The advantages for Obama of going over the cliff transcend even the political value of blaming conservatives for the resulting tax hikes, spending cuts, and possible recession.
Even at record-low interest rates, it will become increasingly harder to service the Obama deficits and aggregate debt without massive cuts to defense and income-tax increases across the board. Obama knows that there are not enough wealthy targets to squeeze out of them sufficient taxes to make up for his post-2008 gargantuan spending. But going over the cliff ensures that the federal government can continue to run the entitlement state while raising federal income taxes only on the more culpable 53 percent who are currently paying them.
Obama is far more worried about the 47 percent who now pay no federal income taxes and who will still be largely exempt when the old income-tax rates expire across the board, and enough subsequent income-tax revenue comes in to continue to service the redistributionist borrowing a while longer. That’s the real war: not the 1 percent against the 99 percent, but the blameless 47 percent versus the 53 percent who must pay their fair share.
As an additional plus for Obama, the military will be cut back to a more correct size, curbing its overweening global presence — all a win-win-win situation — at least for a while longer, until even more new spending means even more new income taxes on those who in 2013 only paid the first installment of their fair share.
Still, even by going over the cliff there will not be enough money to fund Obama’s envisioned $10 trillion in aggregate eight-year borrowing, as 2013 marks the beginning not the end of the new age of real taxation.
A modest suggestion: Perhaps we can get even more back by going up a bit to a fairer 60 percent to 70 percent federal income-tax rate on fat cats who make over $250,000. Along with raising payroll taxes and blue-state income taxes, in theory we might reach a state/federal/payroll aggregate rate of 110 percent of annual income on those who need to show a bit more patriotism. That would be equivalent to a long-needed “wealth” tax that draws the extra 10 percent beyond annual gross income from accumulated assets of those who in the past unfairly piled up wealth that they neither needed beyond a certain point nor built themselves nor were supposed to make when it was not a time for profit.