Quote of the Day
A hero is a man who does what he can.
Roman Rollard
Republicans: Just Say 'NO'
To Obama's Class-Warfare Tax "Compromise"
Several weeks ago, House Minority Leader/Speaker-elect John Boehner on Face the Nation blundered by saying if backed into a corner between allowing expiration of the Bush tax cuts for higher income versus expiration of the tax cuts for all, he wouldn't allow tax increases on the middle class. This was a tactical and strategic blunder, which news correspondent Bob Schieffer inexplicably portrayed as a compromise. What was a "compromise"? That implies that the Republicans got something in return, e.g., permanent spending cuts. The Democrats promised tax cuts (i.e., continuing the Bush era tax cuts, plus additional tax credits) for all except the top 5% from the campaign; the Republicans vowed to extend (preferably permanently) the Bush era tax cuts for everybody. The only compromise was to Boehner's principles...
From a strategic standpoint, the Democrats want to separate the middle class from the upper income, and that plays into current "compromises" going around where they allow the Bush middle class cuts to be made permanent, but the upper income to expire, say, after 2 years. The objection from a conservative standpoint is obvious: it would put the Republicans in the position of having to put up for a vote separately for a permanent tax cut for the rich--which, of course, plays right into the Democrats' plan in their class warfare pitch against the Republicans as the party of the rich.
Before elaborating on that further, I was watching a FNC overnight feed this week of Obama holding a joint news conference on his current international tour. A female correspondent finally asked a question, exposing the patently absurd Democratic talking point that we "can't afford", on grounds of the deficit or national debt, to extend tax cuts on the upper income. [The talking point becomes incredibly more arrogant when progressives portray maintaining the status quo high tax bracket as giving the already rich an expensive gift; this talking point presumes that the government is entitled to windfall tax revenues from a counterproductive, excessively progressive tax on the upper income taxpayers to fund a morally hazardous, ineffectual agenda.] When the female correspondent pointed out the overwhelming majority of tax cuts were to the benefit of the middle class and why those weren't considered an even greater threat to the deficit or national debt (my paraphrase, but the point is spot on), Obama gave the knee-jerk reaction to his class warfare argument: the upper class has been the primary beneficiary of the Bush tax cuts at the expense of the middle class, and so the government needs to compensate the middle class for their lost ground. This is redistributionist nonsense, of course. The indisputable fact of the matter is the upper-income class has increasingly picked up a greater share of the tax burden as a result of the Bush tax reform. The deficits are not a cause of being taxed too little but of the federal government lacking discipline to live within its means.
Even more importantly, progressives ignore the elective nature of higher income taxpayer events. For example, Obama supporter Warren Buffett infamously noted that that he paid an effective tax rate under 20% (even though with an annual income in the millions, he was in the highest tax bracket. Progressives eagerly cite this in supporting the idea the rich don't pay their fair share. But in fact, increasing the top tax bracket doesn't address the leaky nature of that bracket, and I don't see Buffett paying a much higher tax rate even if you raise 4.6 points on his income tax rate. You need more comprehensive tax reform, with simplification. Let's say, for instance, Buffett pays for some municipal tax-free bonds. If you take away tax incentives for municipal bonds, local governments will be forced to raise rates to attract investors; can they afford them in a tough economic environment? These are some of the questions which have to be raised. Push too hard, and wealthy people can and will move, with their assets, to a low-tax country, similar to the way a nontrivial number of millionaires after Maryland Governor O'Malley increased taxes on higher-income Maryland residents. And the fact is--it's counterproductive. When one increases the costs of economic activity, there is less of it.
Now let's go back to the perm versus temporary tax issue. We have seen, both in the misguided Bush stimulus of 2008 and then the $860B Democratic Party Stimulus Bill last year, the implications. What happened after mortgage relief ended? When cash for clunkers expired? In effect, if people think that their costs are going up after the stimulus installments end, they may well save the money (and there's evidence that's what happened), which is hardly stimulative activity. If you take away the temporary nature of the tax cut, so people won't be engaging in end-game activities, e.g., taking capital gains this year than next year because taxes next year will be higher. They will have faith that $15 extra per paycheck will be ongoing, so they may be more comfortable in spending it.
