I’ve tried to think about anything but the coming economic calamity but this column from the Daily Telegraph is too perceptive to ignore. Of course, the liars include most of the US media, press and TV. We have to get our news from the British media about American politics. The US media has become an arm of the Democratic party.
Must we assume now that no party that speaks the truth about the economic future has a chance of winning power in a national election? With the results of presidential contests in the United States and France as evidence, this would seem to be the only possible conclusion. Any political leader prepared to deceive the electorate into believing that government spending, and the vast system of services that it provides, can go on as before – or that they will be able to resume as soon as this momentary emergency is over – was propelled into office virtually by acclamation.
So universal has this rule turned out to be that parties and leaders who know better – whose economic literacy is beyond question – are now afraid even to hint at the fact which must eventually be faced. The promises that governments are making to their electorates are not just misleading: they are unforgivably dishonest.
I have not believed that Romney’s problem was one of poor communication or salesmanship. Certainly, the turnout numbers show that Obama’s organization made the most of a very intrusive data mining system. The possibility that the system of the campaign will become part of the political party’s permanent infrastructure is worrisome. I don’t want to be an alarmist but one feature of totalitarian governments, after the French Revolution, was the intrusion into daily life.
Of course, once in power all governments must deal with reality – even if they have been elected on a systematic lie. As one ex-minister famously put it when he was released from the burden of office: “There’s no money left.” So that challenge must be met. How do you propose to go on providing the entitlements that you have sworn never to end, without any money? The victorious political parties of the Left have a ready answer to that one. They will raise taxes on the “rich”. In France and the United States, this is the formula that is being presented not only as an economic solution but also as a just social settlement, since the “rich” are inherently wicked and must have acquired their wealth by confiscating it from the poor.
I see no sign of any recognition of reality yet by Obama or his government. The “fiscal cliff” negotiations, if they can be called that, have been a farce. The Republicans have allowed themselves to be maneuvered into secret negotiations which have been demagogued and which have set them up for blame for what is coming. They would have been far better advised to insist on open negotiations, on C-SPAN if necessary.
Barack Obama knows that a tax rise of those proportions in the US would be politically suicidal, so he proposes a much more modest increase – an income tax rate of around 40 per cent on the highest earners sounds very modest indeed to British ears. But that is precisely the problem. If a tax rise is modest enough to be politically acceptable to much of the electorate, it will not produce anything like enough to finance the universal American entitlement programmes, social security and Medicare, into a future with an ageing population. There is no way that “taxing the rich” – that irresistibly glib Left-wing solution to everything – can make present and projected levels of government spending affordable. That is why Britain and almost all the countries of the EU have redefined the word “rich” to mean those who are earning scarcely twice the average wage, and pulled more and more middle-income people into high tax bands. Not only are there vastly more of them but they are far more likely to stand still and be fleeced, because they do not have the mobility of the truly rich.
In fact, the best step would be to go off “the cliff” and keep the tax increases on everyone. Even the spending cuts, while devastating the military, might address the deficit usefully and the military can expect no mercy from the Obama, Kerry left wing. None of this will happen, of course. Either the GOP will cave or, possibly more likely, they will not and Obama will insist on a tax cut for everyone below the infamous 2% in January. Either way, we are doomed to another depression.
Boy do I have responses. I too am deeply pessimistic about the way that this is coming down.
Allow me to start with some information gleaned from an article in the Friday WSJ:
“How ‘Cliff’ Talks Hit the Wall” The Wall Street Journal on December 22, 2012, on page A1
http://online.wsj.com/article/SB10001424127887324731304578193770576333616.html
* * *
“Mr. Obama repeatedly lost patience with the speaker as negotiations faltered. In an Oval Office meeting last week, he told Mr. Boehner that if the sides didn’t reach agreement, he would use his inaugural address and his State of the Union speech to tell the country the Republicans were at fault.
“At one point, according to notes taken by a participant, Mr. Boehner told the president, “I put $800 billion [in tax revenue] on the table. What do I get for that?”
