Last week, the White House made their initial offer on the so-called “fiscal cliff,” asking congressional Republicans for $1.6 trillion in tax hikes coupled with a $400 billion in spending cuts over 10 years. Republicans leaders, who have been open to the idea of raising tax revenue, dismissed the unrealistic proposal out-of-hand, rightly explaining that the White House gave them something that would never pass Congress.
Yesterday, Republicans made their pitch to resolve the “fiscal cliff,” making a counter-offer that that cuts spending, reforms entitlements, and raises $800 billion in new tax revenue:
House Republican leaders on Monday made a counteroffer to President Obama in the “fiscal cliff” negotiations that would cut $2.2 trillion from the deficit with a combination of spending cuts, entitlement reforms and $800 billion in new tax revenue.
Republican officials said their 10-year plan contained more deficit reduction than the offer the White House presented last week while standing firm against Obama’s demand to increase tax rates on the wealthy.
The White House quickly panned the offer, saying it contained “nothing new” and did not “meet the test of balance.”
The Republican offer came in the form of a three-page letter to the White House signed by House Speaker John Boehner (R-Ohio), Majority Leader Eric Cantor (R-Va.) and four other senior Republicans, including Rep. Paul Ryan (Wis.), the party’s just-defeated vice presidential nominee.
With concern over the “fiscal cliff” growing, one thing has become painfully clear — Republicans are losing the debate in the eyes of the public. Some Republicans in Congress have abandoned the pledge they made to their constituents never to raise taxes and others haven’t effectively made the case as to why President Barack Obama’s tax proposal is a loser for the country.
Let’s get one thing clear on the “fiscal cliff” debate — this is not about a “balanced approach” to solving the deficit problem, despite what President Obama may say. The tax proposal that the White House is pushing would raise revenues by $1.6 trillion over the next 10 years ($160 billion per year), but, as J.D. Foster of the Heritage Foundation recently noted, the “national debt still goes up by about $7 trillion” in that budget window. In other words, our deficit problems are still there.
Over the past couple of days, we’ve pointed out the problems with Sen. Saxby Chambliss (R-GA). After making a pledge to the people of Georgia not to raise their taxes, Chambliss seems willing to do just that.
That fact has led to cries for a primary challenge and speculation of potential challengers, including Reps. Tom Price and Paul Broun, as well as former Georgia Secretary of State Karen Handel. But there is another name that is being pushed — Erick Erickson, editor of RedState.com and a talk show host for Atlanta-based WSB Radio.
My friend Charlie Harper noted at Peach Pundit, Georgia’s most read political blog, that Erickson told his audience last night that he is in “prayerful consideration” of challenging Chambliss as those trying to draft him in the race:
I managed to catch the first hour of Erick Erickson’s show [on Tuesday night]. He led off the show by stating that he has been approached by serious people asking him to consider a primary challenge to Senator Saxby Chambliss. He says he hadn’t really been considering it, but will get with his wife and give it “prayerful consideration.”
I’ve traded a couple of texts with him and would say this isn’t a publicity stunt. Nor has he decided he’s running and is being coy about it. It’s something he needs to think about. So he will.
During the debt ceiling debate last year, House Speaker John Boehner made a compromise on tax revenues, offering the White House $800 billion by closing tax loopholes, rather than raise tax rates. Boehner and at least some House Republican leaders saw the offer as necessary to reach a broader agreement on spending cuts. President Barack Obama played along, but eventually told Boehner, according to Bob Woodward, that he needed an additional $400 billion in tax revenue to make a deal work.
Boehner backed down and eventually all sides agreed on the sequestration deal — $1.2 trillion in automatic spending cuts over the next 10 years — that make up part of the “fiscal cliff” scenario that the White House and Congress are now trying to avoid.
The lesson for Boehner and Republicans should have taken from that particular situation is that when you show that you’re willing to compromise on a core economic principle, you’re almost always going to be asked to go another step. And now with many Republicans in Congress signaling their willingness to break their pledge not to raise taxes, provided that it is coupled with other fiscal reforms, Democrats are seizing the opportunity, according to The Hill, by raising their asking price in fiscal cliff negotiations by taking entitlements off the table:
Senate Democratic leaders signaled Tuesday they would not agree to any entitlement reforms before the end of the year that cut spending on Medicare and Medicaid beneficiaries.
Warren Buffett is back in the national news. With talks on the “fiscal cliff” heating up, Buffett is once again pushing for a “millionaires” tax (also known as the “Buffett Rule”) as bridge between some sort of comprehensive tax reform plan:
In an op-ed column in Monday’s New York Times, Buffett advocates that taxable income of between $1 million and $10 million should be taxed at a minimum 30% rate, and that income above $10 million should be taxed at 35%.
“A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours,” Buffett writes. “Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy.”
Some have suggested comprehensive tax reform, which eliminates many deductions across the board and simplifies the tax code, would be the best policy for the economy. Buffett writes he supports such tax reform, but that he believes higher tax rates on the wealthy should be an interim step.