The Republicans have to specify, in no uncertain terms, you have to treat people fairly; taxes are a burden, a sacrifice. There must be fair sacrifice. If you increase or decrease the taxes on one group (higher income), you must do the same on the other group. The fact of the matter is, there aren't enough rich people to pay all the bills the Dems are setting up--especially that 17% of the economy paying for health care. The same thing with perm versus temporary tax cuts.
Now going back to Boehner's dilemma, you have the strategic issue: in the big picture, if you agree to a temporary freeze on upper income but a perm on lower income tax rates, you end up have to set up a second vote to grant upper income people a permanent tax cut. Now you can point out exactly what I've been mentioning above--the discretionary nature of certain purchases and investments, when to realize gains and losses, etc.--but you may expect something like what happened in cash for clunkers. Maybe instead of investing in new manufacturing plant employing a number of people, wealthy people invest more in tax free bonds. Democrats love to point out only a small percentage of small business owners may the top tax rate; but what incentive do they have to grow their businesses, knowing there's a larger than expected tax bracket in their future? Isn't the whole idea to grow businesses and the jobs that go along with them?
Of course, Boehner with 179 seats in the House had no chance of stopping Pelosi from passing a higher-income tax increase on a party line vote where Pelosi could afford to let several Democrats off the hook (i.e., reversion to the Clinton era tax hikes). From a tactical perspective, though, it was undermining Blue Dog or other centrist Democrats recognizing the anti-business growth effects of a tax increase on our "seed corn" higher-income taxpayers. Of course, the Senate GOP would still be able to block it via filibuster, but it looks bad for the House and Senate GOP sending out mixed message on taxes.
The fact of the matter is that Obama has a problem in that if nothing happens, everybody pays higher taxes at the start of the year, which contradicts his earlier pledge of tax cuts for the middle class. He and the other Democrats of course would lose face if they backed off their decade-long opposition to the tax cuts for the higher-income taxpayers. The Dems realize this which is why they're complaining about the GOP holding the tax cuts "hostage". But the fact of the matter is with 9.6% unemployment and weak GDP growth, now is not the time to be rolling out a tax increase to the job creator class.
There are rumors that the GOP will negotiate a 3- to 5-year freeze on income tax rates across the board. They should stand firm. The President and Dems, by trying to hold on to their ideological goal exposes their hypocrisy to the American people. The GOP must protect the minority rights of the job creator class. It's a question of treating people fairly, and the Democratic solution once again picks winners and losers, but the losers in this case will be the American people by the Democrat's prescription for weakening the incentives necessary to increase economic growth, the rising tide that lifts all boats.
The Supreme Court Gives the Military More Time to Prepare
for Revision of "Don't Ask, Don't Tell": Thumbs UP!
Defense Secretary Robert Gates is pushing the "Don't Ask, Don't Tell" repeal for the lame duck session of Congress. This seems to stem from a concern that the more Republican Congress may well block the implementation of a repeal. I think that's counterproductive because it's basically pushing a policy without assurances that military processes have been revised to accommodate the difference. I personally don't see the need for a rush, because I'm sure that the military has a robust recruitment process in the middle of a weak economy.
I have made my position clear that I favor repeal, but I'm concerned about any short shift of procedures in place to deal with privacy concerns, sexual harassment, behavior restrictions, etc. The Supreme Court is right to give the military some breathing room on this controversial change.
Political Humor
"Nancy Pelosi is throwing a party to celebrate her time as speaker of the House. If you would like to get her a gift, she's registered at Bed, Bath and Don't Blame Me." - Jay Leno
[I don't know, but I heard at least 61 Democrats have sent in their RSVP's...It was supposed to be a surprise party but the CIA leaked the details to the press, and Leon Panetta insisted that he had never been briefed about the party...Each guest on arrival gets a box and directions to John Boehner's office: Surprise!...The Democratic Congressmen are chipping in to get her a nice gift--a one-way ticket to any location outside the US.]
"JetBlue is appointing retired Gen. Stanley McChrystal to its board of directors. That’s who I want looking for my missing luggage — the guy who’s been trying to find bin Laden for 10 years." - Jimmy Fallon
[I'm not saying that General McChrystal is having problems letting go of his military past, but now every child coming on board gets his choice of the games "Where in the World is Osama Bin Laden?" or "Where's Osama?"...]
Musical Interlude: Instrumentals/One-Hit Wonders
Stan Getz & Joao Gilberto, "The Girl From Ipanema"
