Monday, December 17, 2012

Going Over the Fiscal Cliff

“the cliff’s consequences — huge tax increases and defense cuts — are progressivism’s agenda.”

--George Will, Washington Post  

“The natural progress of things is for liberty to yield and government to gain ground.”

--Thomas Jefferson

We said last April that if Barack Obama won re-election, he would raise taxes on all of us, doing so by simply allowing the Bush tax cuts expire. It’s happening.

And conservatives aren’t really surprised. Washington Post columnist and Former Bush 43 speechwriter Michael Gerson writes about the real advantages Obama may accrue from smashing the economy and simultaneously doing in Republicans:
The Democratic left is perfectly comfortable with most consequences of the cliff -- large defense spending cuts, tax rates back to Bill Clinton levels for everyone, Republicans blamed for defending the rich. Obama may be calculating that his leverage with the House would be even greater in January. As the weeks of pain go by, political pressure might grow so heavy on the GOP that Obama could essentially dictate terms -- whatever mix of tax increases, tax cuts and spending he wishes. The risk of this strategy is serious -- market panic, credit downgrade and recession. The political reward for Democrats might also be considerable: marginalization of the GOP based on a three-point presidential victory.
And the Washington Examiner’s Michael Barone similarly discounts the pain a bad economy may inflict on Democrats:
doesn't this president, like his predecessors, want bounteous economic growth? Maybe not. First-term presidents want strong economic growth because they think they need it to be re-elected. But Obama has already been re-elected without it. And economic growth produces things Obama doesn't like. Some people. . . get very rich. Obama prefers a more equal income distribution. The Depression of the 1930s did a great job of increasing economic equality.
Earlier, I compared Obama to Herbert Hoover. Obama, like Hoover, is the president who presides over a four-year bad economy leading to a re-election defeat. I was wrong.

The American people treat Obama not as a Hoover-like incompetent, but rather as Franklin Roosevelt, the president re-elected twice (1936, 1940) in a bad economy. Roosevelt and Obama were re-elected not because they turned the economy around (they didn’t), but because enough parts of the Democratic coalition saw them as one of their own, and gave them a pass for trying.

In other words, the hidden re-election slogan turned out to be, “Stupid, it isn’t the economy!”

Barone even suggests Obama and Roosevelt found things to like about hard times:
Sluggish growth and recession. . . make things more predictable. Constituencies that enjoy political favor -- UAW members at General Motors or Chrysler, for example -- can be subsidized to remain in place. The cost of such subsidies can be extracted from disfavored constituencies. This is called, in Obama's words to Joe the Plumber, "spreading the wealth around." Remember when ABC's Charlie Gibson asked candidate Obama if he would raise capital gains tax rates even if it brought less revenue to the government. Yes, Obama said. "I would look at raising the capital gains tax for purposes of fairness."
So we’re going over the cliff. George Will reminds us why it’s so wrong for the country to do so:
At the end of the Clinton administration, when the budget was balanced, annual federal spending was $1.94 trillion and revenue was $2.10 trillion. “Adjusting for inflation and population growth since the start of 2001,” [University of Georgia economics professorJeffrey] Dorfman writes, “today’s equivalents would be $2.77 trillion and $3.00 trillion,” and a $230 billion surplus.
Today federal revenue is $2.67 trillion [just $100 billion below “the Clinton equivalent,” yet] spending is $3.76 trillion, so we are spending $987 billion more than we would be if we had just increased Bill Clinton’s last budget for inflation and population growth.
Increased tax rates will hurt growth, enlarging the deficit, not shrinking it.  The only rational path to a balanced budget is through lower entitlement spending.

No comments: