American Elephants

To listen to the media, you would think this “fiscal cliff” stuff is all about the Republicans being stubborn and refusing to negotiate. The media rhetoric has already lost sight of what the term “fiscal cliff” describes, as Peter Ferrara said.  They talk as if the fiscal cliff is all about the deficit and the point is a tax-increasing budget deal to close the deficit.  But the fiscal cliff refers to the economy falling off the cliff due to the fiscal policies of comprehensive tax rate increases and spending cuts already enacted into law — to go into effect on January 1.

The election was a mere 22 days ago, and Obama is so emboldened by his win, that he’s turning negotiations over to Tim Geithner and going out to campaign some more. We thought that perhaps he was reelected to show some leadership, but he enjoys campaigning more.

Here is the threat: Going into effect on January i are increases in the tax rates for virtually every major federal tax. The tax increases of ObamaCare go into effect. The Bush tax cuts expire which mean huge tax increases. Obama refuses to renew the Bush tax cuts for the nation’s job creators, investors and successful small businesses.

Obama has talked a lot about the rich not paying their fair share. The Occupy crowd of layabouts yammered on about the 99% and the 1%, and the evil corporations. But the Bush tax cuts were smaller for the rich than for the rest, yet even at that, with lower taxes the richest 1% ended up paying $84 billion more in taxes in 2007 than they had paid in 2000 — a 23% increase. Their share of all taxes paid climbed from 37% in 2000 to 40% in 2007.

Millions dropped from the tax rolls entirely. Bush doubled the per-child tax credit to $1,000 and lowered the bottom rate to 10%. Going over the fiscal cliff would reduce the child tax credit back to $500, and tax rates for the middle class and poor would climb.

The GOP says the President is insisting on about $1 trillion in new tax revenues immediately by raising tax rates, plus another $600 billion in net new revenue as part of tax reform next year.  Besides that, he wants $150 billion in new public works “stimulus” spending, $50 billion of it next year, and another extension in unemployment benefits which runs at $30 billion a year. And oh yes, he wants the debt ceiling permanently removed so we can just o on borrowing, assuming that anyone would want to loan money to such a profligate administration.

In return, Mr. Obama will blithely promise some $400 billion in entitlement savings next year — details to come later. Probably cutting Medicare again, or counting the $800 billion he has already taken out of Medicare to pay for ObamaCare as a saving.  Add that up.  This is supposed to reduce the deficit. This is not serious, and is almost insulting.

Obama wants to tax the rich some more, which everybody who isn’t rich supports. And he claims that this will pay down the deficit and the nation al debt., which has now soared past $16 trillion. Obama has admitted to being bad at math, but there is no excuse for being this bad. Mark Thiessen has listed the top ten things Obama’s $82 billion tax hike on the rich would buy:

1. 8.5 days of federal spending ($3,504 billion annual budget)
2. Food Stamps for one year ($81 billion)
3. The budget of the U.S. Postal Service for just over a year ($70.5 billion budget)
4. The U.S. Intelligence budget for about 1 year ($75.4 billion budget)
5. The cost of Hurricane Sandy in NY & NJ (current est. $71 billion++)
6. Just 4 months interest on the debt ($258 billion annual budget)
7. Just under one-tenth of the 2009 “stimulus ($830 billion)
8. 6.6% of Social Security/ Medicare costs in 2012 ($1,231 billion)
9. 7.5% of the deficit ($1.1 trillion) or 1 month of borrowing per year
10. One-third of annual cost of ObamaCare coverage expansion (about $240 billion annually by the end of the decade.

The problems of the fiscal cliff cannot be solved by taxing the rich. It is not even a down payment. We must rein in the spending. Obama has shown no restraint whatsoever in spending, and wants to continue picking winners and losers among the new businesses he likes like electric cars, rewarding the cronies who supported his campaign, and spending lavishly on new employees, Czars, and new ideas. ObamaCare, when fully implemented will have over one hundred new offices and agencies and bureaus. Mr. Obama can’t even show restraint in his private life, planning a $4 million, 17 day vacation in Hawaii.

Mr. Obama is not serious about the fiscal cliff. He believes he can rouse up enough public clamor to put pressure on the recalcitrant Republicans to force them to give in to his demands, with the force of his personality. I don’t know. Even Warren Buffett is turning against him. Though you must remember that Mr. Buffett is an investor, not an economist, and is currently battling with the IRS over unpaid taxes.

In Britain, former Prime Minister Gordon Brown raised taxes on the rich to a 50% rate, and guess what? Two-thirds of British millionaires have left the country. In the 2009-2010 tax year, more than 16,000 people declared an annual income of more than £1  million to HM Revenue and Customs. After Mr. Brown introduced the new 50% top rate, that number fell to 6.000 people. It is believed that the rest either moved abroad, or reduced their taxable incomes to avoid the new levy.