Thursday, December 6, 2012

New Normal in US: Obama and Reid Attempt to Eliminate Congressional Checks on Debt Limit, Geithner Says "Absolutely" Yes to Going Over the Fiscal Cliff, Dean Says "Raise Tax Across the Board"

Dems gone wild.

Harry put it for voting, and Republicans in the Senate blocked the vote, for now. Barack and Harry's plan would have passed by a simple majority (51), which Democrats have in the Senate, to give Barack the executive power to unilaterally raise the debt limit.

Combine that with Ben's unilateral unlimited QE. (Move over, Abe.)

In the US Senate, there are 51 Democrats and 47 Republicans.

From Reuters (12/6/2012):

Senate Republican leader blocks debt limit vote

(Reuters) - Senate Republican leader Mitch McConnell on Thursday prevented a simple majority vote on a proposal to give Democratic President Barack Obama unilateral power to raise the debt limit.

Senate Majority Leader Harry Reid brought the measure to the floor for consideration at the request of McConnell. But McConnell refused to permit a vote after Reid said it could pass with 51 votes in the 100-member Senate. McConnell demanded 60 votes needed for passage.

The jockeying played out as Democrats and Republicans seek to end a stalemate on how to resolve spending and tax issues by year's end.

In the meantime, during his appearance in a TV show (CNBC), Treasury Secretary Timmy "Turbotax" Geithner said Obama would be "absolutely" willing to go over the fiscal cliff.

As Bruce Krasting at Zero Hedge says in his piece today (emphasis is mine),

Given that Geithner will be out of his job running Treasury soon, I’m sure that he went on TV with the blessings of Obama, and he had a scripted message from the President. There will be no negotiations on tax rates, the top rate is going to 40%, or we will be sailing off the cliff. What an idiotic bargaining position.

At this point, I don’t think there is any significant opposition to increasing tax revenue from America’s wealthiest folks; the question is how to achieve it. Raising marginal rates is one option; cutting deductions can accomplish exactly the same thing. Geithner and Obama will not consider adjusting deductions; the reasons are a mystery to me. It appears that the President wants to “punish” some folks rather than to find a compromise that achieves the desired results.

So I agree with Bartiromo, unless the President backs off, we are going cliff diving in 20 days.

I believe the President has started a war, No real bullets or sabers in this war, but there will be casualties none-the-less. The question is, “Who is going to get hurt?” The thinking by all of the pundits is that a fall of the cliff will fall squarely on the shoulders of Republicans. If they stand up to the Administration on tax rates, the Republicans will get slaughtered in the Congressional elections two years from now.

The facts force me to conclude that Obama is, in fact, using the cliff negotiations to bend Republicans over and force them into submission. The goal is to destroy the Republicans, and have the House, Senate and the White House all Democratically controlled in twenty-two months. Harry Reid would be in charge of the Senate, Nancy Pelosi would be running the House, and the President would have the last two years of his administration with the government controlled by “friendly” hands. A disaster in the making.

Mr. Krasting has said he voted for Mr. Obama in 2008. I don't know if he voted at all in 2012.

And if you think it will be only the so-called "rich" (household earning more than $250,000 a year), former Democratic National Committee chairman Howard Dean has a better idea. From Real Clear Politics (emphasis is mine):

The only problem is -- and this is initially going to seem like heresy from a progressive is -- the truth is everybody needs to pay more taxes, not just the rich. And it's a good start. But we're not going to get out of this deficit problem unless we raise taxes across the board, to go back to what Bill Clinton had and his taxes. And if we don't do that, the problem is the pressure is going to be on spending even more.

If Mr. Dean and his party are proposing the cutback of the Federal bureaucracy to the level last seen in the Clinton Era, that's one thing. Mr. Dean of course does not offer that, and instead threatens us with even more spending by the Obama administration. Which they will do anyway, as Obama's "cut" (for that matter, Republicans' "cut", with the exception of Ron Paul's) is nothing but decreasing the rate of debt increase. Instead of debt growing at 5% a year, for example, Obama would cut the growth rate to, say 3% a year, and call 2% a "cut".

Again, from Bruce Krasting (emphasis is mine):

I think the Republicans should call the President’s bluff. Lets take a walk over the cliff; see what happens when we get to the other side. It can’t be much worse than 50%+ tax rates in the most productive states in the Union. Will Republicans get hammered in the bi-elections as a result? Maybe. But one thing is sure, if the President gets his way on tax rates today, and we also have the Republicans lose the House in two years, it sets up the possibility for a return to a more conservative frame of mind for the country when the next Presidential election comes around. If Obama gets his way, the economy will pay the price. In the process, any legacy that Obama might have had will have been converted into something like Herbert Hoover’s. So who is bluffing whom?


Atomfritz said...

Imho the US really needs to go back to the pre-atomic age progressive taxation.
(Thanks Ex-SKF for reporting about this recently, as this seems to have been forgotten largely)

When the richest of the rich have to pay 90% taxes instead of far less than 40% as today, they will stop hoarding money like Uncle Scrooge, and instead reinvest the profits, in turn boosting the economy.

The rich won't suffer from this, and the masses won't be struggling any more to pay high taxes to allow the rich accumulate obscene wealth.
In turn the masses would be able to consume again instead of being pressed into poverty.
This in turn would boost economy way more efficiently than any debt-financed subventions.
And the state finally would have the means to sustain the infrastructure.

