Here is a quote from Matthew Spalding, Ph.D., in a great article at The Foundry:
“Military strategy should drive the budget, not the other way around. The mission of the United States military is determined by America’s vital interests and an assessment of the threats to those interests. We must spend what is necessary to fully fund our military. Of course there is waste and inefficiency in the defense budget. But the core and undisputed responsibility of the U.S. government to provide for the nation’s security must not be up for negotiation.” [emphasis mine]
Spalding illustrates just how far down our military has fallen in the name of the budget. He also says:
“… while government spending is soaring, defense spending relative to the size of the economy is near historical lows. The Obama Administration is promising to hollow the military even more in the years ahead.”
Spalding paints a rather sobering picture of the current condition of our military, but with sequestration cuts of almost $500 billion just around the corner the worst is yet to come! The Army alone says that troop readiness and equipment repair will be affected by the cuts, as well as many family support programs. Sequestration is set to start on March 1, 2013, unless Congress enacts a preventative deal, which sources say is unlikely.
Here’s more news about the military. America’s enemies are increasing defense spending (as a percentage of Gross Domestic Product), while America does just the opposite. Current Defense Secretary Leon Panetta says, “Instead of being a first-rate power in the world, we’d turn into a second-rate power. That would be the result of sequester.” Joint Chiefs of Staff chairman General Martin Dempsey said that about a third of the cuts would have to come from forces. He also said that two-thirds of the cuts will be taken from spending on modernization, compensation, and readiness.
Compromise readiness. I guess that means that when Americans are being attacked, as they were in Benghazi, the solution is to “stand down.” But, what the heck? Obama could not care less. He, according to Leon Panetta, never communicated with Obama or anyone at the White House. Is this just a forecast of what is to come?
And let’s not forget this bit of information about former senator Chuck Hagel from PJ Media:
“Senate sources [say] that one of the reasons that President Barack Obama’s nominee for Secretary of Defense, Chuck Hagel, has not turned over requested documents on his sources of foreign funding is that one of the names listed is a group purportedly called ‘Friends of Hamas.'”
When it rains, it pours! Just when you think Fearless Leader Barack Hussein Obama and the Democrats can’t get any lower, they do.
But that’s just my opinion.
Please visit RWNO, my personal web site.
Soon, President Obama will stand before the American people, at his inaugural, and take the Oath of Office. He will place his hand on the Holy Bible (we assume) and swear an oath before God and country to preserve, protect and defend the Constitution of the United States of America. He did this once before in 2009. But, he has increasingly ignored the dictates and tenets of this Founding Document – one of the documents in the Charters of Freedom. He has disparaged the document as “flawed” and has transparently sought out legal mechanisms – and sometimes not so legal mechanisms – to circumvent the provisions and authorities set forth within. Many Presidents have done the same, although, perhaps, not as egregiously.
Truth be told, a great deal of the partisan gridlock – at least where the finances of the nation are concerned – wouldn’t exist today if the politicians we elect to office would simply cease being politicians upon being tasked with doing the business of government; if they simply followed the rules of government as set forth by the Founding Documents. But then, as James Madison said, “If men were angels…”
“‘All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.’
“And while the verbiage that follows outlines the processes by which the presidential veto and congressional veto overrides are to be executed, nowhere is the power of the purse – the ability to create legislation that raises revenue – extended to any other branch of government or congressional body.
“I bring this fundamental tenet of our system of government to the forefront because I am puzzled as to why House Republicans, led by Speaker of the House John Boehner (R-OH), are negotiating budgetary financial matters, a responsibility and purview exclusively vested in the US House of Representatives, with anyone outside that body, let alone the Executive Branch, which only has the constitutional power of the veto over said legislation?
“Such are the questions that arise when the bully pulpit is used to usurp the constitutional order of our government.”
So, you can imagine how happy I was to read that Speaker of the House John Boehner (R-OH), has told his fellow Republicans that he is done with private, one-on-one negotiations with President Obama. The simple fact of the matter is that he never – ever – should have entered into negotiations with anyone from the Executive Branch over issues of raising revenue in the first place; not on the fiscal cliff, the debt ceiling, the budget, tax reform, deficit reduction…none of it. Pure and simple, the Executive Branch, other than allocating revenues granted to it to through the constitutionally mandated legislative process, to the agencies and departments under their purview, has no authority over the raising of revenue whatsoever. I defy anyone to find any provision in the US Constitution that contradicts that fact.
The reality that President Obama (and through him his team) can co-opt authority over matters of national finance simply by bullying his way to a “negotiating table” under the perverted guise of “leadership” says a lot about how far we have gotten away from the constitutional process of government. That the elected officials in the Legislative Branch do not howl in protest over the usurpation of the Separation of Powers – and perhaps that they don’t know better to howl in the first place – presents as a frighteningly, but all to true, commentary on just how constitutionally illiterate (or subversive) our elected officials have become. The same, sadly, can be said of the electorate itself.
If, and that is the optimal word here, our elected federal officials adhered to the US Constitution as the rulebook by which government is executed (which it is), legislation would follow a path that goes something like this:
▪ Legislation regarding the generation and securing of revenue (including matters of debt reduction, budgeting and borrowing) would be created working through regular order, letting the House work its will.
▪ The legislation would be advanced to the US Senate where they “may propose or concur with Amendments as on other Bills.” (Note: had the 17th Amendment not been passed allowing for the direct election of Senators by the electorate, Senators would still be charged with protecting the rights of their respective States from the overreach of the federal government.)
▪ The legislation would then go to “conference” where the original legislation would be reconciled between the two chambers.
▪ The legislation would then be presented to the Executive Branch (as is the proper procedure for any piece of legislation), where the President can either sign it into law or veto it.
▪ At this point the House (because the legislation for our purposes has to do with revenue generation) would reconsider the legislation and the objections of the Executive Branch and either override the veto or make changes so as to satisfy the Executive’s objections. The overridden or revised bill would then go to the Senate for a similar procedure.
So, as you can see, the only options available for President Obama (or the Executive Branch), constitutionally, are to either sign the legislation into law or veto the legislation presented. Nowhere – nowhere – in the US Constitution is the Executive Branch afforded negotiating rights on matters of raising revenue but for those two options and at that moment in the timeline.
That understood, what we just witnessed – with the US Senate crafting legislation regarding the raising of revenue and the Executive Branch negotiating from the start with the leadership of the US House – was wholly in usurpation of the constitutional process by which revenue legislation is supposed to adhere. In fact, it could be said that the entire piece of legislation, by way of its origination, is unconstitutional.
Yet, because there will be no constitutional objection to this travesty of process, American taxpayers are now saddled with higher taxes and over $4 trillion in new debt over the next ten years, and we haven’t even dealt with the sequestration, the debt ceiling or the budget, all of which will, most likely, see an arrogant and belligerent Executive Branch bullying its way to yet more “negotiating tables”; negotiating tables at which they do not belong. I am willing to bet that through it all, taxes spending and the national debt will rise, and deficit reduction will remain in the realm of political rhetoric; the filth of political opportunism soiling the futures of our great-grandchildren.
On January 21, 2013, Barack Obama will place his hand on the Holy Bible (we assume) and swear this oath, as mandated by Article II, Section 1 of the US Constitution:
“I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.”
Nowhere in that oath exists the caveat, “…unless I think the document is flawed.” Barack Obama’s job as President of the United States is to uphold and protect; to defend the US Constitution. That means adhering to the provisions, limitations and authorities held within, including the legislative process by which revenue is raised for the federal government.
So, when you hear Mr. Obama say: “I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” two thoughts should come to mind.
First, your eyes should roll, given the fact that all the Obama Administration has done over the past four years is scream that they need to spend more money. Blaming Congress for racking up trillions in new debt with nothing to show for it but fictitious “jobs saved or created” numbers that don’t reconcile with the unemployment and workforce stats is tantamount to piling up debt on your Dad’s credit card and then blaming him for being a spendthrift.
Second, you should be asking yourself – and your elected representatives – this: What gives Mr. Obama the right to say he “will not have another debate with this Congress,” over the debt ceiling when he has no authority to debate it in the first place? More importantly, you should ask yourself why your elected members to the US House would allow their leadership to include Mr. Obama in debates exclusive to House membership…ever.
