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The Reality of the "Cliff" & What to do

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Created: Wednesday, 05 December 2012 15:43

Written by Ax D. WhiteMan

There are some stark political realities that the GOP leadership seem unwilling to face.

First, they are likely to lose the House in 2014.

This is based on their refusal to fight the runaway spending in Washington that they were elected to fight. This behavior has been consistent since the first "budget battle" of 2011. It was then that the "cave" lead to the spending authorization battle later that year. Caving on that battle brought the debt ceiling battle where GOP caved and agreed to a "select committee."  Failure of the select committee to reach a solution - brought us the current "fiscal cliff." The stunning impotence of the twice elected House Majority will not be rewarded by conservative voters. 

The 2nd reality is that President Obama WANTS to "go over the cliff." The Obama Administration successfully parlayed the "Financial Crisis of 08" into political cover for all of its failed economic policies - the sum of which have lead to a "recovery" that is substantially worse than than "the recession." Exit poles show that most voters still find the Bush Administration to be responsible for all of Americas economic woes. Obam NEEDS another crisis on which to blame the certain economic woes of the coming four years.

The 3rd reality is that "The Cliff" is the best deal Republicans are going to get. Obama simply will not accept anything that improves the conservative position - even a little bit.

Given those realities - the GOP must position itself for the "post cliff" reality that it will confront at the start of 2013.

First, before leaving for Holiday Break, the House should pass legislation which PERMANENTLY extends the current tax rates for ALL individuals, and simultaneously repeals the "fiscal cliff" law. The "fiscal cliff" agreement is in itself currently obsolete. It's purpose was to curb Government Growth in return for raising the debt limit. The debt limit is already being reached again and the budget process is about to begin again. It would be exceedingly easy to argue that purpose of "The Cliff" has come and gone - and should simply be vacated.

Of course Obama would veto this if passed in the Senate - which it won't be; but it would give the GOP some starting point for the newly convened Congress in 2013.

With taxes being raised on EVERYONE, the GOP will be confronted by the Democrats to pass legislation restoring the "Tax Cuts" to 98% of the country.  They should beat the Democrats to the punch and pass legislation to restore "Tax Cuts" to everyone - again PERMANENTLY. The Bill should be named: "The President George W. Bush Tax Cuts for ALL Americans Act." That name should be said loud and often at every opportunity. 

The Senate will pass a corresponding bill, without the tax cut for the top 2%.

That's ok. The bill will go into conference where the minor differences will be reconciled. The GOP will probably not be able to get ALL the tax cuts back for the top 2%. That's not the point. They will then be advocating for TAX CUTS not agreeing to TAX INCREASES - and the rates will be permanent.

For this to happen, the GOP has to not only be willing to "go over the cliff," but be willing to shut down the government during ensuing budget talks. They must make it clear that not only are they willing to "shut down" the government - but that they'd shut it down til the next election if necessary. Two years of "essential services only" might be just what this country needs.

Well, we can dream can't we?

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Terminally Stupid GOP Swan Dives over "The Fiscal Cliff"

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Created: Wednesday, 28 November 2012 14:06

Written by Ax D. WhiteMan

The GOP has once again maneuvered itself into an un-winnable position. They have now brilliantly bought into the framing of the "fiscal cliff" argument as:

"Tax the Rich"

vs.

"Cuts in Social Security, Medicare/Medicaid"

Of course the GOP has taken the side of opposing "tax increases on the rich," but will consider them IF they get some cuts in entitlement spending. Could there be a more certain way to lose the House Majority?

At this point the GOP must realize that its unlikely to hold the House in 2014.

They're positioning to be the loser no matter what happens. If they give in to tax increases, they lose their base - and catch undying flack from the media for the "draconian cuts" in entitlements.  In that scenario, they may not get a single vote in 2014.

Conversely, if they hold firm and EVERY tax rate increases; the economy will slow, revenues will decrease, deficit will increase; and they'll again be designated as the culprit that was willing to trash the economy and the military in an effort to "protect the rich."

What's the solution?

They simply must decouple the two issues. They ARE two issues. No cut in entitlement will enhance the revenue to the Government. No increase in taxes will alter the spending habits of Government, or reduce entitlement liabilities.

The GOP must discuss revenue in terms of the Laffer Curve. That is, that there exists an "optimal" level of taxation above or below which tax revenue will decrease. There is significant evidence that we are at, or near the optimal tax rate. We need to face the reality that the "Tax Engine" is close to "red lined," and that we aren't going to see much net revenue gain by moving taxes in either direction.  The evidence for this is that the massive tax increase by Bill Clinton RAISED revenue, and the subsequent tax cut by George Bush also RAISED revenue. Though the theoretical "optimal tax rate" is always a moving target; its logical to conclude that we are very close to "optimal."

