It would be a great tragedy if a super tax hike came out of a supercommittee compromise deal. It would do great harm to the economy — just as much harm as President Obama’s various tax-hike threats. And on the Republican side, a super tax hike would irreparably split the GOP.
Okay. Here’s the good news. In a CNBC interview this week, I asked supercommittee co-chair Jeb Hensarling about an idea of the Democrats to raise taxes by $600 billion to $800 billion. About $300 billion of that might be up-front, with $500 billion later from some tax-reform overhaul. This would be an unmitigated economic disaster.
But Hensarling was blunt: “Not going to happen, Larry.” He said no such deal has been presented to him. And if it were, he and other Republicans on the supercommittee would not support it.
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Hensarling then added, “We put $250 billion of what is known as static revenue on the table, but only if we can bring down rates. We believe we can bring the top individual rate down to 28, 29, maybe at most 30 percent, and bring the corporate rate down to the median of the EU, 25 percent.” For emphasis, he said, “We have gone as far as we feel we can go.”
The Texan was referring to the Sen. Pat Toomey plan, which would lower the personal tax rate to 28 percent and head down from there, while at the same time putting limits on personal deductions (such as mortgage interest) for upper-income taxpayers. In other words, flatten the rates and broaden the base.
Net revenues would go up in this scheme for two reasons: first, the reduction in personal tax breaks; second, the economic-growth impact would be positive. This calls on the research of Harvard professor Martin Feldstein, who urged Congress to trade off lower rates with fewer deductions since the incentive effect of taking home more after-tax income would benefit the economy.
Trouble is, Democrats don’t buy into it — at least not yet. Senate supercommittee members Patty Murray and John Kerry have opposed real tax reform. And it has been reported that House supercommittee member Xavier Becerra opposes it (although Chris van Hollen might be looking at it).
But the whole trouble with the machinations of the two sides in this deficit-cutting episode is that the closer you get to the November 23 deadline, the more compromises are made. Democrats are pulling hard for higher tax rates, which would damage the economy, while Republicans are making no progress getting any meaningful health-care entitlement reform.
Larry Kudlow is telling us that Rep. Hanserling supports a deal whereby taxpayers will be denied use of itemized deductions that are currently allowed by U.S. income tax law in exchange for the Democrats agreeing to continue the current marginal income tax rates after 2012. Further, Kudlow and Hanserling appear to believe this will result in the American people paying approximately $300 Million more in individual income taxes over the next ten years than would be the case if current tax law continued from 2012 to 2021.
If Kudlow's reporting is true, this is another example of Republican political stupidity. The media will paint this as a Republican tax hike and it will split the GOP going into a 2012 national elections that has the potential of a realignment election in the favor of the GOP along the lines of 1896, 1920, and 1980 elections.
Kudlow's reporting sounds believable. I think the GOP insiders will always find a way to lose no matter how favorable the political circumstances.
Tinkering around the edges, kicking the can a little farther. Meanwhile still borrowing $118 million an hour and $15 trillion away from being broke. Half of income earners not paying taxes and and our politburu is banning light bulbs and subsidizing eco-fetish cars for the well to do. Oh and the guy in charge is a "community organizer" with a chip on his shoulder and not too fond of limited government.
This is how it sounds right before the sclerosis finally seizes up the welfare state completely and we have depression that makes the earlier Great one look appealing by comparison. But I'm sure glad they came up with this Supercommittee idea, for a while there I was getting worried.
Democrats are playing "shoot the hostage" with the GOP. They believe, perhaps correctly, that the GOP is more terrified of Defense cuts than they are of Grover Norquist. The best possible solution at this point is for the GOP to let the triggers engage, and restore Defense funding in the 2013 budget IF we feel it is needed. Panetta's report was politically timed to scare the GOP. I have a feeling that it would not be as bad as suggested. If the GOP does nothing, we get immediate cuts in social welfare programs with no tax increases.
As I've often learned in life, a simple "no" can accomplish a lot of "yes".
What genius could not have predicted this outcome back in August. Besides, of course, the Republican Leadership. Keep sending me Republican Leadership surveys, they help to keep the table from wobbling when you put one under the "short" leg.
How about this, if your department got 178 billion dollars in 2011 it gets 178 billion dollars in 2012 and 2013 and 2014. When the deficit is zero we will revisit.