The time to understand the US Constitution – to become constitutionally literate – is now…as is the time to actually start asking these question. Your great-grandchildren’s’ freedom may just depend on what you do right now.
We’ve all seen the video of the Lansing, Michigan union protests. They’re mad that Gov. Rick Snyder passed a right-to-work law, which would curtail the power unions have in the state. It’s Wisconsin reloaded. However, the level of thuggery and violence has reached a whole new level. Union supporters thought that they could really make a difference in this debate by tearing down an Americans for Prosperity tent, which was located outside the state capitol building. The tent had women and children inside – and one union supporter assaulted conservative commentator and Fox News contributor Steven Crowder multiple times during the chaos. Crowder has been receiving death threats ever since he dared to cover the event.
American for Prosperity released this statement to the press on December 11:
LANSING, Mich. – Americans for Prosperity – Michigan State Director Scott Hagerstrom today released the following statement in response to the passage of Right-to-Work legislation in Michigan:“The passage of Right-to-Work is a win/win for Michigan. Not only is this legislation critical to Michigan’s economic recovery, it is a victory for workers who for too long, have been forced to join and financially support a labor union.
“This is also a win for union protestors, even though they might not know it yet, as they will have the freedom to choose to join a union, and will no longer be forced. I commend Michigan lawmakers who courageously stood up, despite union intimidation and violence, for worker rights. “This is about giving private-sector and public-sector union members in Michigan more rights, not less, by allowing workers to chose whether or not to join a union and how their hard-earned dollars are spent. At the end of the day, Right-to-Work legislation gives workers more freedom and more rights. Isn’t that what democracy looks like?
“Despite this victory, it took place amid union brutality and violence. I am saddened by union protestors’ complete disregard for safety and freedom of speech, tearing down an AFP tent and stomping on peaceful AFP demonstrators trapped under the tent.
“Angry, violent union protestors are yelling, screaming, and physically assaulting citizens they disagree with all while chanting “this is what democracy looks like.” That isn’t what democracy looks like, democracy is about free speech and peaceful assembly, not putting people’s well-being in danger just because you disagree with them.”
AFP-Michigan has taken the lead on rallying grassroots activists to contact their legislators in support of right-to-work legislation. Hundreds of activists have met with their lawmakers to stress the importance of this issue, and thousands have phoned in their support for workplace freedom.
Now, AFP released footage of attendees underneath the tent, as they tried to keep it came crashing down.
So, as unions throw a temper tantrum over their loss of political clout, they decide to take it out on decent Americans, who happen to disagree with them on the issue of labor.
I hate raising taxes. I find high tax rates immoral. However, we lost the election. An increase in revenue is inevitable. What’s perverse about this whole episode is that if we fall off the cliff – Democrats will get everything they want. They’ll get their tax increases, their revenue, and defense cuts. They would complete their decade-long project of ending the Bush Tax Cuts and gutting of the Pentagon. They have no incentive to meet us halfway, or negotiate in a meaningful way to make sure the markets don’t tank. They don’t need to. They won. In the meantime, Americans should prepare for the worst.
Since the tax hikes from falling off the cliff are far more severe, I’ve written in previously that Republicans will have to swallow the concept of raising taxes. However, there is latitude within this debate. Republicans should press Democrats to increase the tax rate on those making $500,000 a year, instead of $250,000. As George Will aptly noted on This Week a few months ago, a Chicago school principal with twenty years experience, who is married to a cop with twenty years experience, is almost rich in the eyes of the Obama administration. Cops and school principals aren’t your typical fat cats, hence this is an area where conservatives on the Hill could construct a narrative that this tax increase – within this particular income bracket – a) isn’t really hitting the rich and b) effects professions associated with the middle class.
There’s been some movement towards pushing the amount of taxable income above the $250,000 bracket, and addressing other areas relating to federal spending. As Lori Montgomery and Paul Kane at The Washington Post wrote on December 9, continued negotiations have produced the following:
●Fresh tax revenue, generated in part by raising rates on the wealthy, as Obama wants, and in part by limiting their deductions, as Republicans prefer. The top rate could be held below 39.6 percent, or the definition of the wealthy could be shifted to include those making more than $375,000 or $500,000, rather than $250,000 as Obama has proposed.
Obama wants $1.6 trillion over the next decade, but many Democrats privately say they would settle for $1.2 trillion. Boehner has offered $800 billion, and Republicans are eager to keep the final tax figure under $1 trillion, noting that a measure to raise taxes on the rich passed by the Senate this summer would generate only $831 billion.
●Savings from health and retirement programs, a concession from Democrats necessary to sell tax hikes to GOP lawmakers. Obama has proposed $350 billion in health savings over the next decade. Boehner has suggested $600 billion from health programs, and an additional $200 billion from using a stingier measure of inflation, reducing cost-of-living increases for Social Security recipients.
●Additional savings sufficient to postpone roughly $100 billion in across-the-board agency cuts set to hit in 2013, known as the sequester, and to match a debt-limit increase. The sequester, perhaps paired with an automatic tax hike, could then serve as a new deadline, probably sometime next fall, for wringing additional revenue from the tax code and more savings from entitlement programs.
I like the fact that liberals are willing to increase the rates on those making $500,000, which we can fix if we retake Congress in the 2014 midterms. However, concerning the entitlement spending, I want deeper cuts that are also immediate. Nevertheless, the dynamic is the same – and it’s no love fest.
As Meredith Shiner and Daniel Newhauser of Roll Call wrote in the early morning hours on December 11:
…the primary differences between the two sides remain. Boehner’s office said the speaker is waiting for the White House to come back to Republicans with more spending cuts. And the White House says the president is waiting for the GOP to give more on revenue. Two years of fighting over how to rein in the federal debt is now coming down to two weeks of deal-making at best and he-said/she-said at worst.
“The Republican offer made last week remains the Republican offer, and we continue to wait for the president to identify the spending cuts he’s willing to make as part of the ‘balanced’ approach he promised the American people,” said Boehner spokesman Michael Steel, who confirmed conversations with the White House “are taking place” but declined to specify the nature of those talks.
White House Press Secretary Jay Carney told reporters aboard Air Force One that Obama has offered specifics on cuts — pointing to the president’s original deficit reduction plan that has repeatedly been dismissed by the GOP. Carney added that the Republicans are the ones stalling talks by not giving more detail on what they would be willing to do on revenue.
Frankly, both deals are bad. I’m not happy with either of them. I know that caving on our principles won’t make liberals like us better. Yet, as in the 2012 election, it’s all about messaging and making the argument. Barack Obama pervasively made the argument that Bush ruined the economy, and raising taxes will fix it. Mitt Romney and his communications team, which was always on defense, never made the argument against this claim. Conservatives don’t have the high ground in this fight.
Montgomery and Kane wrote that “a Washington Post-Pew Research Center poll last week found that a majority of Americans would blame the GOP if talks between Obama and Boehner fail to avert more than $500 billion in automatic tax hikes and spending cuts set to hit in January, potentially sparking a new recession.” Now, Pew and WaPo are left-leaning polls, but it doesn’t matter. It’s almost axiomatic that the GOP will be savaged by public opinion if we go over the cliff. While Democrats can take cover under a cloud of legitimacy and have the sober satisfaction that they’ll get what they want anyway, even if Republicans won’t budge on tax increases.
Our movement doesn’t need anymore setbacks right now. With the debt ceiling, that’s a different debate. But for now, we may have to hold our noses and increase taxes on people making $500,000 or more, which is the only (gulp) compromise Republicans should accept on revenue. They should also keep pressure on the White House for more immediate cuts to federal spending. Now, while some, like NYT’s Helene Cooper, say that Obama would own the recession if we fall off the cliff, I’m still dubious if that would happen. Some said that Obama’s extension of the Bush Tax Cuts in December of 2010 would be an albatross around his neck during his re-election campaign. It wasn’t. As I’ve said, I hate raising taxes, but the alternative not to, at this time, could be more damaging than the vote for them. It should give conservatives more incentive to win in 2014.
Right now, debt talks will probably remain in neutral as the car tumbles towards the jagged rocks below.
