Part Two – More Fiscal Cliff From Thomas Sowell, Daniel J. Mitchell and Patrick Buchanan
Yesterday An Excellent Spirit began our latest look at the imminent Fiscal Cliff and the consequential Taxmageddon with Thomas Sowell. Today, we continue with Thomas Sowell and other economic and political commentators. Our question remains, “do “we” care about all this noise or are have “we” been drugged, lulled and lied to sleep so that “we” will accept and endure anything that “they” tell us, as long as “they” bring “us” our daily fix of whatever it is “we” use to kill “our” pain. Any examination of the mood and tolerance of the American people is difficult, as the assault upon “our” senses is constant and our perceptions change as fast as the weather. That said, An Excellent Spirit ventures where angels fear to tread with the help of messers Sowell, Mitchell and Buchanan.
We have examined Professor Sowell’s Fiscal Cliff Notes I, in which he made the case that “taxing the rich” would not make even a small dent in the economic crisis we are in, despite the perception of the American people that it would. Today, Thomas Sowell starts us off with his Fiscal Cliff Notes II in Jewish World Review (simultaneously run in Townhall). Here “One of the big advantages that President Obama has, as he plays “chicken” with the Congressional Republicans along the “fiscal cliff,” is that Obama is a master of the plausible lie, which will never be exposed by the mainstream media— nor, apparently, by the Republicans. A key lie that has been repeated over and over, largely unanswered, is that President Bush’s “tax cuts for the rich” cost the government so much lost tax revenue that this added to the budget deficit— so that the government cannot afford to allow the cost of letting the Bush tax rates continue for “the rich.” It sounds very plausible, and constant repetition without a challenge may well be enough to convince the voting public that, if the Republican-controlled House of Representatives does not go along with Barack Obama’s demands for more spending and higher tax rates on the top 2 percent, it just shows that they care more for “the rich” than for the other 98 percent.”
Stanford Professor Thomas Sowell
What Sowell is telling us is that the rich have had it. They will be taxed and taxed more until they cannot be taxed more, because the American people have bought completely into the socialist mantra that the rich’s “fair share” is more as long as the “poor” have any need whatsoever. Tax increases for the rich, therefore, are a done deal. Whatever the consequences, the rich that stay in America will pay more. This is despite the facts that Sowell shows are reported by President Obama’s own economics report. “What is remarkable is how easy it is to show how completely false Obama’s argument is. That also makes it completely inexplicable why the Republicans have not done so. The official statistics which show plainly how wrong Barack Obama is can be found in his own “Economic Report of the President” for 2012, on page 411. You can look it up. You may be able to find a copy of the “Economic Report of the President” for 2012 at your local public library. Or you can buy a hard copy from the Government Printing Office or download an electronic version from the Internet. For those who find that “a picture is worth a thousand words,” they need only see the graphs published in the November 30th issue of Investor’s Business Daily. What both the statistical tables in the “Economic Report of the President” and the graphs in Investor’s Business Daily show is that (1) tax revenues went up— not down— after tax rates were cut during the Bush administration, and (2) the budget deficit declined, year after year, after the cut in tax rates that have been blamed by Obama for increasing the deficit.” Not as amazing as all that, An Excellent Spirit has been telling our readers about these facts for months. Here
What it means is that we are going over this “cliff” whatever”the cliff” is and we will do so at the choice of “our” President and Congress, whom “we” just re-elected to represent “us’. Daniel J. Mitchell of Townhall Finance.com has this cogent analysis. Here “I’m very concerned about both the fiscal cliff and its possible replacements. It will be bad news if we get an automatic tax hike on January 1, and it will be bad news if that tax increase is replaced by an even more odious plan concocted by the White House. But the cliff is not our biggest fiscal problem. Here’s some of what I wrote for today’s New York Post about the fiscal cliff, along with a warning that we have a much bigger problem down the road.” Mitchell then emphasizes: “…it’s a fight that has important implications, particularly since some of the tax increases will have a significantly harmful impact on incentives to work, save, invest and create jobs. In a competitive global economy, for instance, it is bizarrely self-destructive to increase the double taxation of dividends and capital gains. …This is all bad news, but it is not a crisis. If we go over the cliff, it simply means the economy will grow a bit slower and politicians will spend a bit more money. And the sequester actually would be (modest) good news, since it means the burden of government spending would be “only” $2 trillion higher 10 years from now, rather than $2.1 trillion higher. And even if Obama prevails in the fight, that simply means that we get a different mix of tax hikes and spending rises at a faster rate. Sure, that’s bad for the economy, but it’s not the end of the world. The real crisis is the ticking time bomb of entitlement programs and the welfare state. This bomb won’t explode this year or next year. It may not even explode for another 20 years. But at some point America will experience a Greek-style fiscal collapse if these programs are not reformed.”