Sure, bring on the sequester, take out a chunk of the deficit on the spending side, than move forward to December 2012 for President Obama to veto any Bush Tax Cut extensions and address it from the revenue side. Wow, before you know it were running a positive balance and paying down the deficit, just like when Clinton was President. Cordially, Bill
The big problem in this country is that different types of income are taxed differently. All income, including income from one's own work (salary) and from other people's work (capital gains and dividents) should be taxed at exactly the same rates. Then super rich people such as hedge fund managers will not have to lobby so that their compensation be taxed differently than the compensation of doctors or policemen. Tax ALL income with the same rates!!! Also reform AMT so that it does what it was originally supposed to do - not be a middle class tax as it is now.
Let the sequestration begin( the sooner the better), but for the love of the English language and for the love of America stop calling it a $1.2 trillion cut. It's a $1.2 trillion reduction in the amount of automatic increases in spending. Why does the federal government get a COLA if my 91 year old grandmother and my 78 year old dad do not? (If you're doing the math, the grandmother is not my dad's mother and yes she was 13 when he was born.) And why should the budget increase at all when the government continually insists there is no inflation? If there is no inflation, they shouldn't need more money to accomplish the same services.
I do a zero based budget every month for my family. Surely the government can find a way to do the same...
Cut the tax rates - but tax ALL income equally. The big problem in this country is that different types of income are taxed differently. All income, including income from one's own work (salary) and from other people's work (capital gains and dividents) should be taxed at exactly the same rates. Then super rich people such as hedge fund managers will not have to lobby so that their compensation be taxed differently than the compensation of doctors or policemen. Tax ALL income with the same rates!!! Also reform AMT so that it does what it was originally supposed to do - not be a middle class tax as it is now.
Seems to me that the Democrats went into this thing with no intention whatsoever of making any progress toward debt reduction. It looks like a disingenuous ploy to slash military spending and still blame the Republicans for failure, while protecting their favorite boondoggles, lobbyists and union supporters. If Republicans can't see through this charade and fight for a Balanced Budget Amendment, I'm afraid that Derb will be proven right: "We Are Doomed"
Exactly, and THAT is the most discouraging thing. With a solid House majority, the electoral winds at their back, GOP leadership still fumbles and sets them selves up with this ridiculously inane and utterly stupid idea of "sequestration".
OF COURSE the Dems dont' care, because the consequence of their inaction is cut in defense which they don't care about anyway and which can be blamed on the Republicans for not raising taxes with which to pay for it.
Can't the Republicans ever, ever figure any of this out??? Are they consistently this banal that the jokers in Democratic party like Reid and Schumer ALWAYS, ALWAYS outplay them? If so, then I'm all for throwing them all out and starting from scratch on the Republican side. Of course, we wouldn't have this problem if people would wake up and see that the cure for the disease is TERM LIMITS. Get them out sooner so they can't be entrenched, then a lot of our problems go away.
Until the RINOs McConnell and Boehner are willing to hang tough nothing will change. We have a spending problem not a revenue problem. The RINOs love to spend just as much as the Democrats. We will get tax increases and no meaningful cuts.
We need to go with the triggers and then be effective when describing why. We need to keep repeating that the Democrats are the ones who are being irresponsible children by refusing to spend less.
The Republicans ALWAYS lose the narrative. Always. They bend like a wilting flower in the summer sun. There wasn't one new Tea Party approved Republican on the committee, only the standard yield and wimper GOPer. So, we'll get the same. Dems claiming intransigence on the part of the GOP and Tea Partiers, nation held up due to new GOP. Yet not one leader of GOP will be combative enough to stand up for their beliefs. They'll hem and haw - but NOBODY will say,
"Heah, look, we compromised on the debt ceiling to get here. BUT, the purpose of this exercise was "budget CUTTING", not tax raising. Given the Dems sole penchant for tax and spend, it is now again, a proven truism of American political discourse, that even in dire economic straits, Democrats are incapable of acting in any way other than in their own parochial self-interest. That when the times require boldness of action and fairness in spirit, they spin webs of deceit among rocks of lies. That when tough decisions were called for they picked up their marbles, whined, cast blame and ran for their media caretakers to bail them out. That when the American People needed and wanted forward looking leadership, the Democratic party again shows us how Greece got into the mess it is in. Unfortunately America, until you vote signficant numbers of Democrats OUT of Congress, we will continue our doomsday march into the economic abyss under a cloud of fear and despair. Just look at what they've done in California and what their philosophies have done to Europe and especially Greece. "
Maybe Newt is the only one who knows how to fight back. Ryan might, but he's not one of the senior leaders. But mark my words, within 24 hours of the sequestration action being implemented, Reid will be out there blaming Republicans while McConnnel fumbles with words. Sen. "whiner" Schumer will be out with a "made for TV line" that everyone else will parrot all day long blaming the wealthy and their GOP handlers.