“‘You get nothing,’ the president said. ‘I get that for free.'”
* * *
“Mr. Obama insisted on raising tax rates for those with household income above $250,000. The House GOP wanted significant spending cuts and fundamental changes to Medicare and other entitlement programs in exchange for new tax revenue.
“The president repeatedly reminded Mr. Boehner of the election results: ‘You’re asking me to accept Mitt Romney’s tax plan. Why would I do that?'”
* * *
“On Dec. 13, Mr. Boehner went to the White House at the president’s request …
“The president told him he could choose one of two doors. The first represented a big deal. If Mr. Boehner chose it, the president said, the country and financial markets would cheer. Door No. 2 represented a spike in interest rates and a global recession.
“Mr. Boehner said he wanted a deal along the lines of what the two men had negotiated in the summer of 2011 in a fight over raising the debt ceiling.
“‘You missed your opportunity on that,’ the president told him.”
* * *
“That night, the speaker and Majority Leader Eric Cantor … decided to make the biggest concession so far.
“… Mr. Boehner called the president and for the first time offered to let tax rates rise—on income above $1 million.
“The president acknowledged the concession but said Mr. Boehner’s plan wasn’t raising enough revenue.”
* * *
It is clear to me that Hussein doesn’t care if the country goes over the cliff. What he wants is to humiliate the Republicans. He is offering them the following choice:
1. Be my bitch.
2. Accept all of the blame I will dump on you for every thing that goes wrong over the next four years, and my slaves in the Media will beat you to a bloody pulp.
If the Republicans take door number 1, Hussein will laugh as they all get primaried and lose control of the House in 2014. At least that’s what the Democrats believe, and I don’t think they are wrong.
Door number 2 is correct. There will be a $#;+storm of blame if the the Republicans do not fold. And the MSM will blame the Republicans for everything from earthquakes to halitosis.
But, I ask so what. No matter what happens the MSM will attack the Republicans. That is what they do. Indeed, it is the only thing they know how to do.
I think the real issue is what will be the effect of going off the cliff? Will it cause a recession? How bad will it be? Will the Government raise more revenue? Will it cut the deficit?
Answering my own questions
2 propositions:
1. Changing tax rates will not affect tax collections.
From one my favorite websites:
How much does the top income tax rate affect how much money the government collects each year?
* * *
The chart below plots the ratio of total government Revenue Per Household (RPH) to the Median Household Income (MHI) for the U.S. for each year from 1967 through 2010. The chart also plots the maximum income tax rate that the topmost income earners in the United States have had to pay for each year from 1967 through 2010.
[chart omitted]
* * *
What we do see indicates that the maximum tax rate has little to no bearing on how much money the federal government collects per household in any given year. Since 1967, the government’s RPH to MHI ratio has risen steadily on average, indicating that the U.S. government is collecting more and more money per household over time, with the changing level of the topmost income tax rate having little to no effect on the rate of that change.
With that being the case, there is no legitimate reason to set higher income tax rates today, as they are now demonstrated to have little to no effect on how much money the government collects in any given year.
http://politicalcalculations.blogspot.com/2011/09/why-hiking-top-income-tax-rate-wont-fix.html
Check it out at the link.
The correlation between MHI and RPH is very tight. R^2 = .996584
http://politicalcalculations.blogspot.com/2011/09/biggest-driver-of-us-government-revenue.html
2. No matter what Congress does with the tax code, go over the fiscal cliff or do what Hussein wants, there will be a recession. At least three factors determine that:
a. The implementation of Obamacare will cause employers to reduce hiring, lay employees off, make full time employees part timers. It will also cause insurance premiums to skyrocket and millions of people to drop existing coverage.
b. The ongoing cluster**** in Europe will get worse not better.
c. China will continue to struggle to maintain any semblance of growth, and fail.
My new motto:
Lasciate ogne speranza, voi ch’intrate.