Daniel J. Mitchell of Townhall Finance.com
Great! Not only are “we” going over the cliff, now we will land somewhere in Greece as a people. All of “our” hard work and taking care of everybody, all the time, will result in our being bankrupt like Greece, dependent on whom we do not know to bail “us” out while our streets burn, our children riot and our unions, teachers and government workers get paid with whatever is left of our homes, retirement accounts, Medicare and Medicaid and Social Security. Only those who “they” can depend on to re-elect “them” will be entitled to the remaining money “we” have or can make. Then, when “we” have no more, “we” will be like them, penniless and demanding someone else give us what “they” have earned. What echo’s in our ears is Margaret Thatcher’s oft quoted statement: “The trouble with socialism is that you run out of other people’s money.” What happens then? Greece is what happens then. Welcome to Greece, America.
Mitchell spells this out for us. “A lot of people get upset about the national debt, which is somewhere between $11 trillion and $16 trillion, depending on whether you include money the government owes itself. Those are big numbers — but if you add up the amount of money that the government is promising to spend for entitlement programs in the future and compare that figure to the amount of revenue that the government projects it will collect for those programs, the cumulative shortfall is more than $100 trillion. And that’s after adjusting for inflation. Some politicians claim this huge, baked-into-the-cake expansion of government isn’t a problem, because we can raise taxes. But that’s exactly what Europe’s welfare states tried — and it didn’t work. Simply stated, even huge tax hikes won’t stem the flow of red ink in the long run if government keeps growing faster than the private economy. This is the fiscal problem that demands attention. Absent real entitlement reform, such as block-granting Medicaid to the states, the burden of government spending will consume ever-larger shares of our economic output with each passing year. That, America is not the Cliff, it is The Abyss!
Patrick J, Buchanan of Townhall.com
As we have said, no one tells “us” the truth and the only way we can remain free is to know the truth. Pat Buchannan, that relic of the Nixon years and acerbic commentator recently said this in a Townhall piece. “Two years ago, Obama had to eat crow and extend the Bush tax cuts. Now it’s payback time. And behind their arrogance lies a belief that the GOP cannot say no. For if the Bush tax cuts and the payroll tax cuts expire on Jan. 1, Americans will face the highest tax hike in history.
— Every family earning up to $100,000 would see 2 percent of its income lopped off, as the employee half of the Social Security tax rises from 4.2 to 6.2. percent. The discretionary income of Middle Americans would be ravaged.
— The federal tax rate on capital gains will rise from 15 percent to a maximum 24.7 percent, a jump of 60 percent.
— The federal tax rate on interest and dividends will triple from 15 percent to a maximum 44.7 percent.
— Where $5 million of an estate can now be passed on to one’s heirs non-taxed, that will be cut to $1 million. And the death tax rate would shoot from 35 percent to a neo-Marxist 55 percent.
Even Senate Democrats fear this would force a selloff or breakup of family farms and family businesses at death. Yet somewhere, the radical socialist Saul Alinsky, who inspired the young community organizer, is smiling. Why does Obama see himself in the catbird seat, though his demands are intolerable to the GOP and, absent a deal, he risks taking the country over the cliff Jan. 1? Obama believes that if we go into the abyss, he can paint the Republican Party as having imperiled the economy and imposed tax increases on the middle class, just to spare America’s top 2 percent from a modest increase in its contribution to debt reduction.
And Obama has a hole card. If those tax hikes hit Jan. 1, he will be able to posture as the rescuer of the 98 percent by proposing to the new Congress an Obama tax cut that restores the Bush rates for all couples earning less than $250,000. He will also be able to dictate to Boehner & Co. the tax rate on estates, dividends and capital gains that he will accept or not accept. The Bush tax cuts would be replaced by the Obama tax cuts, as the GOP is cursed from coast to coast for taking us over the cliff. Obama believes he will then be seen as pulling the nation out of the pit into which the GOP had plunged it, simply to spare its fat cats a needed haircut.”
