Wednesday, December 5, 2012

Not Yet Deal Time?


For John, BLUFYou say the Democrats won, but the Republicans are not rolling over and playing dead, and it frustrates the Democrats.  Nothing to see here; just move along.

Over at Hot Air is a post that says that Harvard Professor David Gergen is saying "Democrats would rather humiliate GOP than solve fiscal cliff".

I am currently reading Reporter Bob Woodward's book, The Price of Politics, and in his reporting on the 2011 negotiations one gets the impression that everyone was trying to get a solution and trying to count the votes, both House and Senate, both Democrats and Republicans.  What would be different now?  Unless the Democrats think that "they won" last month and thus the Republicans should kow-tow to them.  For those who forgot, DWS failed in her mission to win back the House of Representatives.

But, Mr Gergen, who is an experienced observer, notes:

But since this election, there’s been — I think it’s the Democrats are the ones who are really trying to rub it in and almost humiliate the Republicans, and that’s not going to get to a bargain.  Again, I think it has to be win-win.  … You hear among some Democrats right now, and it’s disturbing, that maybe we ought to just take it over the cliff, that[’ll,] we’ll score political points against the Republicans, that will force their hands in the new year.
He notes it is "...a very, very, dangerous risk."

As for me, I am optimistically thinking that there is posturing going on but the serious players have a Plan B.  And, everyone is looking for a fig leaf to cover an ugly deal (put lipstick on this pig?).

Regards  —  Cliff

6 comments:

  1. I hear it will cost me 2 Grand to go over the fiscal cliff.

    If this pain is distributed "fairly," I'm willing to take the hit.

    Let the chips fall?

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  2. I agree that a 2G nick could be handled by your or me, with a little budgeting work.  My concern is that going over the cliff could lead to a double dip recession.  There would be big cuts, both in Defense and non-defense spending, plus the tax increase (and I am sure the President is betting that the tax increase for other than the rich would soon be reversed).

    If Defense takes a $100 billion dollar cut it will mean contract terminations and end-strength reductions.  I would guess the Army would go down by 50,000 soldiers, plus or minus.  It could be worse if the President, as rumor has it, elects to not make immediate slashes to programs, in hopes that the US Congress will come through with the money.  In that case the Summer will be bloody.

    The impacts would be across the nation.  At the Breakfast Table this AM my wife and I discussed the possible impact on our two sons, one of whom works for DOJ (he will probably be OK) and the other of whom works for a Godless Defense Contractor (depends upon how deep the cut is into Intelligence Systems).

    On the other hand, it is a sharp repudiation of the Keynesian approach to economics.

    Frankly, I believe in the concept that one flies the airplane into the crash, rather than throwing up one's hands and just letting it happen.  I am still hoping there will be a deal.

    Regards  —  Cliff

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  3. I agree with Jack.

    Deductions are nothing more then 'gifts' for doing what the government wants you to do. And with the tax code, it can do whatever it wants.

    I get to write off my children, while I indeed benefits from this, I always read a ugly comment off the internet here and there that children should be taxed.


    Are taxes for the necessity of government, or to manipulate our decisions?

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  4. The Washington Post had a pretty good summation of the Simpson-Bowles plan that was so hastily voted down by Congress that most folks can't even remember what's in it. But it's important to consider. http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/04/11-shocking-true-facts-about-simpson-bowles/

    The only successful recipe(s) here must begin with the realization that we've borrowed away our right to live comfortably into our retirement. We just have. We bought our cars and TVs (and retirement plan and medical coverage) on a credit card that was maxed out long ago, and soon the (often foreign) collection agents will start buying down our currency until we're out on the street because it can't even continue to buy us the roofs over our head.

    The only solution is to sell the big new car and start driving a smaller old one, sell the flat screen and play cards around the kitchen table instead. We have to start living on less, and we should all be ruing the day that our old worth-something currency was changed from the gold standard to a debt standard that means the paper in our pockets is actually debt.

    We've been robbed blind by the financiers over the past 40 years, without ever caring that our pockets were being picked clean. Anything less than cruel austerity now only prolongs the malaise, and winds up being worse in the longer run. The only way we will ever return to prosperity is to mark down our overpriced assets, take the bitter pill, and hope our children live long enough to see better days, and do better than we did passing along this ailing country to the next generation.

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  5. "Are taxes for the necessity of government, or to manipulate our decisions?"

    I think the answer is "YES".

    Taxes are definitely to fund the Government.  This is better than our current approach of just printing money, which will eventually come back to bite us.

    But, we give a deduction to those having a child because we know that those parents are doing the rest of us a favor, since the childless will go into old age not having made a provision for funding Social Security by making new workers available.  Some might see that as selfish on their part, but some couples just can't have children.

    We give a tax deduction for home mortgages because we think home ownership is a good thing.  We give parents deductions for sending kids to college because we think college is a good thing for those of us moving into retirement, because we need new, well paid (because well educated), workers to keep Social Security funded.

    The question is, why do we need thousands of pages of deductions and regulations?  I am for a flat tax with no deductions, or even a slightly progressive tax with no deductions.  How about starting at ZERO percent at $30,000, progressing along a straight line to 20% at $1,000,000, and then heading on out on that straight line to a top tax rate of 32%?  No deductions.  The only problem is all the lawyers and accountants it would put on the dole.

    But, taxes have a social component to them.  We are do-gooders and nudgers by instinct.

    Regards  —  Cliff

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  6. It is going to cost a LOT more than 2G's. A LOT more. Even if Obama gets what he wants in a grand bargain, in terms of tax hikes, it will not come even close to providing enough "revenue" to pay for all the money Obama wants to spend...just in 2013. This tax hike is only the beginning of many more, much larger ones....but slowly implemented.....boiled frog anyone?

    Kad is right on the mark. When you are deep in a financial hole and nearing the end of solvency in any respect.....STOP SPENDING. Hey, maybe this year we shouldn't send billions of dollars to countries who basically hate us to begin with. How about not spending on the hundreds of thousands of "interesting studies" like "Does classical music make cows produce more milk?" And when we talk about entitlement reform...lets start with reforming the entitlements afforded to the Congress and other political appointees that are quite literally timeless in delivery of their largesse.

    The popular dialogue lays the blame on "us" as if Joe the Plumber has been sucking on the government teat and causing us to approach a fiscal cliff. BS!!! The spending originates, is managed, and grown by a very few people who reside year round in Washington DC. And almost 80% of it is payment for quid pro quo of some sort.

    Today's news contained a blurb that the Federal government could hand a $20,000 check to every living person under the Federal poverty level.....on just what we spend annually on the Welfare budget. Trust me....the poor don't get $20,000 out of the Welfare tap....it is stripped out along the way....

    A "deal" or "grand bargain" is simply a euphemism for "more of the same and then some."

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Please be forthright, but please consider that this is not a barracks.