Politicians last night announced the framework of a deal to increase the debt limit. In addition to authorizing about $900 billion more red ink right away, it would require immediate budget cuts of more than $900 billion, though “immediate” means over 10 years and “budget cuts” means spending still goes up (but not as fast as previously planned).
But that’s the relatively uncontroversial part. The fighting we’re seeing today revolves around a “super-committee” that’s been created to find $1.5 trillion of additional “deficit reduction” over the next 10 years (based on Washington math, of course).
And much of the squabbling is about whether the super-committee is a vehicle for higher taxes. As with all kiss-your-sister budget deals, both sides can point to something they like.
Here’s what Republicans like:
The super-committee must use the “current law” baseline, which assumes that the 2001 and 2003 tax cuts expire at the end of 2012. But why are GOPers happy about this, considering they want those tax cuts extended? For the simple reason that Democrats on the super-committee therefore can’t use repeal of the “Bush tax cuts for the rich” as a revenue raiser.
Here’s what Democrats like:
There appears to be nothing in the agreement to preclude the super-committee from meeting its $1.5 trillion target with tax revenue. The 2001 and 2003 tax legislation is not an option, but everything else is on the table (notwithstanding GOP claims that it is “impossible for Joint Committee to increase taxes”).
In other words, there is a risk of tax hikes, just as I warned last week. Indeed, the five-step scenario I outlined last week needs to be modified because now a tax-hike deal would be “vital” to not only “protect” the nation from alleged default, but also to forestall the “brutal” sequester that might take place in the absence of an agreement.
But you don’t have to believe me. Just read the fact sheet distributed by the White House, which is filled with class warfare rhetoric about “shared sacrifice.”
This doesn’t mean there will be tax increases, of course, and this doesn’t mean Boehner and McConnell gave up more than Obama, Reid, and Pelosi.
But as someone who assumes politicians will do the wrong thing whenever possible, it’s always good to identify the worst-case scenario and then prepare to explain why it’s not a good idea.
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Welcome Instapundit readers. Thanks, Glenn.
While additional taxes are on the table, they are unlikely. The Dems would have to convince one of the members of the supercommittee and over 50 House Repubs to vote for tax increases. Repubs hold all the cards because of the mandatory across-the-board cuts if the supercommittee fails. It’s a fine deal for conservatives.
Once again the Republicans in WA have failed us. I think we need to watch closely what GOP members vote for this deal. It meets none of the stated objectives of the GOP candidates swept into office in the last election. Spending continues to march higher. Deficits continue to march higher. And now we learn taxes may march higher under Boehner/Obama Compromise.
“Shared sacrifice”, defined: Those who presently pay through the nose on April 15th “sacrifice” even more, so that money can be “shared” by those who pay little or nothing.
Clearly the committee and it’s makeup will be key, but there is reason to hope:
1) The Republicans go in united around a clear plan. The debt limit fight made clear, the Democrats are not united and have no clear plan. Any attempt to create a plan makes them even less united.
2) Although the Ds like to use taxes as a rhetorical point, they haven’t identified very many actual taxes they want to raise (except the corporate jet deduction…and “big oil”…how much money actually IS that anyway?
The really big mud wrestle will be over the Bush rates and the AMT. Both sides have an incentive to make whatever is agreed to permanent so that these two stop coming back every few years like the Terminator.
I think the Rs can hold the line on rates and keeping tax reform revenue neutral, but some deductions will get phased out…especially at the top end. Obama can call that balance and shared sacrifice and it isn’t necessarily a growth killer.
The duopoly has kicked the can down the road until 2013. Did you expect anything else? It’s just the same old same old: we’ll make a smoke and mirrors deal with phantom sacrifices and we’ll keep all of the wonderful goodies intact like student loans for the “new economy”and we’ll win our precious seats again in the 2012 election and be able to enjoy all of the perks and privileges of high office.
The question still is, how long will the world allow us to run up unlimited debt and/or print unlimited funds in our own currency? Never fear, the day of reckoning is fast approaching. Or is it?
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There is no final victory in politics. The Liberals WILL attempt to raise taxes again, and we must be ready to fight them again.
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The tax hikes are already baked in the cake. The Bush tax cuts are going to expire while Obama is still president, and he will veto any attempt to extend them. There you go: increased taxes, and – on paper – deficit reduction.
It won’t actually work, tax revenues don’t go up linearly with tax rates, but that won’t stop them from crashing the economy for the sake of ideology anyway.
Republican (aka stupid person) = “Let’s give all the wealth to the top 1% of society, and somehow the economy will continue to function.”
Science = “If 99% of America has no money to spend the economy will die.”
It is basic math: 1% of American’s are rich, and 99% of American’s are NOT rich. 1% is less than 99%. If 99% of Americans do not have any disposable income, or no income at all, 99% of the economy WILL FAIL because people who do not have any money to spend will not be able to spend any money. This is not hard for anyone with a functioning brain to understand.
If the economy fails the money/investments of rich people will become WORTHLESS because they only retain their value in a good economy.
You cannot have a successful economy or society based on only taking care of 1% of the population.
[…] for the committee to impose massive tax increases, including the expiration of Bush tax cuts [see Dan Mitchell's article and Erick's post]. The White House is explicitly saying that the commission will pursue a […]
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[…] warned at the time that this was a tax increase […]
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[…] to reach the deal’s goal of $2.4 trillion over ten years may very well end up raising taxes instead of finding additional spending reductions to reduce the […]
[…] and they wound up with a crummy deal. And that paved the way for subsequent defeats, such as the debt limit debacle that planted the seeds for the current tax-hike dilemma. The GOP needs to stop this carousel of capitulation. The fiscal cliff, while bad, is not as bad as […]
[…] and they wound up with a crummy deal. And that paved the way for subsequent defeats, such as the debt limit debacle that planted the seeds for the current tax-hike dilemma. The GOP needs to stop this carousel of capitulation. The fiscal cliff, while bad, is not as bad as […]
[…] and they wound up with a crummy deal. And that paved the way for subsequent defeats, such as the debt limit debacle that planted the seeds for the current tax-hike dilemma. The GOP needs to stop this carousel of capitulation. The fiscal cliff, while bad, is not as bad as […]
[…] and they wound up with a crummy deal. And that paved the way for subsequent defeats, such as the debt limit debacle that planted the seeds for the current tax-hike dilemma. The GOP needs to stop this carousel of capitulation. The fiscal cliff, while bad, is not as bad as […]