As Buchanan points out, the winner of an election wins something, even when the country is in a mess. They win the people (that’s “us”) telling the other side (that is the losing Republicans), no more gridlock. And that means you, Republicans! The polls show that this is the case and one thing President Obama is good at: reading the polls. Here and here. Buchanan gives us a hint of what is driving the President’s strategies. “In “Rules for Radicals,” the Alinsky rulebook and Obama playbook, the first rule is, “Power is not only what you have, but what an opponent thinks you have.” Clearly, many Republicans think that if they do not yield, Obama will let the country go over the cliff, blame them and portray himself credibly as the man who saved the nation from Republican intransigence over a small tax hike for the rich that most Americans support.” So far, so good. Obama ‘s strategy seems to be winning the day while losing the fiscal future of the country. “Yet Obama is not without risk here. As America heads toward the cliff, there could be panic selling of stocks, bonds and assets to avoid higher taxes on interest, dividends and capital gains in 2013. The economy could tank. Obama could become the Democrats’ Herbert Hoover.” As An Excellent Spirit has pointed out, this sell off by the rich is already happening with some of the President’s most well known supporters leading the way! Here
Warren Buffet – the Billionaire Who Watches Over Obama
Buchanan concludes by putting forth an interesting strategy for dealing with all this. “As for John Boehner, he must know that if he yields too much, his caucus will rebel and his speakership will be at an end. What to do? Forget the deal. Walk away from the talks with Geithner. Pass an extension of the payroll tax cut, and send it to Harry Reid. Pass the Bush tax cuts, and send them to Harry Reid and say:
“Harry, you are going to have to pass this extension of the tax cuts, or kill them, or send us a counteroffer. Do nothing, and you, not we, will take America over the cliff.”
When Sen. Edmund Ross rose to cast the decisive vote in the impeachment trial of President Andrew Johnson, he said, “I looked down into my own political grave.” Reviled by the radicals of his era, Ross yet made it into JFK’s “Profiles in Courage.” We are at such a moment. Not bad, Pat. But what of Mitchell?
Mitchell, an economist, says, “In other words, the solution is to follow Mitchell’s Golden Rule. That’s the only way to make sure that the burden of government spending shrinks relative to economic output. Fortunately, that simply requires some modest spending restraint to address the short run problem and some intelligently designed entitlement reform to solve the long run challenge.” Not being politically savvy, he does not see the sheer lunacy of the left, just numbers fixing numbers.
Sowell, also an economist, sees things a little differently. “The bottom line is that Barack Obama’s blaming increased budget deficits on the Bush tax cuts is demonstrably false. What caused the decreasing budget deficits after the Bush tax cuts to suddenly reverse and start increasing was the mortgage crisis. The deficit increased in 2008, followed by a huge increase in 2009. So it is sheer hogwash that “tax cuts for the rich” caused the government to lose tax revenues. The government gained tax revenues, not lost them. Moreover, “the rich” paid a larger amount of taxes, and a larger share of all taxes, after the tax rates were cut. That is because people change their economic behavior when tax rates are changed, contrary to what the Congressional Budget Office and others seem to assume, and this can stimulate the economy more than a government “stimulus” has done under either Bush or Obama. Yet there is no need to assume that Barack Obama is mistaken about the way to get the economy out of the doldrums. His top priority has always been increasing the size and scope of government. If that means sacrificing the economy or the truth, that is no deterrent to Obama. That is why he is willing to play chicken with Republicans along the fiscal cliff.”
The thing is, all three of our experts are right. Mitchell knows the numbers and how to follow the numbers to fix the numbers. Buchanan knows the politics and how to be patient and force the aggressor to back off until you have him in the corner he has created by his aggression. Sowell is both economically and politically brilliant. Thomas Sowell understands that the end game is how much the American people (“us”) can stand before “we” start another revolt, a “tea party” if you will. With the Election just over, “we” have a way to go before “we” will come to understand what these three men know and begin to put it all together. Let “us” pray that “we” don’t take too long. The damage to “us”, “our” children and this nation is adding up quickly and Greece is quickly becoming our present, not our future. God bless America!