The PBS NewHour has yet to invite a hard core conservative on the program to talk about the fiscal cliff. Last week, they had NYT’s columnist, left-wing economist, and Obama cheerleader – Paul Krugman to detail his view. Then, they had Sen. Bob Corker ( R-TN), but the December 6 broadcast was the most interesting. PBS invited the Norquist of the left Max Richtman, of the National Committee to Preserve Social Security and Medicare, that we shouldn’t be in a rush to reform our entitlement spending. After all, when the unfunded liability of both programs is around $100 trillion dollars, what’s the big hurry? Where’s the fire?
Richtman started his argument with semantics and a false narrative. First, he wants to call these programs ‘earned benefits,’ instead of entitlement programs. Second, it’s called welfare when the baby boomers’ parents received all of these benefits by paying next to nothing in contributing to the system. The entire interview beset on a throne of lies.
When the question related to the solvency of Social Security arose, Richtman confidently said that this program doesn’t add a dime to the deficit. As USA Today aptly pointed out on November 27, Social Security ran a deficit of $48 billion last year.
Furthermore, Richtman thinks the American lifespan hasn’t increased. Therefore, Medicare is safe.
JUDY WOODRUFF: Well, let’s talk about Medicare again for a moment…
MAX RICHTMAN: OK.
JUDY WOODRUFF: … the other large so-called entitlement program.
We heard — we have heard a lot of conversation about raising the eligibility age. We know Americans are living longer. Why isn’t that a reasonable solution? President Obama himself has said that’s something that should be considered.
MAX RICHTMAN: Well, it’s not true that — as you know, not all Americans are living longer.
We might be able to do a program like this for a long time, but there are some jobs that are much harder to continue working and have health care benefits and have those available.
Raising the age for eligibility in Medicare would be particularly hard on communities of color. These are people, for the most part, they tend to have poorer health conditions at an earlier age. They have accumulated less wealth to pay for health care out of their pockets between, let’s say 65 and 67 because of lower lifetime earnings, and they have shorter life spans. So we don’t need to do that. We don’t need to look at reducing benefits, whether it’s by raising the age for eligibility or means-testing the program or charging seniors more.
This is a lie. And Woodruff made no effort to correct him in this area. Even John Podesta’s Think Progress and National Public Radio posted stories showing that the elderly Americans are living longer, are healthier, and have increased their chances of living to eighty-five or older. Pharmacology has increased American life by almost two decades, and it’s rather amusing to see those on the left omit this accomplishment since it chips away at their welfare state narrative. In terms of a percentage, Americans who are 85 and older represent the fastest growing segment of the population. Demographics don’t lie, and math, not the reformers of our welfare state, are the enemy.
Now, Richtman says they aren’t against reform. They’re just against reform right now. Nothing is more indicative of an organization that prefers to kick the can down the road. Richtman’s grand plan for reform rests with “improving the efficiencies of the programs, by maybe bringing in some more revenue, [but] not going back to the old mantra of let’s cut, cut, cut.” Yes, tax increases are the option of choice for liberals for any economic defect. As for “improving the efficiencies.” I commend Richtman for being purposefully vague.
As Christmas is approaching, there is one item on my list. Invite Grover Norquist on the PBS NewsHour.
Is it revenge of the squishy Republicans? It sure isn’t the reaffirmation of conservatism within the Republican Party. On December 4, Matthew Boyle at Breitbart reported that the House GOP had begun purging conservatives from various committees. In a time when Republicans need strong, principled conservatives to thwart the aggressive expansion of the state under Obama, Speaker Boehner and company inanely decide that they’re the problem. Talk about the pot calling the kettle black. Squishy Republicans are part of the problem. President and CEO of FreedomWorks Matt Kibbe aptly said at BlogCon Charlotte last spring that sometimes “you need to beat the Republicans before you can beat the Democrats.”
Kibbe made the same statement at a Young Republican event in Franklin County, PA in February of 2012. It’s a saying that’s starting to become axiomatic, especially as these debt negotiations continue to have a repetitious character of a bad deal being countered by a delusional one. The first salvo was fired at Rep. David Schweikert (R-AZ) on December 3 when “Speaker John Boehner (R-Ohio) and other top Republicans were huddled in a Steering Committee meeting… that panel, which is controlled in large part by Boehner, decides who sits on the various House committees,” according to John Bresnahan Jake Sherman of Politico.
Sherman and Bresnahan added that ” Schweikert — who was en route from Arizona to Capitol Hill on Monday — will now serve on the House Science, Space and Technology Committee. Rep. Mick Mulvaney (R-S.C.) will replace Schweikert on the Financial Services Committee. Michael Steel, a Boehner spokesman, said a member’s voting record isn’t the sole determinant of his or her committee assignments. ‘The Steering Committee makes decisions based on a range of factors,’ Steel said” – or ones grounded in a purge list. Boyle wrote that:
in remarks to the Heritage Foundation’s Bloggers Briefing on Tuesday [Dec. 4], Kansas Republican Rep. Tim Huelskamp confirmed the existence of such a list. “We’ve heard from multiple sources that someone walked in with a list of votes and said if you didn’t reach a particular scorecard of what was considered the right vote – which by the way, in most cases, was not the conservative position – then [they said] ‘we’re going to have to remove you from the committee,’” Huelskamp said.
“All that took place behind closed doors, which is again a problem with Washington, D.C. – whether it’s the budget negotiations, whether it’s everything else, it’s usually done behind closed doors,” he explained. “I think, as conservatives, this is where we can win: We’ve got to be willing and able to talk about things in public instead of being afraid of actual public scrutiny.”
Huelskamp later told Breitbart News he thinks House Speaker John Boehner, Majority Leader Eric Cantor, and Whip Kevin McCarthy owe it to the American people to be transparent about this decision making process – and that they should publicly release the list.
Breitbart’s Boyle noted that the criteria within the list is unknown. And the name of the person who initiated the purge is unknown. FreedomWorks has been urging conservatives to demand answers from Speaker Boehner.
In the final days before the start of a new Congress, John Boehner and the Republican establishment is quietly purging crucial House committees of strong fiscal conservatives, including:
Rep. Tim Huelskamp (KS) – House Budget Committee (96% FreedomWorks Lifetime Rating)
Rep. David Schweikert (AZ) – House Financial Services (96% FreedomWorks Lifetime Rating)
These three principled legislators have stood with the Constitution even when it was unpopular to do so. Their dedication to the principles of lower taxes and limited government is now being punished by a Speaker who would rather concede to the big spenders in Congress instead of making the tough choices.
Call John Boehner and tell him to restore these genuine fiscal conservatives to their respective committees.
Call House Speaker John Boehner Now
Office Phone Number: (202) 225-0600
Amanda Terkel at Huffington Post wrote the conservative butcher’s bill on December 4 listing:
Reps. Justin Amash (R-Mich.) and Tim Huelskamp (R-Kansas) from the House Budget Commtitee. Reps. David Schweikert (R-Ariz.) and Walter Jones (R-N.C.) [who] lost their positions on the Financial Services Committee.
Huelskamp and Amash were also the only GOP votes against Rep. Paul Ryan’s (R-Wis.) budget plan this year, arguing that it didn’t cut spending enough. The Steering Committee recently recommended that Ryan stay on as Budget Committee chairman.
Luckily, the Senate is safe from Boehner’s reach. At least principled conservatives, like Sen. Mike Lee (R-UT) and Sen. Jim DeMint (R-SC), remain in a blocking position. Chris Moody of The Ticket, which reports on politics for Yahoo! News, wrote yesterday that Sen. DeMint “slammed House Republican leaders for the “fiscal cliff” proposal they offered earlier this week.”
“Speaker [John] Boehner’s $800 billion tax hike will destroy American jobs and allow politicians in Washington to spend even more, while not reducing our $16 trillion debt by a single penny,” DeMint said in a statement. “This isn’t rocket science. Everyone knows that when you take money out of the economy, it destroys jobs, and everyone knows that when you give politicians more money, they spend it. This is why Republicans must oppose tax increases and insist on real spending reductions that shrink the size of government and allow Americans to keep more of their hard-earned money.”
I know I’ve said I’ll stomach slight tax hikes for now, but it seems Democrats aren’t going to budge on their end relating to families making more than $250,000 a year. In fact, Moody wrote “Democrats dismissed it quickly, calling for a bill that would increase taxes on households earning more than $250,000 per year and more federal spending on infrastructure, which were not included in the Republican plan.”
