refusing to answer what sounded like a meaningful fiscal cliff question shouted by Bloomberg reporter Hans Nichols.

“That was a great question, but it would be a horrible precedent for me to answer your question just because you yelled it out,” Obama said. “So thank you very much, guys.” There was love in the East Room that afternoon.

Economic illiterates on the Left such as the leaders of MoveOn and AFL-CIO’s Marxist president Richard Trumka, are keeping the pressure on Obama. They argue that the cliff is a figment of accountants’ imagination. “What we’re facing is an obstacle course within a manufactured crisis that was hastily thrown together in response to inflated rhetoric about our federal deficit,” Trumka said in a speech yesterday.

If Bush-era tax rates in effect since 2001 and 2003 come to an end as scheduled on Dec. 31, “Taxmageddon” –the largest tax increase in U.S. history— will descend on America. Earners at all income levels will be hit by the fiscal hurricane.

The Heritage Foundation defines Taxmageddon as “a one-year $494 billion tax increase slated to strike the economy” on Jan. 1, 2013 that “is made up of several expiring tax policies and the beginning of some major tax increases from Obamacare.” Taxes will be hiked by $3,800 on the average American household in 2013 alone. Taxes levied to pay for Obamacare will be phased in over the following decade but will begin with a hospital insurance 3.8 percent surtax on income over $250,000. The expiration of Bush-era tax rates will account for a third of the tax increases; a quarter, from the expiration of current payroll tax rates.

Taxmageddon will affect middle- and low-income Americans the most because those two groups received 60 percent of the Bush tax cuts. The “patch” on the Alternative Minimum Tax (AMT) will also expire. Taxmageddon will hurt all Americans because it will retard job creation and wage growth.

The cuts in the fiscal cliff fall heavily on the Department of Defense, which faces an automatic across-the-board cut of a $55 billion a year for 10 years.

During the election cycle, many Republicans assumed a strangely Keynesian posture, attacking the Pentagon cuts because they would eliminate jobs. On the other hand they embraced the Austrian school of economics, applauding possible entitlement and welfare cuts while railing against further economic stimulus packages.

They missed the point. Cutting defense spending is not bad because it will harm the economy. In fact, as Milton Friedman argued, government spending for the most part doesn’t benefit the economy. It is inherently inefficient and wasteful. We spend taypayers’ money on defense because we have to – only the government can fulfill that mission – and not to create jobs. The better argument against defense cuts, one that was heard less frequently on the campaign trail, is that with all the challenges America faces abroad, now is not the time to be cutting back on defense.

There is also the prickly issue of the national debt ceiling. Senate Majority Leader Harry Reid (D-NV) said after the election that if the current $16.394 trillion legal limit on federal borrowing needs to be raised in coming months by another $2.4 trillion, “We’ll raise it,” according to Many Republican lawmakers, especially those associated with the Tea Party, have said they plan to fight vigorously against such an increase.

Given the political situation, it seems highly unlikely that any reforms to entitlement programs will come out of the lame duck session. Preventing tax increases seems to be the most Republicans can hope to accomplish in the coming weeks.

The day after President Obama won reelection, Boehner seemed receptive to some tax increases. He said House Republicans were willing to consider “some additional revenues via tax reform.” The successful tax reform compromise of 1986 that President Ronald Reagan reached with a divided Congress could be a model for any tax deal that might be reached, he said. “We’re willing to accept new revenue under the right conditions,” he said.

The Speaker took heat from members of the Republican House conference for telegraphing his strategy early and seeming to wave the white flag.

The next day a chastened Boehner said in a TV interview that “raising tax rates is unacceptable.”

“Frankly, it couldn’t even pass the House,” he said. “I’m not sure it could pass the Senate.”

Since Election Day, Senate Minority Leader Mitch McConnell (R-KY) has come out more definitively against tax increases than Boehner has.

With both sides digging in for a fight, right now the odds seem to favor going over the fiscal cliff. Make sure you pack a parachute because it’s a long way down.

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  • Steve Chavez

    BUSH will still be blamed for something and if Obama and the Dems don't get their way, they'll be the crybabies blaming the Republicans. "The Republicans are the obstacles to going FORWARD. They want our President to fail."

    WHERE WAS THE DEMOCRAT BUDGET? DON'T YOU REALIZE that their plan was to DO NOTHING. HOW CAN YOU ATTACK NOTHING? What happened when Paul Ryan came out with one which is at least something? THEY ATTACKED HIM but we said, "Where's yours" but the media only attacked Ryan's and his WAR ON MEDICARE, and old people, since it was something.


    Strange that they attack the Republicans, who are luckily a check and balance on Obama, when it is "the Republicans who can't reach across the isle," but it is Pelosi and Reid who had Congress during Bush's last two years and they DID NOTHING TO HIM TOO except having endless hearings on who outed a CIA agent that accomplished nothing since the prosecutor already knew who did it. IT SUCCESSFULLY DEMONIZED REPUBLICANS, BUSH, ROVE, AND CHENEY. AND LET'S NOT FORGET THAT SENATORS OBAMA AND HILLARY SPIT ON GENERAL BETRAY US, and Hillary called him a lair to his face, and now he has the opportunity to SPIT BACK AT THEM BY BETRAYING THEM.

    IMPEACH OBAMA FOR "HIGH CRIMES AND MISDEMEANORS." General Betray Us also knows the contacts Obama, Hillary, Huma Abedin, and others are making to terrorists, as labeled by the U.S. Government, and he will reveal these overtures TO OUR ENEMY, LIKE AIDING AND ABETTING ESPECIALLY IN THE DEATH of four Americans including J. CHRISTopher Stevens.

  • John C. Davidson

    Soon, we all will find out just how incompetent those we elected actually are!

