Boehner: Rich to pay more in taxes

[LSN80]

House Speaker John Boehner today has conceded, something that he and the House Republicans were initially opposed to, that taxes on the wealthy will go up. In doing so, he's challenged President Obama to sit down with him and work out a fiscally sound economic plan? But will this work?

http://www.cnn.com/2012/12/05/politics/fiscal-cliff/index.html?hpt=hp_t1

President Obama, in turn, has insisted that there be no tax hike for anyone but the top 2% of Americans. He sees this as the first step towards a broader agreement, with the January 1st deadline for when automatic spending cuts and tax hikes takes effect. Much of the "concessions" by the Repuplicans is due to the limited amount of leverage they now hold after Obama's re-election, and the overall support from the public on higher taxes for the wealthy. This from Boehner today:

"We have got to cut spending, and I believe it is appropriate we put revenues on the table. Now the revenues we are putting on the table are going to come from guess who? The rich."

This wasn't so much Boehner agreeing in any way with the President's proposals, but rather, feared backlash over fighting Obama, and the House Republicans being blamed for everyone's taxes going up in 2013. The proposal from the House Republicans revolves around eliminating tax deductions and loopholes. The problem that remains is that this tactic will raise far too little money to avoid hitting the middle class hard as well. Obama's response was as follows:

"I think that there is recognition that maybe they can accept some rate increases as long as it is combined with some serious entitlement reform(benefits paid by the government to citizens to improve the nations budget) and additional spending cuts. And if we can get the leadership on the Republican side to take that framework, to acknowledge that reality, then the numbers aren't too far apart. We can probably solve this in about a week, it's not that tough."

It does seem like a good first step being taken by House Republicans in both acknowledging and agreeing to increasing the taxes on the wealthy. However, it seems overly simplistic and optimistic for President Obama to believe this can be "solved" in about a week. Even if it's due to forced hand, it is a positive thing to see Republicans and Democrats working together on budget reform in a manner that seems fair and equitable, as a start. Both sides have also agreed that the 98% of Americans making less then $250,000 a year should avoid a tax hike when the tax cuts from the Bush administration expires on December 31st. Obama has called for the House to guarantee that outcome now by passing the Senate measure now regarding the tax hike. Obama then promises that after that measure is passed, he and Democratic leaders will work out other compromises, such as reform to the Medicaid and Medicare programs. In an interview with Bloomberg TV yesterday, Obama said the following:

"The issue right now, that is relevant, is the acknowledgment that if we're going to raise revenues that are sufficient to balance with the very tough cuts that we have already made and the future reforms in entitlements that I'm prepared to make, then we are going to have to see the rates on the top 2% go up. We will not be able to get a deal without it."

So it seems that the entire reform of the budget hinges on the increase of taxes for the "two percenters." A CNN poll conducted last week showed that 45% of Americans will blame the Republicans if no deal is reached, while only 34% would blame Obama and the Democrats. But even if fear of backlash from the American people is the motive, it's as good as any to work out a fiscally responsible deal, isn't it?

Is the tax hike for the "two percenters" a good first step? Is it enough for the time being?

Who will you blame if no deal is reached?

Any other thoughts or discussion on the story are more then welcome.

 

[Rayne]

My thoughts? I'm pretty sure that the substance of the 'deal' is already done. It'll include a package of tax increases, and not just through loophole reduction (a euphemism for tax increases). The Republican Party is going to come out of this looking like losers, which they pretty much are after the last election. Their goal right now is damage mitigation. We're currently setting the dynamic for the next Congress, even if they haven't been seated yet.

Republican strategists want the party to hold out as long as they can, so they can appear that they're fighting something very unpopular with their base. Democratic strategists likely want any agreement to fail. It's a two party system; both parties can lose, so long as one loses less than the other.

A key consideration is that the "fiscal cliff" isn't really a cliff. There is absolutely nothing stopping Congress from reversing any 'cliff' related changes on a voice vote on a Friday afternoon (when politicians typically try to sneak stuff by the media- it's Friday afternoon, journalists and reporters don't want to be at work any more than anyone else.) They can 'fail' to reach an agreement, and still reach an agreement. Republicans are going to absorb most of the damage; it's to the Democratic advantage to make sure a deal doesn't go through until "OVER THE FISCAL CLIFF" appears in headlines. Republicans want a deal, but they can't afford to be seen as wanting a Democratic deal.

As far as the actual tax numbers involved? We aren't even talking about paying down debt right now. The most expansive offer (and I am going off the top of my head at 5am in the morning from what I think was yesterday's paper) would result in, as the phrase went, 'a reduction in the national debt by $4.4 trillion over ten years'; which isn't $4.4 trillion less than what the national debt is now, but a reduction in what it would be if we didn't do anything about it. Which is still adding significantly to the national debt. Politicians are still afraid to do anything serious about Social Security and Medicare, the biggest expenditures (and they have been since I was a boy), which is what the conversation is eventually going to have to be about.