While caving for tax hikes is one thing, purging conservatives in various House committees is another. It’s simply irrational for Speaker Boehner to rid himself of the most vociferous defenders of freedom and limited government in Congress. Conservatives are the vanguards against the usurpatory nature of government, and the implementation of a hyper-regulatory progressive state. Does any rational person feel that a squishy Republican will exude the same amount of tenacity and steadfastness exhibited by a conservative? No, they’ll cave, Democrats will gain ground, and the American taxpayer will pay for it.
Republicans can play with who is saddled with the tax hikes, and as I’ve said previously, a slight hike on anyone making over $1 million isn’t insane. But the spending cuts that follow need to be deep and enacted immediately. Furthermore, most of those cuts need to be focused on curbing the welfare state. However, with the climate becoming more toxic and Republican moderates declaring war on the conservative wing of the party – I’m starting to lean towards being more intransigent towards tax hikes. If Democrats won’t come halfway, then we shouldn’t indulge them.
Nevertheless, Speaker Boehner seems to be making it all the more easier for Democrats to expand the size and scope of government. What are your doing up there, Speaker Boehner?
Yes, I know that in the post-2012 election era, my blog will naturally pivot to more philosophical writings, but some economic analyses will come up here and there. This is an example of one of these economic analyses.
As many readers of my blog know, rarely would I conduct an analysis on a simple article such as the one listed above. Usually, as seen in this previous analysis, I prefer digging deeper and analyzing primary-source data… usually involving IRS data tables, OMB information, or anything of the like. Since this is a simple analysis of the second-hand information discussed in an article, it is officially a “quick and dirty” look.
The CNN Money article talks about Obama’s hard-line plan on raising taxes on the wealthy. At the bottom, it goes on to list the various increases in revenue for each tax-raising move. Keep in mind, these revenue figures summed up over a period of 10 years. They are:
– Letting the Bush-Era Tax Cuts Expire for High-Income Earners: $1 trillion in revenue raised over the next decade
– Limiting Tax Breaks (and, I’ll assume deductions): $500 billion in revenue raised over the next decade
– Increase Carried Interest Tax Rates: $13.5 billion in revenue raised over the next decade
– Imposed the Millionaire Minimum Tax (the “Buffett Rule”): $47 billion in revenue raised over the next decade
– Enact Business Tax Proposals: Though not explicitly clear, this would raise $240 billion in revenue raised over the next decade
Now, using simple math, these five main tax increases raise $1.8 trillion in revenues over the next decade. If divided equally over 10 years, that’s $180 billion per year. To put this in contrast, the budget deficit for Obama’s 2013 budget is between $909 billion and $1.1 trillion, depending on whose estimate you’re looking at. For conservative numbers sake, we will use the $909 billion value, and we can see that by enacting ALL the tax hikes Obama wants, he would be shrinking the 2013 budget deficit by a very small amount. In 2013, should all these tax increases work like Obama has said they would, our government would still have a $729 billion deficit. Basically, as stated numerous times throughout this blog, increasing taxes on the wealthy does very little to close the deficit. While it does have a small benefit with respect to direct revenue increases, the negative effects of increased expenses on job creators and small business owners will hurt employees’ pockets, ultimately slowing down the economy further.
There is another part of this proposal Obama has promised: spending cuts. So far, I’ve only looked at the revenue side of this plan. It’s time to look at the spending cut side. Examining the CNN article, Obama claims he will cut $4 trillion from the federal budget over 10 years. This is obviously an average savings of $400 billion per year.
Let’s now take a look as to how this all plays out. The following figures are simple linearly-extrapolated numbers based on the conditions we know currently exist in the 2013 budget:
For 2013 – Government expenditures: $3.808 trillion / Government revenues: $2.902 trillion.
According to Obama’s $400 billion per year spending cut savings, let’s assume the government will then spend about $3.4 trillion per year over the next 10 years (granted this is difficult to predict since entitlements such as Social Security and Medicare are expected to rise in cost due to the aging population). Let’s also assume that the government, based on the $180 billion per year increase in tax revenue, will take in $3.083 trillion per year over the next 10 years. The budget situation would look something like this (all dollar figures are in trillions of dollars):
Again, it must be stated that assuming expenditures and revenues stay the the same year after year is a tough sell, but, being that all this discussion centers on estimated spending cut savings and estimated revenue increases, it’s semi-safe to say that this chart displays a good approximation of average values. Notice that even with $400 billion per year in spending cut savings factored in with $180 billion per year in additional revenues, significant deficits remain, and more importantly, the total national debt still balloons to over $19 trillion in 10 years. Unfortunately, as the population ages, expenditures are going to rise, and as the economy declines further because of exogenous forces like slow economic growth worldwide and endogenous forces like business-stifling tax increases, revenues are going to shrink. This chart shows very optimistic scenarios, and realistically, it’s doubtful that if passed as Obama wants it, this spending cut and tax increase plan will produce deficits smaller in size than the ones shown here.
In short, though this is a “quick and dirty” look at Obama’s budget plan proposal, it leads me back to the original conclusion: increasing taxes will do little to help our budget, and spending decreases via entitlement reform are really the budgetary remedy this country needs. If nothing is done soon, as time goes on, our entitlement spending will swallow us further into the black hole of debt oblivion.
Sen. Saxby Chambliss has decided to part company with Grover Norquist. In so doing, he invites a primary challenge. Representatives Paul Broun, Tom Price, and former secretary of state Karen Handel have all been maneuvering to oust Chambliss from his Senate seat in 2014.
Joshua Miller at CQ Roll Call reported on November 19 that conservatives just aren’t happy with Chambliss. Debbie Dooley, national coordinator of Tea Party Patriots, did not equivocate: “Senator Chambliss is not very popular among a lot of the conservative grass roots.”
Conservatives “don’t feel he’s as conservative as the base is,” said Virginia Galloway, the state director for the Georgia branch of Americans for Prosperity. “Sometimes when he sees himself being a statesman, conservatives see him as being a sellout.”
The crux of the base’s concern is Chambliss’ history of reaching across the aisle to work on solutions to issues such as immigration and federal debt. Another thing that rankled some of the base: his involvement in the bipartisan effort to come up with a solution to the debt ceiling crisis as part of the “gang of six.”
Chambliss will almost certainly have a primary challenger from the right. But over the next months, the decisive factor in determining his true vulnerability is whether a GOP congress member will run or whether Chambliss will face off against a less-formidable challenger.
Heck, even conservative blogger Erick Erickson considered challenging Chambliss, but decided to take a pass last week. Aaron Blake at The Washington Post listed four reasons why Chambliss is a vulnerable incumbent on November 30.
1. While it’s not clear who might have the wherewithal to challenge Graham, there are plenty of candidates ready to challenge Chambliss. Price and Broun both have very conservative records, and Handel, of course, has a statewide resume.
2. Chambliss had a weak showing in 2008. Despite being an incumbent, he ran a few points behind Sen. John McCarin (R-Ariz.) at the top of the ticket and actually needed to go to a runoff to keep his seat against Democrat Jim Martin, who wasn’t seen as a top-tier opponent. (Chambliss did beat Martin by double-digits in the runoff, for what it’s worth.)
3. He’s from South Georgia. Chambliss is from Moultrie, which is very far from Atlanta and from most of the state’s population centers. Thus, it seems logical that a candidate from the Atlanta area could beat him by regionalizing the race.
4. He’s got a tone problem. While Chambliss has got a largely conservative record, he’s hardly a conservative favorite. In fact, when it comes to the National Journal vote ratings, Chambliss has scored more conservative than Sen. Johnny Isakson (R-Ga.) the last two years, and he was tied for the most conservative senator in 2010.
While I’m not so up in arms about him filing a petition for divorce from Grover Norquist, the reality that Chambliss unpalatable to the conservative grassroots is a problem. The power of the incumbent is omnipresent in elections; but if he, or she, finds that their relationship with the grassroots is shaky – then they should either update their resumes or quickly get cozy with them.
Money is a powerful asset, but former Senator Dick Lugar (R-IN) outspent his Republican challenger, Richard Mourdock, by a 3-to-1 margin and still lost the primary. In fact, Lugar was shellacked. This is what happens to representatives that anger or become disconnected with grassroots organizations.