  • JacksonPearson

    Lots of talk about a cliff. But nothing uttered or mentioned about a balanced budget!

  • Roger

    The photo of Boehner shows us the face of the enemy.

    Remember his 'deal' to extend the credit limit? He put us in this mess and should resign in disgrace.

    • JacksonPearson

      How you been Roger?
      Boehner scares the crap out of me. He's not a conservative, and can't be trusted.

      • Roger

        I'm doing well.
        That's more than I can say for the failed 'moderate' republicans who got their clocks cleaned and aren't bright enough to realize it.

        Why can't they run on ideas and success instead of under a mantel of 'we're almost as reasonable as liberals'?

        • JacksonPearson

          No question the GOP and Romney made a number of blunders. Because, if ever presidential candidates had ammo to toss back at a failed incumbent, they had it all.

          Like McCain, Romney had the kitchen sink and toilet to throw at the Kenyan, but didn't use them. e.g., As a major, yes major issue, I'm still not convinced that Obama's Constitutionally eligible for the presidency. Yet this question was taboo and off limits for them, but OK for the Donald to squawk about. All aspects of Obama's white house BC, proves a forgery….a felony!

    • Jim_C

      Ah yes, Boehner, an actual human being who appears to take his job as a legislator seriously, for which he pays with the tag of "RINO."

      "RINO"s, of course, are Republicans with the balls to run for office and actually govern once they get there.

      • Roger

        Like whom? Like Reid that hasn't passed a budget? Obama that golfs more than attending security meetings? Like Pelosi who changed locks on committee rooms to keep out republicans?

        Like whom?

  • Looking4Sanity

    Republicans will cave after making an effort to look like they put up a fight. It's all about the votes. The problem is that fewer people are being fooled by Republican RINO's every day. They should vote unanimously to jump off the cliff after Obama, Pelosi and Reid. At least that would have the appearance of a strategy instead of them all looking like a bunch of retarded vajayjays.

  • OldSoldier38

    I think we might be better off if we go over that cliff. Yes, it will be costly, but the mandatory spending cuts will really impact Obama's socialization of America plans. How many on the dole will no longer have a dole to receive? OMG, they may even have to find a job, if anyone is hiring that is! The unions would also feel the squeeze and thus lose a bit of their power. Would that not be a good thing?

  • riverboatbill

    I don't mind going over the cliff; it's the impact on the bottom rocks that concerns me.

  • Mike in VA

    Here's an idea:


    Grow a spine Republicans…

  • WilliamJamesWard

    I had a friend years ago who's grandmother always talked about traveling to Europe to shop
    and or to South America to buy fresh vegetables and fruits, after some years I realised just
    how crazy she was as she didn't have a dime. We liked her just fine but winked at what she
    had to say, one day she made it to the airport, got on a plane without a ticket, made it to
    Paris, charged a fortune in stores, flew on to Bueno Aires and was never seen again.
    It was thought this happened because she found people that believed what she said
    and for all I know loon land was the happy ending she was after, something like Washington
    as a destination for the crazy or the congenital liars of America who leave families back home
    that are going to be stuck with the bill because they are moral folk, Buenos Aires it is a

  • Goldbug36

    The Congress criminals of both Parties are on the same team. They merely provide us with continuous entertainment .. you know .. like the faux-election we just witnessed, filled with fraud, folly and memory card hacking. Babbling Boehner will blubber and cry .. and snivel and whine. Then he'll pretend to confer with his RINO consortium. In the interest of "goin' along to git along," you know, reaching across the aisle, they'll cave at the midnight hour. Oh, the drama .. it's more than I can bear, so grievous that I had my satellite service discontinued to spare me the agony of having daily BS hurled in my face.

  • Joe Ordinary

    It's time for a steep LUXURY TAX on Movies, TV Shows, and Music, so that the putzes in Hollyweird can start paying THER FAIR SHARE and quit HOGGING everything to themselves.

    • 13Sisters76

      DC depends on the majority of Americans not understanding that the uber rich have the means to hide their money using perfectly legal means. The goofs in Hollywood have high priced tax attorneys to take care of that. Politicians like Obama (who benefits most greatly by his friendship with these people) certainly DO understand this, so all his rhetoric is for the dopes who vote for him.
      What the left wants, what they have ALWAYS wanted, what they wanted AND GOT in Russia, China and other assorted communist countries, is the total destruction of the middle class. The middle class (bourgious, kulaks, etc.) stands between them and the system they like better- the ruling class (entitled) and the masses.

  • JasonPappas

    The economic case, as valid as it is, misses the main point:

    Violating the rights of a minority, in this case our most productive minority, is a moral outrage.

  • 13Sisters76

    I support the republicans far more than I could ever support the democrats (that is true for every issue). However, when are the REPUBLICANS going to learn just what it takes- and it isn't how to win a fight using "compromise".
    Are there NO republicans who understand that a flourishing economy depends on taxing CONSUMPTION and NOT PRODUCTION? I am an educator and a historian, not an economist, but even I understand this basic principle.

  • Hiawatha-Phuck

    ~ IS FIST-CAL "CLIFF"…….

    …. Barney Frank's roommate whom ran a homosexual brothel out of Frank's Capitol Hill basement ?

    …..jus AXin'

  • richard ahern

    Our only hope is to return to our Constitutional Republic Our law are based on natura law which is eternal

    We are a Constitutional Republic-In God we Trust-Washington Etablishmnt is out of control-Be it Democrat or Republican-Government is to serve not dictate, In the new year you will see more layoffs.We are going off the cliff President Obama has done nothing to create a healthyclimate for business-WAKE UP AMERICAREAD YOUR CONSTITUTION-YOU SHOULD NOT BE LOYAL TO TYRANNY