 

[Slyfox696]

As far as the actual tax numbers involved? We aren't even talking about paying down debt right now.

That's true but the fact is, and I'm not saying you're arguing differently, we CAN'T pay down the debt right now. Any deal which would wipe out over $1 trillion dollars of government deficit in one year would be devastating. It has to be a case where the deficit gradually gets paid down and hoping the economy hits its stride to pay more down than we currently expect. But most importantly, if we ever get to the point where our budget is balanced (through income and expenditures, not a law) we cannot be reckless like we were back in the early 2000s and CHOOSE to run deficits in our spending, and least not until our national debt is down to a level which is not only manageable, but also capable of handling an economic downturn as well.

Politicians are still afraid to do anything serious about Social Security and Medicare, the biggest expenditures (and they have been since I was a boy), which is what the conversation is eventually going to have to be about.

I see both sides on this. The first side is there's a duty of politicians to do what's responsible for the country. On the other hand, politicians also have a responsibility to follow their constituents wishes, and right now, our voters don't want cuts to Social Security or Medicare. There's an old saying which, loosely paraphrased, is "I can't help you if I'm not elected". So it's a delicate balance.

There are three major programs in this country which takes up the largest portion of our spending, and they are Social Security, Medicare and military. And those are the three so many people don't want touched.

At the end of the day, almost every American agrees that we need to quit spending so much and that we'll have to sacrifice some to get our deficit to a manageable level, but everyone seems to think it is the "other guy" who needs to make that sacrifice. "We need to quit running deficits on entitlements...but don't you dare touch my Social Security". "I'm not rich, but the rich need to pay their fair share". "We have to quit giving tax breaks...but don't you touch MY tax break."

It's always someone else who needs to make the sacrifice. It won't work. Because of reckless policies that America enacted in 2000 until 2008, America dug itself a huge hole, a hole which is simply going to take a long time to get out of and a hole in which everyone is going to have to sacrifice. There's just no other way around it.

 

[Rayne]

That's true but the fact is, and I'm not saying you're arguing differently, we CAN'T pay down the debt right now. Any deal which would wipe out over $1 trillion dollars of government deficit in one year would be devastating. It has to be a case where the deficit gradually gets paid down and hoping the economy hits its stride to pay more down than we currently expect. But most importantly, if we ever get to the point where our budget is balanced (through income and expenditures, not a law) we cannot be reckless like we were back in the early 2000s and CHOOSE to run deficits in our spending, and least not until our national debt is down to a level which is not only manageable, but also capable of handling an economic downturn as well.

We definitely can't pay down our debt right now. I'm huge on Keynesian economics, and theory holds that right now the government should be spending more in order to stimulate growth, but that idea is a complete no-sell right now. The idea was to give people an idea of the numbers we're talking about; where we are now vs. where we're going to have to go.

I see both sides on this. The first side is there's a duty of politicians to do what's responsible for the country. On the other hand, politicians also have a responsibility to follow their constituents wishes, and right now, our voters don't want cuts to Social Security or Medicare. There's an old saying which, loosely paraphrased, is "I can't help you if I'm not elected". So it's a delicate balance.

There are three major programs in this country which takes up the largest portion of our spending, and they are Social Security, Medicare and military. And those are the three so many people don't want touched.

At the end of the day, almost every American agrees that we need to quit spending so much and that we'll have to sacrifice some to get our deficit to a manageable level, but everyone seems to think it is the "other guy" who needs to make that sacrifice. "We need to quit running deficits on entitlements...but don't you dare touch my Social Security". "I'm not rich, but the rich need to pay their fair share". "We have to quit giving tax breaks...but don't you touch MY tax break."

It's always someone else who needs to make the sacrifice. It won't work. Because of reckless policies that America enacted in 2000 until 2008, America dug itself a huge hole, a hole which is simply going to take a long time to get out of and a hole in which everyone is going to have to sacrifice. There's just no other way around it.

That's the root of the problem. A politician- anyone besides a second-term president- rarely makes a decision based upon what would be best for his constituents, and typically makes a decision based upon what his constituents want to hear. And still- even though we've known we've had to have this conversation since before I was born- no one really wants to talk about Social Security, Medicare, and the military. If we ignore the elephant in the room, hopefully, he'll just leave on his own.

At this moment in time, can you imagine a politician running for office on the "Higher Taxes, Lower Benefits" platform? (I hate the word 'entitlements'. It makes it sound like Social Security and Medicare are programs provided because of the largesse of government officials, not because people spend all of their lives paying into the funds.) He'd get blown out of the water no matter how you phrased it. I can see this kind of politician existing for the short term, like a Tea Party that doesn't get co-opted by the insane, but it's not a recipe for a long political career.

So you're absolutely right. It's sort of like a Prisoner's Dilemma, where everyone is taking an action which has the most benefit to them individually, but not collectively. (Kind of like a Prisoner's Dilemma. If the prison had transparent walls, I guess.) We're all going to have to eat a shit salad, right now we're fighting over who gets served first and most visibly.