So, I'd really wish that the Americans go back to the traditional American progressive taxation, instead maintaining this Republican (but in fact communist) dogma "equal tax percentage for everybody".

Anonymous said...

Yes, let's try something new now after the past 12 years...The trickle-down theory really has NOT helped the U.S. economy, as a whole. So, why are we even considering it???...

Someone just has to pay up now that the middle and poor classes have borne the burden....

As Clinton would say--it's simple math.

Anonymous said...

No more massive legal loopholes for the rich would be a start!... No more subsidies for oil companies either!.... And consistent, hardcore law enforcement is critical to hold it together. That's my take, after watching current events go down, painfully during recent years...

arevamirpal::laprimavera said...

Cutting the government size back to Clinton era would be a wonderful start, before anything else. I wouldn't single out oil companies for getting subsidies. How about solar panel companies? Electric car companies? Pharmaceuticals? Defense industries?

Anonymous said...

A good start would be closing loopholes that allow rich people and corporations to avoid paying any taxes. Unfortunately this won't ever happen because it would effect a majority of the people in positions of power.

"An IRS report indicates that, in 2009, 1,470 individuals earning more than $1,000,000 annually faced a net tax liability of zero or less. Also, in 1998 alone, a total of 94 corporations faced a net liability of less than half the full 35% corporate tax rate and the corporations Lyondell Chemical, Texaco, Chevron, CSX, Tosco, PepsiCo, Owens & Minor, Pfizer, JP Morgan, Saks, Goodyear, Ryder, Enron, Colgate-Palmolive, Worldcom, Eaton, Weyerhaeuser, General Motors, El Paso Energy, Westpoint Stevens, MedPartners, Phillips Petroleum, McKesson and Northrup Grumman all had net negative tax liabilities. Additionally, this phenomenon was widely documented regarding General Electric in early 2011.

Furthermore, a Government Accountability Office study found that, from 1998 to 2005, 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied. A review in 2011 by Citizens for Tax Justice and the Institute on Taxation and Economic Policy of companies in the Fortune 500 profitable every year from 2008 through 2010 stated these companies paid an average tax rate of 18.5% and that 30 of these companies actually had a negative income tax due"

Anonymous said...

You'll remember that Hoover was a Republican who demurred from spending enough money to save the U.S. economy, creating a mess that took FDR nearly 4 terms to solve and was overcome only by massive government spending for WWII.

Anonymous said...

"When the richest of the rich have to pay 90% taxes instead of far less than 40% as today"

1. Less than 0.001% of all taxpayers were subject to th 91% tax rate. You also had to have income more than 3 Million to get the 91% rate. $3 million in 1958 adjusted for inflation is about $90 to $100 million in todays dollars (inflation)

2. Back then there was huge tax loopholes. Most high-income people avoided the higher tax rates using the loopholes that were closed under the Reagan Admin.

3. You would have to raise the tax rate to 125% on all americans to balance the budget and pay for the outlays of entitlements. The Real budget deficit is about $5 Trillion per year, when all of the off-balance items are included (mostly future outlays for entitlements).

4. Raising taxes will easily double the unemployment rate as companies shift operations overseas.

5. The more revenue the gov't gets via tax increases, the bigger the federal gov't becomes. Already 2/3s of the workforce is gov't (federal, state, and local). Only 1/3 of the workforce is left to pay the income of the rest.

"55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied."

This is deceiving since few companies have any profits. The Fed Tax Rate on Corps is 35% (plus state + local income taxes). Most businesses reinvest their profits into expansion or higher salaries for its workers, and use debt instead of savings for expansion. Since debt is deductable, companies opt to borrow to expand rather than save to expand. Also multi-nation businesses choose not to repatriate earnings from oversea sales (they already pay income tax subject by foreign govt's, repatriating is a double tax).

"A good start would be closing loopholes that allow rich people and corporations to avoid paying any taxes."

They already did. Further measures will just push companies out of the US or out of business. The reason why there are fewer jobs is because regulation and tax burden in the US are already too high. You are recommending unemployment for yourself. Gov't taxation is generally a waste of resources since full of waste, fraud, and abuse. Giving the gov't all your money is surrenderring your liberty and freedom, and the gov't will re-invest your tax money to enslave you, in the form of strick laws, dependancy on gov't programs, and lose of your ability to enjoy your efforts. Notice the Soviet Union and China are no longer socialist states. They have adapted to capitalism because socialism is a failure. Tax the working class and they simple choose to be less productive, less innovative and the system stagnated and later collapses.

FWIW: As a small business owner. My effective income tax rate for the past 3 years has been about 49% (including federal, state, and the payroll taxes). I pay no corporate taxes since all profits are paid in salaries or business equipment. Its not cost effective to save money in a business. Although My business paid no corp. income taxes is still paying 49% in income taxes on gross revenue.

with the Fiscal Cliff changes my effective tax rate will increase to about 62% next year (with expectations of less gross revenue) If it goes much higher than 65% I will be forced to shutdown since I will no longer be able make any money. I still have to pay for insurance, healthcare, rent, energy, etc. Most likely I would shutdown and collect unemployment and entitlements. There is no point in running a business if I am not going to keep any profit. Tax me too much and I will simply quit, and I am sure I am not the only person who will do this.

A great way to destroy a nation is to expand its gov't and tax its working class out of business.

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