THE OBAMA FISCAL CLIFF—THE MASTER SPEAKS 2/7/13
THIS IS LONG BUT IT’S THE FISCAL CLIFF IN A NUTSHELL
“Fiscal cliff”—an economic shock wave created by President Obama and Congress
that consists of $600 billion in tax hikes and mandatory spending cuts that arrives January 2, 2013. It is his chance to, finally, harpoon the Great White Whale of tax
“Fairness” that up to now has eluded America’s Captain Ahab who now strides the deck of our nation’s foundering ship of state. “What I’m not going to do is to extend further a
tax cut for folks who don’t need it.”
The top one percent of earners in America already pay almost 37 percent of America’s income taxes. Somehow that is not fair enough. He wants more. “When you spread the wealth around, it’s good for everybody.” It diminishes incentives to work,
produce, hire, and increase net wealth. All of which lowers tax revenue.
Republicans, voted to extend the Bush tax cuts for two more years, letting them expire at the end of 2012.
Obama went along with the tax-cut extension, part of a package that included the extension of unemployment benefits and a Social Security payroll tax reduction. Eight months late and agreed to raise the federal debt ceiling under a manufactured threat
of economic doom. Time it was clear to many Tea Party conservatives that a fiscal crisis was being manufactured by the left to force Congress to play on Obama’s terms.
“Don’t call my bluff,” Obama told Eric Cantor, “I’m going to the American people with
this.”3 Thus, Congress passed and Obama signed the Budget Control Act of 2011 which created an extra-constitutional House-Senate “super committee” charged with crafting a proposal to cut the deficit by $1.2 trillion. That effort flopped in November 2011, triggering the Act’s “sequestration” provision, a series of automatic cuts scheduled to begin on January 2, 2013. The cuts total $1.2 trillion over ten years and start with
$110 billion lopped off defense and non-defense discretionary spending in 2013.
A “huge fiscal shock” that totals $600 billion and equals the loss of two years of GDP growth. The package of tax hikes, which includes stiff new ObamaCare taxes, will cost $3,800 per family 4 and affect 90% of all taxpayers. The CBO said we be in a recession in the first half of 2013 and 9 percent unemployment for the year.
“A loss of as many as 10 million jobs, a 6 percentage point drop in GDP, a 2 percentage point increase in unemployment, and 2.8 million more people unemployed. Federal law requires Congress to pass a budget, but that has not been done since 2009. While the
Republican-led House adopted a budget in 2011, the last time a spending plan passed in the Senate. Bernanke, who is credited with coining the term “fiscal cliff,” told the House Financial Services Committee las tFebruary that “a massive fiscal cliff of large
spending cuts and tax increases” was coming on January 1, 2013 and expressed the hope that Congress would find a way to achieve the same deficit reduction “without having it all happen at one date.”
January, lawmakers will be forced to either raise the limit on federal debt, now set at $16.39 trillion, or make hard choices to cut spending and keep federal debt below the limit. Standard and Poor’s downgraded the U.S. in August 2011 from its prized triple-A rating after Congress and the President failed to agree on meaningful tax and spending reforms. Fitch, Moody’s, and Standard and Poor’s all told Reuters recently that failure to
adequately address the pending budget impasse and tame spending this time around will likely lead to a downgrade. Debt trajectory just continues to rise … then we’d be looking at a downgrade of a notch to Aa1,” Bart Oosterveld, Managing Director at Moody’s agency told Reuters.8 That may force the federal government to pay more to
borrow and prompt some lenders to rethink the purchase of U.S. debt. The U.S.
spent almost $360 billion9 last year just to service the debt.
Interest payments on the federal debt pose an enormous threat to America’s fiscal future. Investment author Peter Schiff calls this the true fiscal cliff and projects back-breaking annual interest payments of $1 trillion or more if total debt continues on its current trajectory to $20 trillion and interest rates rise to the historic level of around five percent.
You’ll find in the unprecedented avalanche of tax hikes descending on us in January unless Congress acts in time.
• Income tax rates will go up for all wage earners as the Bush tax cuts expire. Even
some low-income earners will find themselves back on the rolls paying taxes at 15 percent. Those at the upper end of the scale could face a marginal rate that exceeds 50 percent when new federal and state tax bites are added together. The marriage penalty will return, making it more costly to be married. • The alternative minimum tax will hit as many as 50 million people. • The capital gains rate will jump to 20%,
with a 3.8% ObamaCare investment income tax added for households making more than$250,000.
