Wednesday, December 12, 2012

Fiscal Cliffery

The subtitle of this post should be my favorite adage, "Be careful what you ask for."  In August or so of last year, the rampant Republicans in Congress thought they were on a roll.  Having created a monster out of the country's debt burden, based on what was happening in Europe, they:

  • Insisted that getting rid of the deficit and paying down the debt was more important than getting out of the recession we were still in 
  • Blocked approval of the report of the Simpson-Bowles commission for fixing  the country's spending plans, I think because it didn't eliminate Social Security
  • Refused to consider any action in Congress that involved raising any taxes on anything or anyone
  • Caused the country's credit rating to be downgraded by jumping up and down and yelling instead of increasing the legal debt limit.
That last maneuver came close to causing the country to miss routine debt payments.  To soothe their troubled souls from having to raise the debt limit, they insisted on a backup plan:  if Congress couldn't come up with real spending reform by the end of 2012, we would have what we now call the "fiscal cliff":  all existing tax tweaks would expire (mainly the Bush tax cuts and the Social Security payroll holiday President Obama set up to take the edge off the Great Recession), and every government department and spending program would take an across the board, meat-axe 10% cut.  Including Defense.

I assume they all figured that by 2013, they'd be able to think of something to prevent this. I'm morally certain that a big part of "something" was to win the 2012 presidential election, after which they'd have a whole two months to set things up the way they wanted.  The bipartisan Congressional committee they put together to solve it certainly didn't produce anything.

So here we are.  The Republicans actually lost a little ground in the Senate, and President Obama has a mandate to raise taxes on the rich. We have 19 days, 10 hours and 21 minutes (as I write this) to January 1, 2013, when all this will ensue.  Are we any closer to a solution?  Not from what I hear.  I'm hearing all the same posturing as I did then, except that this year President Obama has given up on attempts to be bipartisan, since they never worked.

I have a bet with my financial adviser that they won't agree on a solution.  If they actually come up with something, anything, I take her out for a drink.  If they sit and scream at each other until January 1, she takes me out for a drink.

Several things infuriate me about this.  First, the country is about to be bombed out of a position it should never have occupied in the first place.  Deadlines like this are stupid.  Congress is playing chicken with itself.

Second, it's clear now that the Republicans don't give a rat's ass about the deficit.  If they did, they would be negotiating - and in fairness I've heard some very senior Republicans starting to sound like rational human beings on the subject, since they really don't want those random Defense cuts.  The trouble is, John Boehner isn't one of them.  If the Republicans really cared more about the deficit than anything, they would raise taxes on the rich, since all serious analysis of the situation says you can't raise enough money through budget cuts and eliminating deductions.  For that matter, if the deficit was the real and only issue, they would let the fiscal cliff happen, because it would punch a whacking hole in the deficit.

It's probably unfair to suggest that they won't raise taxes on the rich because the rich would then stop giving them money to get re-elected.  It's almost certainly untrue.  That money buys access to power, even if the taxes are higher.

The other reason it's clear the Republicans don't care about the deficit is that they created the deficit.  Over the last 32 years (since 1980) we have had 12 years of Democratic presidents and 20 years of Republican presidents.  The only time during that span that the budget was balanced (and with a surplus, no less) was under Bill Clinton.    Ronald Reagan tripled the national debt.  George W. Bush, the next president after Clinton, immediately instituted the Bush Tax Cuts to "give the surplus back to the people," then started two wars that he ran entirely on borrowed money.  How are you doing spending that surplus he returned to you, folks?

It pains me to say this, but I get the impression that what the Republicans really want is to stop spending money on poor people.  Grover Norquist's government "small enough to drown in a bathtub" is roughly what we had back in the Gay Nineties (1890s, that is):  no safety net; no services to speak of; certainly no regulation of food, water, or business practices; no health care; no pensions.  If something goes wrong, you're on your own.  The only happy people were the rich, who could pay for anything they needed. That's the impression I get from the spokesmen.  I'm willing to be convinced I'm wrong, but nobody's trying.


  1. Ultimately, everyone wants the money.

    Gore Vidal used to say we have welfare for the rich, and laissez-faire capitalism for everyone else. That's how our tax structure works. The tax rates for individuals haven't changed much since about 1960.

    Statistical analysis tells us the top 1% in America have been making unprecedented gains over the last 30 years, while the middle class has been in static profile. If anything, it's much worse than when we were growing up, when a single middle class salary could support a family in style. Today, $250,000 per year won't make you rich, by any means, but the minimum wage won't even allow you to eat.

    The Republicans want to "close loopholes." What this means in practical terms is that by closing the home mortgage or charity deduction loopholes, you could save, say, $3500 per year, or end up paying it if they change the rules. For a middle-class person, that difference might determine whether you could buy a new car, or a summer vacation. For a rich person, it amounts to nothing. Whereas changing the RATES (oh shiver me timbers!) will actually HURT rich people. If they change the middle class tax rate, I might end up paying $1000 more a year in Federal taxes, whereas a rich person might end up paying a million more. See the difference? That's why the GOP is fighting rate increases, because their constituency is at risk. We gave the rich 12 years of tax holidays. Isn't that enough already?

  2. Curtis, I couldn't agree more. It's time for the rich to man up and pay their damn taxes. They're lucky we aren't asking for back taxes over the intervening 30 years.