And what is going to happen when these tax increases do noting to solve the problem, if not exacerbate it? I
A final note for tonight:
MK wrote:
“Even the spending cuts, while devastating the military, might address the deficit usefully and the military can expect no mercy from the Obama, Kerry left wing.”
Why worry about how much is spent on the Military when Hussein won’t use it? Further, the use that the military makes of the resources that have been provided to them has been a lot less than optimal. The F22 and F35 fiascoes are just a small sample.
But, as MK notes, Hussein and Lurch won’t help the military. Might as well wait until 2016.
Have I got this right?
The “fiscal cliff” (FC) (….it’s a compromise, a legislative budget agreement or rather the perceived result of the agreement) isn’t exactly a draconian economic move with respect to economic sanity. The “professional” journalists have left me scratching my head; here’s how I see it.
The agreement calls for $600 billion in spending cuts and higher taxes. (Apparently $100B in spending cuts/year plus $500B increased taxes).
The INCREASE in spending from 2011 to 2012 is $1.3 trillion so we can look forward to cuts and taxes that will only reduce the INCREASE IN SPENDING by less than half. The total debt will continue to increase by another $7or 8 B (something like an increase in debt from $16.4 to $17.? T) if the agreement goes into effect. Yet the MSM talks about a reduction in federal programs. The taxpayer will be poorer and spending INCREASES will change from about 10% down to 5% so, it seems, nothing is really being cut.
Essentially the FC kicks the can down the road a little more slowly. The FC is still greatly increased spending by the government and radically higher taxes. This being the case (along with printing money), it seems to me that debasement of the dollar is inevitable since FC is only a small fraction of what would be required to stabilize the economy long term and we sure don’t have the stomach for even this pill.
All will change once the ‘low information voter’ finally wakes up and says, “Wait, what?” Until then, keep your powder dry.
Obama’s threats about blaming Republicans ring hollow. He is going to do that anyway (remember Judge Alito at a previous State of the Union?). Meanwhile, the state pension bombs keep ticking away and the Federal entitlement bomb keeps ticking away.
The GOP should just do the right thing and advocate fiscal sanity as best it can. I think they may be rewarded eventually if they would just do that.
Who cares what happens to the GOP? They should go the way of the Whigs.
They can’t deliver.
LIV positive voters should enjoy the checks while they last. They intend to.
To look to the LIV Positive for salvation Cris is utter folly.
Going over the Cliff doesn’t just mean across the board tax hikes, it means the end of extended un-employment benefits.
And let us step back and consider politically what has happened. The Executive continues to prove and reinforce the Four Year running precedent that the Executive may govern without the Legislative.
Our Congress are the Hapless Estates of Europe.
“this is the formula that is being presented not only as an economic solution but also as a just social settlement, since the “rich” are inherently wicked and must have acquired their wealth by confiscating it from the poor.”
It is quite telling that the right seems unable to make its case on the merits, and needs to make up strawman arguments. Its almost as if the merits of the case are not that important, it is the ability to juice up the outrage from their followers that is the only real goal.
The increased marginal rate on income above 250K is simply the end of a temporary tax cut put into place by an exceedingly foolish President who inherited a budget surplus, and instead of using that to pay down the national debt burden on our children, basically said, to hell with the kids, lets lower our taxes for awhile. Even when the unexpected expense of two major wars arose, there was no willingness to actually pay for them (first time in history for that!).
Now that all this irresponsibility has caught up to us, with the addition of necessary spending to deal with the consequences of the financial sector meltdown, it is (obviously) time to, at the very least, end these tax cuts – and return to the rate in place during the longest economic expansion in our nation’s history, at least for those who most able to afford it.
“Either way, we are doomed to another depression.”
Will you commit to coming back here with fulsome apologies and a searching analysis of your own twisted ideological logic when you turn out to be wrong about this?
Joe, I’m here all the time. You’re the newcomer. On my own blog, I have entries to 2007. You are free to look and point out how wrong I’ve been. My one big mistake was predicting McCain would win 40 states in 2008. That, of course, was before the real estate bubble and the MBS market collapsed. After that, even Obama was a lock. I did have a number of entries predicting the MBS collapse. Feel free to look.