Mr. Chambliss isn’t a conservative favorite. But to say that his conservatism poses a liability, as stated by Blake, is wrong. Republicans should primary each other based on that notion. However, if they have a history of selling out, or working too closely with the other side, then by all means initiate the purge. We have an American party and a European one. Bipartisanship is very overrated under these circumstances.
I’m sure a lot of you exuded similar reactions to the president’s laughable fiscal proposal to prevent the nation from going over the cliff. He asked for $50 billion in additional stimulus and $1.6 trillion in tax hikes “as part of any ‘fiscal cliff’ deal,” according to CNBC. In all:
The plan calls for $1.6 trillion in new tax revenue over the coming decade, extending the 2 percentage point payroll tax deduction or something comparable to it, and $50 billion in stimulus spending on infrastructure projects.
The White House seeks $960 billion over the coming decade by increasing tax rates and taxes on investment income on upper-bracket earners, and $600 billion in additional taxes.
The only new spending cuts in the plan would come from administration proposals curbing health-care programs by $400 billion over the coming decade and modest cuts from non-health programs like farm subsidies and cutting Postal Service costs and through higher fees on airline tickets.
The plan would also boost spending by extending unemployment benefits for the long-term jobless, deferring looming cuts to Medicare payments to physicians, and helping homeowners refinance “underwater” mortgages.
Geithner also requested the equivalent of a permanent extension of the government’s borrowing ability to avoid wrangling over the issue as in last year’s summertime crisis over raising the so-called debt limit.
Tax increases, more stimulus, and a black check on raising the debt limit. Yeah, hell no. It never ceases to amaze me how the president seems to forget that his mandate, if he had one, is a hollow shell. Obama was re-elected by the 47%, who don’t pay federal taxes, while most of the Tea Party caucus in the House were re-elected as well. Thus, the tax hike fire Obama stoked on the campaign trail was tempered by the fact that the American people re-elected a vociferously anti-tax Republican majority. According to The Hill, they reported on December 3 that the Republican counteroffer included “$2.2 trillion [in cuts] with a combination of spending cuts, entitlement reforms and $800 billion in new tax revenue.” Both dogs are in the ring.
Republican officials said their offer amounted to $4.6 trillion in deficit reduction when compared directly to the White House offer, which they emphasized was more than what the White House had put on the table.
In its own deficit plan, the White House counts legislation that has already been enacted, savings from future interest on the debt, and savings from the end of the wars in Iraq and Afghanistan. Republicans do not count those as new savings, so their offer amounts to $2.2 trillion in future deficit reduction.
The $800 billion in new tax revenue matches what Boehner offered Obama during their 2011 negotiations for a grand bargain. Republicans are keeping to their opposition to tax rate increases, and aides said Monday they believe that $800 billion can be raised from the wealthy through other means, which their offer does not specify.
Senior Republican aides argued that their offer represented a “fair middle ground” because unlike the White House, they did not use their budget proposal as their opening bid. The House budget contains no revenue increases and included far-reaching changes to Medicare and Medicaid that Democrats consider non-starters.
So, there we have it. We have two deals. One is bad. The other is delusional. Concerning Medicare, we all know that the program poses the most serious threat to our long term financial solvency. As ABC’s Cokie Roberts said on This Week last Sunday, the nation lacks an appropriate amount of young people to keep the elderly on these programs at the current rate. Alas, a liberal agrees that Mr. Arithmetic, not Mr. Ryan – or Mr. Republican – is the enemy of Medicare. However, forty-two liberal members of the House have signed on to a bill that prohibits any spending cuts to the welfare state. It’s a game of give and take, as well all know – and I’m hoping a deal be finalized before December 31. Furthermore, I’m hoping more Democrats see the way of Cokie Roberts when it comes to entitlement spending.
Glenn Reynolds (aka Instapundit), had a few suggestions for the GOP in his op-ed column featured in USA Today on December 3.
1. Adopt the Bowles-Simpson Plan. The plan was the product of a bipartisan commission, chaired by Democrat Erskine Bowles and Republican Alan Simpson, appointed by President Obama to address America’s ballooning deficits and national debt. Most experts agree that it’s a pretty good plan. President Obama didn’t like it because it shrinks government too much.
Tough. It’s a plan, which is more than President Obama has offered, and from a bipartisan commission he appointed. Can Obama get away with vetoing that? Can Senate Democrats get away with rejecting it and bringing on the automatic cuts and tax increases of the sequester? Doubtful. Plus, though the press tends to cover for Obama and blame Republicans, media types love Bipartisan Commissions.
2. Tax the revolving door. I mentioned earlier that Washington is getting richer while the rest of the country gets poorer. (And others are noticing this). One reason why this happens is the revolving door — people shuttle between government, where they make rules governing business, and lobbying, where they make money by taking advantage of those rules.
Well, if you want less of something, tax it. So I recommend a 50% “excess salary” surtax on the earnings of government officials on the Executive Schedule — cabinet and subcabinet officials, mostly — in excess of their government salaries for the first five years after they leave. So, leave a cabinet job paying about $200,000 for a job paying $1 million a year, and the government will take half the $800,000 difference.
3. Make Hollywood Pay Its Fair Share. At the DNC, actress Eva Longoria offered to pay more taxes. Well, back during that Eisenhower era that the Dems are so nostalgic for, there was a 20% excise tax on movie theater revenues. It was established to help pay off the post-World War II debt. Now we’re in debt again. Bring it back. For added fun, extend it to DVD sales, movie downloads and music on CDs and over the Internet. As a great man once said, at some point, you’ve made enough money. If we need more tax revenue, who better to pay it than Hollywood fatcats with their swimming pools and private jets?
As I’ve said previously, I hate tax increases, but I’ll settle if a 10:1 deal is reached. Ten dollars of spending cuts, including welfare state cuts, for every one dollar raised in revenue. It’s a rational deal. If we can retake the Senate, and maintain our majority in the House; then perhaps we can discuss making other changes more palatable for the job creating and investing class. However, in this brief time where I am open to such compromise, the chances of such a deal is unlikely. But I’m still holding an optimistic grin.
Yes, Democrats will get what they want of we go off the cliff – and Republicans will be blamed for it. Joel Pollak at Breitbart described how Republicans were failing ‘negotiation 101.’ In his November 27 post, he wrote that Republicans need to focus on:
Framing the debate. The negotiations are now about the meaning of “revenue,” rather than about how to reduce runaway federal spending. President Obama says “revenue” and means increases in tax rates for the wealthy; when House Speaker John Boehner uses the same term, he means cutting loopholes and deductions while keeping rates the same. But both sides are talking about making the rich pay more to close the gap.
Aside from the fact that the wealthiest Americans bear a disproportionate share of the federal income tax burden–disproportionate even to their disproportionate wealth–and the fact that taxing the rich at a 100% rate would not solve the deficit and debt problem, there is a principle at stake here: that the government does not have an inherent claim to wealth and income that Americans have earned through their own labor and risk.
Arguably, the wealthy–like the rest of us–owe only for what provides the opportunity for all to earn and enjoy income in safety. Furthermore, too much of today’s public spending hurts the public–creating waste, reinforcing cronyism, and building dependency. But Republicans lost the chance to frame the debate around spending last year when they dropped the “Cut, Cap, and Balance” plan after obstruction from the Democratic Senate.
It’s true. The job creating and investing class pay a disproportionate share of the taxes, but Mitt Romney lost. President Obama campaigned heavily on raising taxes on the wealthy, and he won that argument on November 6. This was due to Republicans not making the argument against such hikes. Furthermore, there wasn’t even a single ad in the ’12 cycle that hit Obama on his hypocrisy surrounding the Bush tax cuts. He extended them in December of 2010, which was a tacit agreement of Republican economic policies, regardless of the ‘hostage’ talk – which was pure drivel. I agree with Pollak that the government is taxing too much of Americans’ hard-earned money, and that it’s immoral for members to say that those monies are government property, but there was an election about this – and we lost.
In short, the reason why Republicans will be forced to raise taxes is due to the fact that we have poor leadership and bad messaging.
Media and culture. Democrats blocked “Cut, Cap, and Balance”–but the Tea Party was blamed for obstructionism. Obama destroyed a grand bargain by insisting on increased tax rates–but House Republicans suffered more media criticism when ratings agencies lowered the U.S. credit rating a few days later. Today, more Americans blame the GOP for the fiscal cliff impasse even though the sequester was Obama’s original proposal.