Then Obama will grimace that he hates to see so much being cut in defense, but it's due to the richest 1% and the Republicans desire to protect them.
Yes, based on his record, he's always been. He's the same here. Both he AND Toomey are the idiots who got outflanked by the Dems by offering the $300 bn tax increase. Then Dems said (as newsreports at least indicate) it wasn't enough and backed away from any serious, real cuts. Rather Dems offered to the Wimpy approach and "gladly cut for you Tuesday for a tax increase today!".
Hensarling is NOT the worst, but he is NOT a warrior either.
Of course, the Democrats tipped their hand that no deal would be forthcoming when Reid named Murray to the Super Committee. There has never been any definitive evidence she can read and write, or even ties her own shoes.
This was never going to work. In order to avoid another credit downgrade - which will eventually cost us hundreds of billions in extra interest, we've been lucky the EU is so shaky right now - we need to cut at least $4 trillion over the ten-year budget window for starters, and probably at least another $2-3 trillion to avoid downgrades altogether. The Ryan plan was scored at $5.4 trillion in savings, but the Super-Committee can't agree on $1.2 trillion?
Democrats aren't serious. Either we get rid of Obama and the Democratic majority in the Senate so the real cuts can be made, or the country just goes Greece in a very few years.
I have no faith in the Republican leadership to make the tough calls on their own, but do believe they will realize there is no more road to kick the can down. We are at the dead end.
The next President will be a one-termer, too. There is no way around it. Either he makes the severe cuts in spending and the federal workforce required, extending high unemployment and spreading real pain around, or he doesn't and the economy tanks. There is no plausible path to a second term, no matter what.
We need a President who will realize this from Day One, and act accordingly only in the national interest. I don't know if our guy will be able to this, but I know Obama will not.
Larry, your financial acumen is impressive and I pay great attention to what you say. However, the viability of 'sequestration' as an alternative is nonsense. You would gut our military? Have you not paid heed to what that means in terms of our ability to defend ourselves as so poignantly itemized by our Secretary of Defense? Have you considered our ability to keep the sea lanes open and free trade with a 200 ship Navy?
It doesn't take a $700 billion defense budget to escort some tankers through the Persian gulf. If you've been following the imperialists' talking points, we need the $700 billion budget to protect Georgia from Russia. So no, cutting the growth of military spending would not "gut the military," and it might spur our allies like Germany and Canada to stop piggybacking on our military spending (both wealthy and spending a pathetic 1.4% of GDP).
The US does not have a $700 bn defense budget. Not even close. The core defense budget is $530 bn; the GWOT budget (which will zero out when troops come back home from Afghanistan) is $117 bn. And the US military's duties include a lot more than just protecting tankers in the Gulf (which, by itself, requires a large, strong Navy, which costs a lot of money): nuclear deterrence (a nuclear triad is absolutely necessary), missile defense, cyber defense, air superiority, protecting America's borders, protecting the world's commons, protecting America's crucial allies, etc. The US cannot afford to cut its defense budget any further, even if the military is to defend only America itself (dumping America's crucial allies would actually greatly IMPERIL the US). And contrary to your blatant lie, the sequester would not merely cut "the rate of growth of defense spending", it would severely reduce it IN REAL TERMS - down to $491 bn in the first year (FY2013) alone.
Zbigniew, $491 Billion not enough? For 2010 the next four highest defense budgets in the world ( China, France, England, Russia) totaled $285 Billion. This world policeman and avenger of all evil is getting pretty darned expensive. At least it's a comfort knowing how appreciated we are worldwide. Cordially, Bill
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