Taxpayers just dodged a bullet. Even though Republicans on the so-called supercommittee were willing to break their promises and support a tax hike, a 1990-style budget deal was not possible because Democrats demanded too much and offered too little in exchange.
This is good news for fiscal responsibility. Simply stated, any agreement would have been a typical inside-the-Beltway pact featuring real tax hikes and empty promises of future spending cuts. And if the 1990 tax-hike deal is any indication, that would have resulted in more red ink rather than less.
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Moreover, the supercommittee’s failure means that we get sequestration, which is a budget-wonk term for automatic reductions in the growth of spending.
Not that we should get too excited. The way the law is written, these automatic cuts don’t begin until 2013. Even more important, they’re “cuts” only if you use dishonest Washington budget math. In reality, spending will climb by nearly $2 trillion by 2021 if we have a sequester. Without the sequester, it will increase by about $2.1 trillion, so at least there could be a small shift in the right direction.
But the sequester isn’t a sure thing. It might be derailed if pro-defense Republicans link arms with pro-redistribution Democrats and vote to cancel the money-saving provision.
Hawks on Capitol Hill correctly complain that defense would be disproportionately affected because the Pentagon accounts for less than one-fourth of the federal budget but would have to absorb about one-half of the sequester. As such, the defense budget would climb by only about $90 billion over the next ten years, which may wind up being less than inflation.
It does not require much imagination to see how a coalition could be formed to spend more money. President Obama has threatened to veto any legislation to cancel the sequester, but nobody believes him. And even if he were serious, politicians on Capitol Hill could do a back-door repeal of the sequester by padding other spending bills.
Another threat is that the crowd in Washington may resuscitate one of the many tax-hike plans that were proposed earlier this year. This includes the Gang of Six, Simpson-Bowles, and Domenici-Rivlin.
These plans are dangerous because many Republicans (regardless of the no-tax-hike pledge) are susceptible to a deal so long as something is being done to address entitlement costs and so long as the tax hikes are not based on class-warfare ideology. And all of the aforementioned plans satisfy these criteria.
Greece, Sweden, England, Hong Kong. Only one of these has a vibrant, growing, job-ensuring economy. Only one of these is really a capitalist economy. Curiously, it's the only one located in a ChiCom city...
The lesson is clear. The Reaganites must not compromise. Better no deal than yet another deal that sinks us further.
"Better no deal than yet another deal that sinks us further" is also the sentiment expressed by the hard-left ideologues. I think that leaves two groups to actually work out a compromise.
Again, no one seems to be addressing the real issue: what is the role of government. Cutting spending without changing what the federal government does will simply lead to poor performing federal government (as high-skilled employees, such as engineers, attorneys, managers, leave when their wages/benefits are cut/frozen and when they are over-worked). Increasing the federal budget with inflation is not increasing the size of government; it's paying for what Congress has tasked the government to do!
If you want to decrease the amount of money the federal government takes in, then decrease the tasks you have asked it to do, which will result in the federal government needing less money! The concept seems simple enough, yet neither side wants to address the issue. The reason? Cutting taxes makes people happy. Cutting what government does will inevitable anger a section of the populace. But until we have an honest discussion about what government should and should not be doing we are doomed to failure. "Starve the beast" hasn't resulted in less government; just more debt.
There will be no entitlement reform, and there will be no budget cuts. The US Government is paralyzed and the US populace is occupied by political cliches and entertainment.
The Federal Reserve is our new Government. They will print money until the presses collapse.
Basic fairness dictates that the income of the super rich (which is mostly capital gains and dividents) is taxed at rates that are not lower than the tax rates of the income of the middle class (regular income from salaries). Indeed when federal taxes were introduced in the USA only the income of the very rich was taxed (income of more than $1.2M in today's $) and all income was taxed at the same rates (same rates for dividents, capital gains, and salaries). Taxes should be low - butt fair - tax all income at the same rates!
What you fail to realize is by the time a person gets capital gains its has been taxed TWICE already.
1) as income 2) corporate tax ... both take away from the capital gain... if you tax it at the same rate; as everyhing else.... why on earth would i risk my money on investing; if i get the same return...
Your capital markets then dry up .. and you are hosed...
I want to get the occupy movement to focus on fair taxes. I do not care what or how you pay or don't pay taxes but if you are not paying 1% of your net worth you are not paying your share. I say the movement should be focusing on 1% for the 1%.
those that do not pay income tax still have many other taxes they pay, that together add up to way more than 1% of their net worth. Bumping our heads against the wall saying things are wrong in America is not a solution. Getting our financial affairs in order has to be the start. We can afford to pay our bills, just look on any hill anywhere and you know that. It is the fact that we don't tax enough to pay our bills, that things got this way in the first place. Nobody gives a hoot about whats going on if they are not paying for it anyways. Taxing the citizens enough to pay for what the government spends is the only way you will get reform in spending. Right now you have both the Left and the Right hooting and hollering wan wan wan all the way to the bank. If you don't make them pay for it they will never get off the ride.
Magicbowlbob
