With the election behind us, attention has turned to avoiding the so-called fiscal cliff. Unless Congress and the President reach an agreement, various tax cuts will expire and automatic spending cuts will ensue. These include the 2% temporary payroll tax deduction, the end of the tax cuts passed in the Bush era, and a variety of business incentives. Obama wants a solution based on tax hikes for high income earners, why John Boehner is talking tough about spending cuts and maintaining current rates. There are two major problems here, and neither is the possibility that Obama and Congress can’t reach a deal.<\/p>\n
First, sequestration was a bad idea. It simply deferred the last round of tough fiscal decisions until after the election. Our financial situation is dire because politicians have refused to consider long term effects and unintended consequences of policies. They’ve kicked the can down the road and Americans have rewarded them with reelection. According to Bob Woodward, the sequestration was Obama’s idea, but some of the blame extends to the Republicans in Congress for accepting the idea. No Congress should ever vote on income tax rates that expire on a given date. Representatives should have the courage to change the rates and let future Congresses revisit them if they wish, but not under the threat of expiring tax cuts.<\/p>\n
Second, the REAL fiscal cliff is the coming crisis brewing from the $16 trillion and rising in national debt. Those fretting about the end-of-year fiscal cliff act as if some kind of deal will fix our long term budget problems. They act as if making a deal means that Washington is averting the crisis. This is simply not true.<\/p>\n
It was just reported that President Obama is seeking $1.6 trillion in new revenues over the next decade, twice what was discussed in the summer of 2011. This constitutes $160 billion per year when deficits in excess of $1 trillion are forecast for the coming four years. Of course, tax hikes on job creators always create a drag on the economy and any 10-year deal is meaningless because its terms will be revisited after the next elections anyway. These realities aside, avoiding the current fiscal cliff does nothing to address the real problem.<\/p>\n
The bottom line is simple:<\/p>\n
1. Washington spends too much and serious cuts must be made. Some will be unpopular, but Congress has that responsibility. The federal government is involved in areas well outside of its Constitutional boundaries.<\/p>\n
2. The tax system needs to be simplified and flattened. Punitive taxation of successful Americans balanced with redistribution schemes like EITC for low wage earners creates perverse incentives for Americans to be less productive. Washington needs to get out of the social engineering business and allow Americans and businesses to make their own decisions free from federal intervention.<\/p>\n
Given the fact that Obama vigorously opposes both #1 and #2, it is highly unlikely that any deal to avoid the “cliff” will be much better than going over it. My fear is that Boehner will give in, taxes will be raised, and many Americans will actually believe that our fiscal situation has improved.<\/p>\n
My advice to the Congressional Republicans is simple: Put a bold plan on the table that addresses #1 and #2 and insist that Obama negotiates within that framework. Addressing these issues can create jobs and ultimately raise revenues, and eliminating a wide range of tax deductions (something important to Obama) can be part of the deal. If talks stall, let the next Congress take up the issue in January. It’s time that Republicans take a stand. The real fiscal cliff is not too far around the corner and we must take serious measures to address the real problem.<\/p>\n","protected":false},"excerpt":{"rendered":"
With the election behind us, attention has turned to avoiding the so-called fiscal cliff. Unless Congress and the President reach an agreement, various tax cuts will expire and automatic spending cuts will ensue. These include the 2% temporary payroll tax deduction, the end of the tax cuts passed in the Bush era, and a variety […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/577"}],"collection":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=577"}],"version-history":[{"count":0,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/577\/revisions"}],"wp:attachment":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=577"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=577"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=577"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}