More is at work here than simple media bias. The Democrats have consciously pursued a media and cultural strategy to reinforce the idea that Republicans are the guardians of the rich–even though the wealthiest are actually a Democratic constituency. In the summer and early fall of 2011, for example, after the downgrade and with the economy creating net zero jobs, Occupy Wall Street began–and the Democrats latched on.
The movement failed, but Democrats salvaged the “99% vs. 1% meme,” setting a trap that Mitt Romney fell into with his comments about the “47 percent” last spring. Obama has also made the effect of spending cuts visceral for many Americans; Republicans have failed to describe the cost of debt in similar terms. That media and cultural edge allows Obama to rig the game in his favor. It’s time Republicans found an answer.
Here is the answer is simple. It’s time to have a Reagan throwback. Not necessarily on everything during the Reagan administration, but reconnecting with middle class Americans. Conservatives and Reaganites were a coalition of blue collar, middle class, ordinary, and right-of-center Americans – who took a liking to a lot of Republican policies. For example, it explains the Arkansas bleeding of Democratic voters until Bill Clinton came into the picture.
Shifting away from Wall Street will also have a positive impact on our Hispanic outreach, since Latinos view Republicans as the party of the rich. Yes, it’s an incorrect assumption, but it’s not to say that we can do better with the folks in the American middle class. It’s time to challenge Democrats’ core constituency. I’m not saying we should be anti-wealthy, or engage in class warfare, but we need to find candidates who are popular both on ‘main street’ and ‘Wall Street.’ Let’s face it. Wall Street isn’t, and shouldn’t, come off scott-free from the ’08 financial meltdown. On the other hand, they didn’t deserve Dodd-Frank either.
Coming back to the fiscal cliff, Republicans should insist on entitlement cuts. After all, the president agrees with this position as well. It’s also put him at odds with his fellow party members – forty-two of which signed on to a deal that called for zero cuts to the welfare state. Sen. Patty Murray (D-WA), in Napoleonic stature, has found her Waterloo by leading a coalition of cliff jumpers in the U.S. Senate. To counter this, Republicans may have to take flak from the base by insisting that tax rates only rise for millionaires. There is a winnable argument to be made that $250,000 isn’t rich when all of the mitigating elements are factored in, such as location, utilities, property taxes, state income taxes, sales tax etc. For example, urban residents making this kind of money, and they should be congratulated on it, don’t feel rich once all the bills are paid – and they’re right. The GOP has a winning narrative in this period between elections.
On the other hand, they can fight to keep the 2% cut in payroll taxes. James C. Capretta wrote in National Reviewon November 27 that “this tax cut lowered the Social Security payroll tax from about 12 to 10 percent on all earned income (up to a limit of just over $100,000 annually). In January, if the cut is not extended, all 155 million American workers will see this two-percentage-point hike in their taxes. The Obama administration is ready to let it expire because it fears a long-term cut might create pressure for additional Social Security reform — which is precisely why the GOP should support keeping payroll taxes, as well as income taxes, as low as possible.”
There should be no deal on long-term taxes without far-reaching reforms to health-entitlement programs. And what’s far-reaching? For starters, the entirety of Obamacare should be on the table for revision and retrenchment. The law sets in motion the largest entitlement expansion in a generation. It’s far better to scale the program back now before it gets started than to wait and hope it can be scaled back later.
Republican governors have substantial leverage in these negotiations because they can opt out of the Medicaid expansion in Obamacare, thanks to the Supreme Court. If 25 or so Republican governors refuse to put more people into an unreformed Medicaid program, it will put tremendous pressure on the Obama administration, which is desperate to see the Medicaid expansion occur during the president’s second term. The congressional GOP should use this leverage to move Medicaid toward fixed financing and maximum state flexibility.
Most importantly, if there are any cuts, they need to be immediate. Conservatives stress this because in such fiscal deals during the Reagan and Bush 41 days, they were promised – but never implemented. While those on the left, like Matt Yglesias, think a grand bargain is impossible, and negotiations towards one is hurting the country.
Jennifer Stefano, PA State Director for Americans for Prosperity, stated in a news release on November 20 that she thinks:
…it is funny people are criticizing the president for being abroad in Asia during this crisis. The President can be abroad in Asia and do exactly what he has been doing in the White House; which is absolutely nothing to prevent the economic calamity that will come on all Americans because of his fiscal policies..at the end of the day there are issues. And on the issues there are things that are right and there are things that are wrong. President Obama’s tax hikes are going to continue to crucify small businesses in this country… along with Obamacare, it is a crushing blow to the entrepreneurial spirit and as well as to the bottom line.
Matt Kibbe, President and CEO of FreedomWorks, aptly noted in Forbes on November 29 that such reforms to get our fiscal house in order will take more time, and that Congress should extend all the tax cuts for one more year. This would provide a buffer from the cliff, and give representatives the necessary cushion to come up with a comprehensive long terms plan to tackle our debt and deficit.
This is why FreedomWorks has activated its grassroots members to call Congress with a two-part message. 1) Keep your promise on the sequester savings. 2) Pass a one-year extension of all current tax rates, so America has time to pass serious tax and entitlement reforms.
By the way, there is some good news hiding in all the dust of the “fiscal cliff” fracas. The coalition of committed fiscal conservatives in Congress has grown in the past two elections. Constitutional conservatives in the House held on to the historic gains of 2010, while the Senate just picked up three principled fiscal conservatives in Ted Cruz, Jeff Flake, and Deb Fischer to replace GOP establishment types Kay Bailey Hutchison, Jon Kyl, and Olympia Snowe.
This new generation of legislative entrepreneurs is re-populating Washington with innovative energy. Expect these principled leaders to put real specifics on the table, craft thoughtful budget solutions, and carve pathways to needed tax and entitlement reforms next year – all things Senate Democrats haven’t seen fit to do for the past 3 years.
Fiscal conservatives are once again at the table, but we won’t bargain with ourselves against an arbitrary deadline. Your move, Harry Reid.
Extending the tax cuts for one more year – I’m for it! However, there’s a fat chance that will happen. Reid, Pelosi, and liberal Democrats won’t back a deal with such extensions. As I’ve said, politically, Republicans have little to stand on without getting blasted by the media, and the American people. We need to stand our ground with the spending cuts for sure. No compromise there, but concerning taxes – they’ll have to go up. It’s time to face reality for now. Come 2014, hopefully, we’ll have a comprehensive tax reduction and reform plan that is palatable to everyone, and we can return to a sense of fiscal sanity.
What: Have you ever wondered what Black Conservatives think about the political issues of today? Well wonder no more, “He Said, She Said” with Demetrius and Stacy. brings you an inner peek into the mind of the conservative, bold, full strength, and unfiltered.
Tonight: Special guests: Rep. Tom Price (@RepTomPrice), chairman of House GOP Policy Committee and Bethany Bowra (@BethanyBowra), Founder of NextGenerationVoters, and blogger at Smart Girl Politics and RedState.com
I’ll say it again, Democrats want to go off the fiscal cliff. They’ll get their tax increases – $600 billion dollars worth– their revenue increases, and cuts to defense, which has been a goal of theirs for the past ten years. Goodbye Bush tax cuts, Hello Obama tax hikes. With the fledgling coalition of ‘cliff jumpers’ led by Sen. Patty Murray (D-WA), let’s see how the impact will affect us who aren’t on Capitol Hill.
According to Paul Katzeff at Investors Business Daily, he wrote on November 16 that ending the Bush tax cuts will also be detrimental to the middle class. Contrary to popular belief, the Bush tax cuts has beneficial mechanisms, like credits for lower income households and reductions to the marriage penalty, all of which help the middle class. While conservatives know this, it’s hard to break the deafening noise of the liberal media.
The typical American family will be hit with an extra $3,222 in taxes, the [Tax] Foundation says. That’s based on a two-child family with median income of $74,563. The tax increase will amount to 4.32% of that family’s income. The Foundation’s analysis compares that family’s tax bill in 2011 — the latest year that an AMT patch existed — to what it would be in 2013, assuming all Bush and Obama tax cuts expire, the AMT remains unfixed and the 2% payroll tax cut also expires. The AMT keeps hitting more middle-income taxpayers because the standard deduction and certain itemized deductions such as state and local taxes do not reduce its bite. Also, its exemption does not grow automatically with inflation.