The GOP should be identifying fundamental tax structures that allow companies like Google, GE, and others to pay almost nothing in taxes, while oil and gas producers operate as virtual public utilities. In any case the revenue will only be increased with economic growth.  The GOP must refute the idea that there is a Governmental magic bullet that will increase growth. There is not. Growth is driven by private innovation and production. Government can do much to diminish private innovation - but the most it can do to increase it is to "stop diminishing it."  An old economics professor of mine described this as trying to "push with a string." 

Admittedly, its difficult to make a public policy of "doing less harm;" - but that's what needs to be done to grow the economy and increase government revenue.

In terms of spending, they need to attack the bloated annual budget that was caused by the failed "stimulus" spending before attacking entitlements. They should highlight that the cause of this huge deficit was a single massive "stimulus" bill that has been permanently embedded into this Administrations "Non-Budget". The stimulus bill was supposed to pay for itself by stimulating growth, it didn't. Now we're faced with having to pay for it. While permanent structural balance requires addressing entitlements, short term attention should be placed on excessive spending that began in 09, and continued despite no approved budget since then.

Entitlements can be addressed at a later date.

The only way the GOP can salvage anything from this ugly situation that originated with the idiotic agreement reached on the debt ceiling, is to hold the line on tax increases and decouple the ridiculous position of trading tax increases for entitlement cuts.

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GOP Ignores it's Looming Extinction on Tax Deal

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Created: Tuesday, 13 November 2012 15:40

Written by Ax D. WhiteMan

John Bhoener is about to compromise the GOP out of existence, and seems blissfully ignorant of the stakes with which he is gambling.  For some context, a brief review of how we got here...

In 2009, President Obama embarked on an ambitious goal of "fundamental transformation" of America. His only opposition was a Republican Party with minority status in both houses; and the need to pay some lip service to the Constitution. Despite suffering consecutive losses in both 06 and 08; the minority GOP showed remarkable conviction in their vigorous opposition to Obama's "stimulus," and "ObamaCare," yet due to lack of numbers - fell short in their opposition. The minority GOP invoked a full throated, impassioned support of conservatism and rebuke of liberal ideology. Conservatives found some reason for hope in the newly invigorated GOP.

The sudden re-awakening of the Congressional GOP inspired grass roots activism and re-kindled hope among conservative Americans that the Republican Party had "seen the light" and a return to Constitutionally limited Government was in sight.  The energized conservative base responded by providing the GOP with historic victories in the 2010 mid-term elections.  The GOP won historic majorities in Federal and State elections in all but the most liberal of States.

In the ensuing months, the now "majority GOP" House softly back-peddled on each of its bold goals. It made half hearted efforts to repeal ObamaCare, and it caved on every spending issue - from budget to debt ceiling.  The final cave came in the "fiscal cliff" agreement where a special committee was appointed to find spending cuts - or else we raise taxes and gut the military. Conservatives were routinely reminded that the House majority was "only 1/2 of 1/3 of Government," and that they had to avoid extreme actions that would incite public rebuke of Republicans - thereby decreasing the likelihood of winning the Presidency and the Senate. 

Well, that strategery failed miserably.  But - the success of the House Majority remains, and despite the lame attempts to describe it as 1/2 of 1/3 of Government - it is precisely that portion of the Federal Government that is Constitutionally empowered to control 100% of spending. The argument that the House Majority GOP can't obstruct or even flat out reverse the Obama agenda is factually false.

Unfortunately, House Republlcans seem to only be capable of voicing full throated, impassioned support of Conservatism if they are in the minority - and their glorious rhetoric is completely irrelevant.

Now, it seems that the GOP conservatism was a sham. The GOP preaches bold conservative values when it has no chance of legislative victory. When it has the votes to block the Obama agenda; the GOP is anxious to "compromise." Sorry, but compromise might have been a reasonable position in 09 when there was no ability to stop the Obama agenda. In 2012, entering the 3rd year of Republican majority House which has caved on every single issue - despite its majority status; compromise would yield the effective end of the GOP as we know it.

Conservatives flocked back to the GOP when they suffered legislative defeats but fought heroic battles. If the GOP will only fight when they have no chance of winning - Conservatives will abandon the GOP.

Compromise will usher in a 3rd party - and it will lose every election, but so what. If the GOP can't use its majority status to effectively block the destructive legislative agenda of the Democrats; the Republican victories are of NO value. The current House members became a majority with the express mandate to tame the growing Government Leviathan that threatens to consume all of civil society. Conservatives understand this is a fight we may lose, but it is a fight we must have. If those elected to fight the battle against Government tyranny refuse to fight - they'll be turned out of office; and principled conservatives will take their principle elsewhere.

Sadly, it now appears likely that the GOP will cave, and lose conservatives for ever - virtually ending the possibility of returning to a Constitutionally limited Government - until this system descends into collapse and chaos.