“The reform of such complexities should not promote delay in our correcting simple and expensive inequities,” he wrote in the Times. “We can’t let those who want to protect the privileged get away with insisting that we do nothing until we can do everything.”
Facing a backlash from grassroots activists just a few days after saying denouncing the pledge he once made to protect Georgians from tax hikes, Sen. Saxby Chambliss (R-GA) and staffers tried to play damage control yesterday.
Just before Thanksgiving, Chambliss filled in a Georgia-based television station on some of the “fiscal cliff” negotiations. When asked if he was worried that violating Americans for Tax Reform’s Taxpayer Protection Pledge may be used against him in a potential primary, Chambliss responded, “I care more about my country than I do about a 20-year-old pledge.” Chambliss also took aim at Grover Norquist, president of Americans for Tax Reform, saying, “If we do it his way, then we’ll continue in debt, and I just have a disagreement with him about that.”
Many Republicans are backing away from their pledge not to raise taxes on constituents as they try to work out a deal on the so-called “fiscal cliff.” During an interview on MSNBC, House Majority Leader Eric Cantor (R-VA) said, “I will tell you when I go to the constituents that have elected, re-elected me it is not about that pledge. It is really about trying to solve problems.”
The Americans for Tax Reform’s Taxpayer Protection Pledge has been much maligned in recent years, and has been a favorite target of the White House and Democrats. They’ll take shots at the pledge, claiming that Republicans are taking marching orders from Grover Norquist, president of ATR. Democrats do this to make Republicans look like they’re beholden to a special interest.
The Taxpayer Protection Pledge simply states that the candidate will “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses” and “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” Essentially, a candidate or elected official promises not to support a net-tax hike. This pledge is not made to Grover Norquist, Americans for Tax Reform, or Republican leadership in Congress. It’s made to taxpayers inside that candidates district or state.
While House Republicans have made it a priority to protect business owners during negotiations over the so-called “fiscal cliff,” there are signs that investment as businesses seeing more economic problems coming:
U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.
Half of the nation’s 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.
Corporate executives say they are slowing or delaying big projects to protect profits amid easing demand and rising uncertainty. Uncertainty around the U.S. elections and federal budget policies also appear among the factors driving the investment pullback since midyear. It is unclear whether Washington will avert the so-called fiscal cliff, tax increases and spending cuts scheduled to begin Jan. 2.
Companies fear that failure to resolve the fiscal cliff will tip the economy back into recession by sapping consumer spending, damaging investor confidence and eating into corporate profits. A deal to avert the cliff could include tax-code changes, such as revamping tax breaks or rates, that hurt specific sectors.
The Wall Street Journal does explain that the economy could see a boost when and if a deal is made to avoid the “fiscal cliff.” Don’t take that as a sign of approval from businesses and investors, but rather sign of them knowing what exactly they’re dealing with moving forward.
Negotiations over the so-called “fiscal cliff” are back in full swing, but the White House and congressional leaders are no closer to an agreement on taxes and spending cuts. Just before Thanksgiving, House Speaker John Boehner told ABC News that he wants ObamaCare, President Obama’s signature domestic policy, put on the table during “fiscal cliff” negotiations. Republicans are also pushing for more transparency in the deal-making process, urging their leadership to put everything out in the open.
Boehner has been pushing the idea of pro-growth tax reform that doesn’t raise rates. That seems like a non-starter since White House and Senate Democrats have made it clear that they want to raise rates for higher-income earners. And unfortunately, some Republicans in Congress are getting anxious about a deal and are abandoning their pledge to constituents not to raise their taxes.
Raising taxes in this economy is a bad idea. Just two years ago, President Obama supported extending tax rates for another two years because he realized that the economy would struggle even more if tax rates suddenly changes. The economic climate isn’t much better today.
Michael Tanner, a senior fellow at the Cato Institute, recently explained that raising taxes on the rich isn’t going to balance the budget:
Written by Chip Knappenberger, Assistant Director of the Center for the Study of Science at the Cato Institute. Posted with permission from Cato @ Liberty.
There seems to be a noticeable murmur around town about a carbon tax—a tax on the amount of carbon dioxide that is released upon generating a unit of energy. Since fossil fuels—coal, oil, natural gas—are both the source of over 75% of our energy production and emitters of carbon dioxide when producing that energy, a carbon tax insures that the price of everything goes up.
There is one and only one justification for a carbon tax—an attempt to influence the future course of the earth’s climate (or, as some people prefer, to mitigate anthropogenic climate change) by trying to force down the emissions of the most abundant human-generated greenhouse gas.
But of all the things that a carbon tax will do (raise prices, increase bureaucracy, elect Tea Partiers, etc), mitigating anthropogenic climate change in any meaningful manner is not one of them.
The annual carbon dioxide emissions from the U.S., currently about 5,500 million metric tons per year, only contributes roughly 0.003°C/per year of warming pressure on global temperatures (see here for a handy way of making that calculation). So the best that a carbon tax could ever hope to achieve, climatically, would be to prevent this amount of warming each year by completely eliminating all carbon dioxide emissions from the U.S.