Families in high-individual-income states such as New Jersey would be hit hard by currently slated AMT changes. The AMT exemption level would revert to what it was 12 years ago: $45,000 for married joint filers vs. $74,450 in 2011. And credits such as the child tax credit would no longer be allowed to offset AMT liability.
But, contrary to political conventional wisdom, families in lower-income states, like Arkansas, would also take an outsized hit. That’s because three tax cuts that everyone will lose — the cut in the child tax credit, end of the 10% bracket and reduced standard deduction for married filers — are fixed increases that do not hinge on income. As a percentage of income, those increases will be biggest for lower-income families.
New Jersey is set to take the largest blow, with a looming tax increase on the typical family totaling $6,933.
As more Republicans flee Grover Norquist, Founder of Americans for Tax Reform, and his anti-tax pledge – it’s a forgone conclusion that revenue increases will occur IF there is a deal. However, Republicans should ask themselves why swallow such a demand when it’s been over 1300 days since the Democratic Congress has passed a budget. It’s not logical or moral for Republicans to cave to the soulless, rotten liberal cadre of robbers this easily during the negotiations.
The only acceptable outcome, which I would still be unhappy with, is a deal that calls for at least eight dollars in spending cuts for every new dollar in revenues. The ten-to-one deal is even more “palatable.” I hate tax increases – but the outcome of the election will make it hard for conservatives to hold their ground. Yes, the Tea Party Caucus was re-elected, with the exception of a couple of members, and Obama was re-elected by the 47% who don’t pay taxes, so there isn’t a mandate – but the clock is ticking.
Concerning revenue, Republicans should push to raise the rates on those making $500,000 or more. I’m not a fan of Warren Buffett at all – but his plan to increase the rates on the incomes of those people is reasonable for now.
First, he only calls for raising taxes on Americans earning more than $500,000 a year, not the $250,000 that President Obama is focused on. Families who earn $250,000 and live in major cities justifiably point out that this salary does not leave them feeling “rich.” So, raising the definition of rich would go a long way toward making these tax hikes more palatable.
Next, he calls for a minimum 30% tax on Americans making $1 million to $10 million or more, regardless of how this income is generated. One of the most egregious elements of the tax code is that some of America’s highest earners pay much lower tax rates than average earners, because they generate their income from capital gains or dividends or have figured out how to shelter it by taking advantage of various loopholes. This tax would ensure that most income is treated the same way.
Americans living in urban areas, with rent and other utilities, see their $250,000 income dwindle rapidly, and don’t feel rich. They’re right. As George Will aptly noted, a Chicago school superintendent with twenty years experience, who is married to a police captain with twenty years experience is almost rich within the tax increase parameters of the Obama administration.
As I’ve said, I hate raising taxes, but we cannot be the party that is blamed for going off the cliff. Democrats have planted their flag on the side of willingly going off. That’s perverse, and wrong. Let’s be the party that said NO! We’re the part of no. We don’t want to cut defense by the hundreds of billions. We don’t want $600 billion in tax increases for the American taxpayer. We have an opportunity to blunt the trauma of falling off the cliff.
However, I also understand the political ramifications if we do have a deal – and history hasn’t been to kind to us. John Fund wrote today in National Review that:
many old Washington hands recall that Republicans agreed on tax-increase-for-spending-cuts deals in 1982 under Ronald Reagan and in 1990 under George H. W. Bush. These deals politically damaged the party in the short run, and they also proved to be bad policy. The 1982 budget deal, which promised seven dollars in spending cuts for every three dollars in tax increases, was never honored. Congress agreed to less than 27 cents in spending cuts for every dollar of tax increases, and President Reagan came to bitterly regret his decision to approve the deal. Ed Meese, Reagan’s senior counselor at the time and later his attorney general, recalls that the 1982 deal ‘was the worst domestic-policy mistake of the Reagan administration.’
So, this time Republicans must insist the cuts be enacted immediately. Furthermore, I like the idea Sen. Jeff Sessions (R-AL) has concerning transparency if a deal is reached. A week-long debate on any aspect of the bill, including amendments, edits, and revisions. All will be televised on C-SPAN for the public to see – if they don’t fall asleep first.
Yet, we cannot forget back when “Treasury Secretary Timothy Geithner admitted [last February] in congressional testimony that the administration lacks a long-term plan to deal with the nation’s soaring $16 trillion debt. “We’re not coming before you today to say we have a definitive solution to that long-term problem,” he told House Budget Committee chairman Paul Ryan. ‘What we do know is, we don’t like yours.” I’ll try to temper my cynicism, but being optimistic about government is difficult.
I hope for a deal, but, at the same time, will start cashing out my investments in the stock market in preparation for the day of reckoning.
As the fiscal cliff looms, it is prudent to discuss how we got here. As our crisis moves from housing to student loan and then into health care, it should be noted what, how and who got us into this situation.
“…because this financial crisis just wasn’t the result of decisions made in the executive suites on Wall Street, it was also the result decisions made across kitchen tables across America by folks who took on mortgages and credit cards and auto loans,”
During a 2010 speech at Wall Street, President Obama blamed Wall Street and Main Street for irresponsible financial practices but he neglected the true culprit of the housing crisis…the federal government. When third parties such as Washington politicians, bureaucrats and community organizations get involved, it perpetuated the housing disaster in what we have today.
So, how do you collapse the housing market? You start with the philosophy of “Overloading the system” with an approach known as “Top Down, Bottom Up and Inside Out. Van Jones explains this concept below. Politicians and bureaucrats wrote legislation that entice community organizations, citizens and lawyers to force banks in giving loans they should not have given. This concept begins with the passage of the Community Reinvestment Act, then relaxing HUD policies with unrealistic goals. The Clinton Administration and Congress put pressure on banks, this represents the “Top Down” portion. This placed the legal ability for banks to make risky “subprime” loans. The “Bottom Up” is community organizations, like ACORN and lawyers who push the written law through the court system. These community organizations put pressure or extorted banks through threats of lawsuits. With Fannie and Freddie’s loan goals increased, pressure from federal agencies and community groups demanding risky loans to be made, this is the “Top Down, Bottom Up” scenario. The “Inside Out” scenario is where people within the system begin to work with the community organizations or replaced with people who are friendly to organizations that caused the problems.
So, what caused the subprime lending crisis? Let’s start with the Community Reinvestment Act.
In 1977, the Community Reinvestment Act (CRA) established the foundation for the housing crisis and “encouraged” financial institutions to provide loans to low- and moderate-income communities. It eliminated “redlining”, a practice where banks identify and eliminate lending to certain high-risk communities. But one of the most damaging aspects of the act was the creation of a rating system that evaluated banks on several factors, one being their subprime loan record. The CRA addressed concerns of the deteriorating conditions of cities like urban flight and declining neighborhoods, this was due to limited credit availability. After the CRA was enacted, the federal government continued to tweak previsions for the next 30 years to provide loans to risky borrowers, loosen restrictions so banks were able to give these loans and provided legal grounds for community organizations and lawyers to force these loans.
After the passage of the CRA, trends of outstanding consumer credit skyrocketed. (See chart below)
The Glass-Steagall Act of 1933 kept banks in check. It limited the affiliation between commercial banks and security firms, this also eliminated financial transactions being granted within the same credit, lending and investing institutions, also known as “too big to fail.” What this would do is tie loans to the banks physical assets. Back in 1933, this act gave additional oversight authority to the Federal Reserve. In addition, the FDIC would be able to guarantee loans up to a certain amount.
Ben Bernanke explained that the CRA encouraged many banks to make high-risk loans to low and middle-income communities at low interest rates. The Financial Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA) publicized these CRA reports public. This allowed community organizations and lawyers to “perform more-sophisticated, quantitative analyses of banks’ records.” If a bank’s ratings were not adequate, community organizations such as Association of Community Organizations for Reform Now (ACORN) sued banks for the lack of loans in low income communities.
In 1980, Jimmy Carter signed the HR 4986, “Depository Institutions Deregulation and Monetary Control Act” forcing banks to adhere to Federal Reserve rules. It allowed the merger of banks and raised deposit insurance from $40,000 to $100,000.