• Dividend income will be taxed as ordinary income and go from 15% to a top rate of
39.5%. This tax increase does not just hit the wealthy, but some retirees as well since 63% of people with dividend income are over 50. The estate tax soars to 55% while the
exemption shrinks from $5 million down to $1 million. The 2% payroll tax cut expires, returning the rate to 6.2%. Add to these taxes the ObamaCare taxes that take effect on January 1, 2013, with more to follow in 2014. Investment income surtax of 3.8% for
households earning at least $250,000. • Medicare Payroll Tax which adds .9% for
those making more than $250,000
• 2.3% excise tax on medical device manufacturers. That may not sound like
much, but it doubles the industry tax bill and imposes “one of the highest effective tax rates faced by any industry in the world.”
Boehner has in mind is $1.6 trillion more in taxes, with 80 percent of that coming from wealthy Americans. Obama’s spreadsheet claimed savings of $1.2 trillion in money not spent in the future to fight in Afghanistan and Iraq, something the CRFB called a “gimmick.”
James Pethokoukis broke down the actual $2 trillion or so in proposed savings and arrived at a very different ratio of taxes to spending cuts: Of the supposed savings, then, $1.6 trillion comes from tax hikes and $577 billion comes from spending cuts, not counting saved interest. So 73% of the savings comes from taxes, 27% from spending cuts. That’s $3 of tax hikes for every $1 of spending cuts. Budget Director Jeffrey Zients
appeared before the House Budget Committee to talk about the president’s fiscal year 2013 budget plan, he refused to give a direct answer when asked by what year the Obama proposal would lead to a balanced budget. Geithner acknowledged
that Obama’s plan does not balance the budget in testimony before the Senate Budget
Committee. “we would still be left with—in the outer decades as millions of Americans retire—what are still unsustainable commitments in Medicare and Medicaid”. An economy hampered by restrictive tax rates will never produce enough revenue to balance our budget just as it will never produce enough jobs or enough profits….
After the Bush cuts were put in place, tax receipts grew by a record $785 billion from 2003-2007. That gave us declining deficits, which shrank from $413 billion in 2004 down to $163 billion in 2007. “What I will not do is to have a process that is vague, that says we’re going to sort of, kind of, raise revenue through dynamic scoring or closing loopholes that have not been identified,” Obama said November 15.
Despite sluggish growth of just 1-2%, tax revenue is up 6.4% for the last year, and total
revenue climbed to $2.45 trillion for fiscal year 2012, a number just shy of the 2007 peak. Personal income tax revenue has jumped 26%, or $233 billion, in the last two years.
With the top one percent of Americans paying 36.73% of all federal income taxes. But that’s not all, the top 5% pay 58.66%; the top 10% pay 70.47%; and the top half are
responsible for 97.75% of all income tax payments to the federal government.28 All this means that almost half, 48.47%, of Americans do not pay any federal income taxes.
Charlie Gibson asked Obama in 2008 why he would raise capital gains taxes since, as Gibson said, “History shows that when you drop the capital gains rate, the revenues go
up,” Obama’s answer did not even address revenue. It was all about making the rich pay their share. “I would look at raising the capital-gains tax for purposes of fairness.”
Obama wants to use the tax code to “spread the wealth.” Enshrined in his first
budget statement as president. In that document, Obama bemoaned America’s recent past, stating that, “For the better part of three decades, a disproportionate share of the Nation’s wealth has been accumulated by the very wealthy.” The problems we face demand that we begin charting a new path.”
Thomas Jefferson may have said that “a wise and frugal government … shall not take from the mouth of labor the bread it has earned,”
“97% of all small businesses won’t see their taxes go up a single dime.”