In 1992, the Housing and Community Development Act of 1992 “establish(ed) specified housing goals for each enterprise, including goals for purchase of mortgages on housing for low- and moderate-income families”. These two Government-Sponsored Enterprises (GSE), Fannie Mae and Freddie Mac, encouraged “subprime” lending by authorizing a “flexible” criteria whereas high-risk borrowers could be qualified for home loans. These GSEs were intermediaries who loan to banks and not directly to homeowners. Banks were directed to accept welfare payments and unemployment benefits as “valid income sources” in qualifying for mortgages. If banks didn’t accept these documents, they could face lawsuits.
In 1994, Housing and Urban Development (HUD) instituted a “top down” policy where ten federal agencies adopted a policy, entitled “Policy Statement on Discrimination in Lending”. According to the news release “The following Federal Agencies—HUD, OFHEO, DOJ, OCC, OTS, the Board, FDIC, FHFB, FTC and the NCUA—sharing a concern that some prospective homebuyers and other borrowers may be experiencing discriminatory treatment in their efforts to obtain loans, formed an Interagency Task Force on Fair Lending to establish uniform policy against discriminatory lending.”
Community organizations increasingly used the public comment process to pretest bank applications on CRA grounds. When applications were highly contested, federal agencies held public hearings to allow public comment on the bank’s lending record. In addition, this policy “seek(s) to promote fair lending” and “seeks to prevent lending discrimination and redlining by requiring public disclosure of certain information about mortgage loan applications.” In essence, the federal government established a grading program to evaluate how these programs lent to the poor. Due to these changes in lending practices and activism, homeownership would soar as shown below.
According to the Chicago Daily Observer, Barrack Obama represented 186 African-Americans in a 1995 discrimination lawsuit against Citibank. These individuals were not approved loans but Citibank settled in 1997. Since then, roughly half of those represented have gone into bankruptcy or received foreclosure notices. Today, only 19 of the 186 still own their homes with a clean credit record. This demonstrates how community organizations can pressure banks into giving subprime loans.
In 1999, President Clinton and a Republican majority Congress repealed the Glass-Steagill Act. This allowed banks, lenders and investments firms to practice across different environments, reintroducing “Too Big Too Fail.” The bill passed the house (362-57) and Senate (90-8). At the same time, the Clinton Administration put pressure on Fannie Mae to expand mortgage loans among low and moderate income people. HUD increased Fannie/Freddie’s subprime lending goals to over 40 percent for low- and moderate-income families.
Bill Clinton in an interview describes how much CRA loans were given out during his time as President.
In 1999, Franklin D. Raines, Fannie Mae’s Chairman and CEO stated ”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements.” “Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.”
According to Milkeninstitute, “The rate of foreclosures on subprime loans originated increased each year from 1999 to 2007 and accounted for approximately half of all foreclosures over the same period.” When the collapse occurred in the third quarter of 2007, subprime ARMs made up only 6.8 percent of US mortgages outstanding but accounted for 43 percent of the foreclosures that began in that quarter.
In November 2000, Fannie Mae announced HUD would increase the dedicated amounts to 50%. According to CSR Press Release, to expand the secondary market, Fannie Mae committed to purchase $2 billion through a suite of flexible mortgage options purchasing one-to-four unit homes. Fannie Mae injected a process where previous loans would be negotiated on an individual basis. Dan Mudd, from Fannie Mae stated “By teaming with lenders, Fannie Mae can not only help increase lending to minorities and other underserved market segments, but we also can assist depository institutions in meeting their own community investment goals and objectives. We look forward to working with our customers to create increased liquidity for Community Reinvestment Act (CRA) -eligible loans.”
In 2001, the US Department of Treasury warned, “Subprime borrowers typically have weakened credit histories that include payment delinquencies and possibly more severe problems such as charge-offs, judgments and bankruptcies. They may also display a reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete credit histories.”
Although most home loans were not subprime mortgages, their numbers rapidly grew in the early part of the 21st Century. Subprime loans accounted for 9 percent in 1996 and 20 percent in 2007, one-fifth of US home loan market. Throughout the 2000s, there were calls to reform Fannie and Freddie because they were “systemic risks”. In 2003, Barney Frank stated that Fannie and Freddie are “not in a crisis” and Republicans were crying wolf in calling Fannie and Freddie not financially sound. Democrats blocked Republican-sponsored legislation. From a servicing standpoint, these loans have a statistically higher rate of default and are more likely to experience repossessions and charge offs. Lenders use the higher interest rate and fees to offset these anticipated higher costs.
In April 2005, there was rumble of fixing the housing debacle but some lawmakers said that it undercut the ability of the CRA to “meet the needs of low and moderate-income persons and communities.” Senator Shelby introduced legislation to deal with Fannie Mae and Freddie Mac that was causing a “systemic risk for our financial system.” The carrot was subprime loans that would be purchased and backed by federal GSEs Fannie Mae and Freddie Mac. Community Organizations felt this legislation would only weaken CRA. Even Federal Reserve Chairman Alan Greenspan warned of Fannie and Freddie’s debt. “We are placing the total financial system of the future at a substantial risk,” he said. Senator Charles Schumer (D) says, “I think Fannie and Freddie over the years have done an incredibly good job and are an intrinsic part of making America the best-housed people in the world.” No legislation would be passed to address the looming bubble.
On August 15, 2007, concerns about subprime mortgages caused a sharp drop in stocks across Nasdaq and Dow Jones. Record lows were observed in stock market prices across the the world. The US market recovered all those losses within 2 days. Concern in late 2007 increased as the August market recovery was lost, in spite of the Fed cutting interest rates by half a point (0.5%) on September 18 and by a quarter point (0.25%) on October 31. Stocks are testing their lows of August now.
On December 6, 2007, President Bush announced a plan to voluntarily and temporarily freeze the mortgages of a limited number of mortgage debtors holding ARMs by the Hope Now Alliance. He also asked Congress to: 1. Pass legislation to modernize the FHA. 2. Temporarily reform the tax code to help homeowners refinance during this time of housing market stress. 3. Pass funding to support mortgage counseling. 4. Pass legislation to reform GSEs like Freddie Mac and Fannie Mae.
In 2008, Troubled Asset Relief Program was enacted in response to the subprime mortgage crisis. Citizens do not have access to Fannie and Freddie’s records because they are considered a GSE, so the Freedom of Information Act does not apply. Currently, Fannie Mae and Freddie Mac still have an open checkbook in buying loans.
So, what changed to cause the subprime mortgage crisis? Was it a conspiracy contrived by the Fannie, Freddie, bankers, lawyers or community organizations? NO! Legislation and courts were used to position third parties such as federal agencies, community organizations, GSEs and lawyers who determined the validity of banks’ lending practices based off a banks’ CRA rating rather than the practice for each individual. These players used the law to force banks to lend money to people who could not afford it. The housing collapse was caused by third party intervention intervening into the free market…not capitalism!
According to Maxine Waters (5:08), “Under the outstanding leadership of Frank Raines, everything in the 1992 Act has worked just fine. In fact, the GSEs has exceeded their housing goals. What we need to do today is focus on the regulator and this must be done in a manner so as not to impede their affordable housing mission. A mission that has seen innovation flourishes from desktop underwriting to 100 percent loans.”
According to a 2010 House Oversight Committee Report, top banks such as Countrywide, Bank of America, Chase, Washington Mutual and Wells Fargo established relationships with community organizations such as ACORN. The report also stated “ACORN used provisions in the Community Reinvestment Act (CRA) of 1977 to challenge bank mergers and acquisitions. These challenges successfully forced banks to make lending agreements with ACORN Housing.” ACORN became a HUD approved housing counselor. According to the report, ACORN has “waged savage public campaigns and delivered subtle private threats to large banking institutions for its own financial gain, defeated former political allies…and formed powerful alliances with the SEIU, Rod Blagojevich and Barack Obama.”
With federal legislation pushed banks to make high risk loans and provided upward pressure from community organizations that ensure the subprime. The problem cannot be entirely blamed on the CRA but it laid the foundation. CRA reports enabled community organizations and lawyers to force banks into making subprime loans, and this extortion probably extended elsewhere…and to some degree partnerships. Fannie & Freddie was able to guarantee and provide cheap subprime money.
Ron Paul provided some insight that the very people who was instrumental in creating the legislation are there to fix it.
The next financial bubble will be “Student Loans” while the housing bubble’s intrinsic issues were not addressed.