That top 3% is a group of 1.2 million owners who account for 54% of all private sector jobs. Entrepreneurs will put some of their 77.6 million workers at risk. Plus, the top 3% also pay 44% of business taxes and earn $341 billion, or 91% of all profits earned by small businesses with workers. An Ernst and Young study reports that increasing taxes on the top two tiers of income will hammer the economy, reducing economic output
by 1.3%, dropping wages by 1.8%, and costing 710,000 jobs. . We are awash in red
ink with debt now more than $16 trillion. That’s staggering enough, but the nation’s actual liabilities are much greater. Our “fiscal gap” is $222 trillion. That stupendous number is the difference between the present value of all federal obligations and projected revenue. the coming demographic shock of 78 million baby boomers retiring and beginning to draw Social Security and access Medicare The tax burden on Americans has almost doubled in the last 47 years, growing from $11,554 per household in 1965 to $20,300 in 2012 in inflation-adjusted dollars. During the same period, federal spending per household has galloped ahead, jumping from $11,900 in 1965 to $30,015 in 2012.36 In the last 20 years, federal spending has grown 71 percent faster than inflation.37 The federal government spent $3.6 trillion in fiscal year 2012, which is 22.9% of GDP. By comparison, the 40-year average for federal spending as a share of GDP is 21%.38 The average from 1930 to 1970, a period that included World War II, was just 15.5%.39 And the annual average federal take from the economy from 1787 to 1916
was less than 5%.40 What has changed is entitlements. The explosion of spending since 1965 comes from
Social Security, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and other mandatory financial obligations that put our nation’s future in doubt. entitlements are barely addressed in the president’s program to forestall fiscal chaos at year’s end. Entitlement spending is on autopilot and has grown by 110% over the last 20 years in inflationadjusted dollars. It now makes up about 62% of the federal budget. The actual cost to taxpayers for entitlement spending has jumped from $976 billion in 1992 to $2.053 trillion in 2012. a symbolic threshold: the point at which more than half of all American households receive, and accept, transfer benefits from the government.” 49 percent of Americans resided in households that received at least one government benefit.43 A record 46 million Americans are now on food stamps, with 14.7 million of that total added since January 2009. Federal transfer payments in 2010 accounted for a staggering 18 percent of all personal income that year. Reliance on the federal government has tripled since 1980, that 67.3 million Americans rely on the federal government for shelter, food, heath care, personal income, educational aid, or other help Obama “is purposely overwhelming the U.S. economy to create systemic failure, economic crisis and social chaos — thereby destroying capitalism and our country
Richard Cloward and Frances Fox Piven called in 1966 for recruiting more of the nation’s poor to sign up for welfare in order to create a fiscal crisis that would
bring down the welfare system and force change that would lead, they hoped, to “a guaranteed annual income and thus an end to poverty.” Their plan worked so well that New York City welfare lists were growing at a rate of 50 percent annually in the early 1970s and the financial capital of the world had to declare bankruptcy in 1975. Their approach is one with which Obama was almost certainly well acquainted. Author Stanley
Kurtz notes that the Cloward-Piven strategy was adopted by ACORN, Project Vote, and other likeminded entities Peter Dreier, a 2008 Obama campaign adviser and an ACORN strategist, refined the Cloward- Piven His plan calls for promoting unsustainable government spending growth that leads to fiscal crisis. Then, when austerity is imposed as a solution, the public grown used to monthly checks and other perks, will rise to
overthrow its capitalist masters.
He also needs to mobilize public opinion, which is why Obama has made the current fiscal cliff crisis all about taxes for the “rich.” By talking endlessly about the need for
top earners to pay their “fair share,” Obama is using this fiscal crisis and the power of envy to polarize the nation along class lines. In advance of meetings with congressional leaders on the fiscal cliff, he met with labor, liberal, and “civil rights” leaders, including Al Sharpton. But rather than targeting entitlements, Obama’s class-envy rhetoric pits the haves against the have-nots. Obama’s goal, says Kurtz, is to “polarize the country along class lines, with Republicans marked out as the aggressors.”Saul Alinsky,
Changing the life of a particular community must first rub raw the resentments of the people of the community; fan the latent hostilities of many of the people to the point of overt oppression. “Calculated strategy to promote long-held leftwing ambitions.” The goal is to “dismantle America’s private enterprise system and implement a socialist redistribution of wealth.” Democrats also hope it is the pathway to permanent political power.
The seductive appeal of something for nothing is a powerful way to win votes. That is
one of the ideas, it turns out, behind the Cloward- Piven strategy. The authors closed their 1966 call for a run on taxpayers by exploding welfare rolls with this very common-sense conclusion: If organizers can deliver millions of dollars in cash benefits to the ghetto masses, it seems reasonable to expect that the masses will deliver their loyalties to their benefactors. In making our voice heard, three key points must be made by Tea Party conservatives:
1. This is the Obama Fiscal Cliff. The imminent “crisis” is a creation of Obama and
the left with one goal in mind: force America to accept higher taxes and more statist
solutions. manufactured “Cliff” to make tax increases the only “solution.” We must expose this current crisis as a creation of TeamObama.
2. We as Tea Party citizens must reject any and
all tax increases as a solution. The left wants to increase taxes because their goal is
always to increase government power and control , we must draw a line against any and all tax increases because the real problem is our spending and government addiction
3. This was and is all about America’sspending addiction. We must focus every
discussion on the horrible spending record of Obama and his friends in Congress, the federal budget is marbled with thick ribbons of fat, many of which were identified by Sen. Tom Coburn, in his 2011 report, “Back in Black,” which identified ways to cut $9 trillion from the federal budget over ten years. Geithner said he’d like to see the legal limit on the federal debt eliminated entirely, and “The sooner the better.”In other words, no spending limit at all on Uncle Sam’s credit card.
Washington said in his Farewell Address that we should “cherish public credit” and “use it as sparingly as possible … avoiding … the accumulation of debt” and “not ungenerously throwing upon posterity the burden which we ourselves ought to bear.”