I think there are plenty of politically-saleable things that national leaders could do to address the problem by spurring economic growth. In the US, they could eschew destructive and draconian over-regulation of fracking and other energy technologies. They could rewrite irrational anti-small-business legislation like CPSIA. They could stop encouraging the very expensive higher-education bubble, and begin to seriously address the dysfunctional US public school system. They could end the too-big-to-fail treatment of large banks and reel in the excesses of the litigation industry. Etc etc.
In fact, the best step would be to go off “the cliff”…
I imagine you’re right Mike. A resulting 5 or 10% market loss and healthy economic psychology in play. It would wake up a lot of taxpayers that are unconcerned.
Arg, in my comment above (7 or 8 comments above, 4th paragraph);
” The total debt will continue to increase by another $7or 8 B ….”
This should read
“The total debt will continue to increase by another $700 or $800 B ….”
Who can I blame for this insidiuous misrepresentation of my thoughts! I’m outraged.
Mike,
Just a little friendly advice. If you want to brag to people outside of the bubble about your skills at political prognostication, then noting that you predicted a McCain victory (with 40 states!) and claiming that you would have been correct were it not for the financial meltdown – that isn’t an argument that will get you very far.
“The US media has become an arm of the Democratic party.”
Really? Does that include FoxNews? The Wall Street Journal? The Washington Times, the New York Post, the Detroit News, the Boston Herald etc. etc. Does it include Rush Limbaugh and the many others on talk radio? Does it include the considerable right-wing blog presence? Why do you rightwingers always play this victim game – pretending that only the liberal media is “the media” and therefore “the media” is all against the poor conservatives? In terms of impact and eyeballs and ears, y’all have as much presence in the media, writ large, as the center-left does, and far more than the unabashed left.
And of course, with the epidemic of self-imposed behavioral isolation, wherein it becomes a mark of pride amongst conservatives to not even listen to what non-conservatives say, I think it fair to say that the “media” that the average conservative is exposed to is overwhelmingly rightwing.
So no, you don’t need to read British twits in order to find a rightwing ideological slant on the news.
Anyway, maybe you could flesh out a bit exactly why you think a depression is inevitable if some sort of a cliff-avoiding deal is made, either before 1/1 or shortly thereafter.
OK. I give up my brief inclination to address trolls.
They enjoy the attention and contribute nothing to the discussion. Sorry for the slip.
Wow, really Mike?
I ask you to expand on your claim of an impending depression, to present an actual argument with reasons on a matter of enormous consequence, if true, and all you can do is run away muttering about trolls?
Is the only acceptable behavior for one in your presence to simply nod agreement whenever you make a claim, no matter how provocative or non-obvious?
Just by coincidence I ran across this column today which seems perfectly relevant to you, especially since it deals with the very issues that you raise. I am sure you will find it interesting even though it comes from outside your usual comfort zone:
When Prophecy Fails
What amazes me about this entire fiscal situation – is that the outcome is so predictable – so preventable and yet to politicians who crave power more than helping the country – they continue the drive right to the cliff.
And I put the blame right at Congress – Republicans and Democrats – for enacting entitlement programs with no controls to reign in the spending. And for a generation or 2, these politicians would pat themselves on the back for helping “the people”.
It’s all soon coming to a head and so far – nobody has stepped up to really address it.
Except perhaps Paul Ryan – and look where it got him.
@ Bill Brandt; “What amazes me about this entire fiscal situation – is that the outcome is so predictable – so preventable and yet to politicians who crave power more than helping the country”.
You are amazed? That politicians crave power?
=================================
Going over the Cliff – a hysterical media label – doesn’t hurt pols. At least not the competent ones anyway [Dems]. When more people go on welfare this helps the statist faction.
It’s called the Curley Effect and I’m sure it’s a familiar term here.
Michael Kennedy: Are you the same person as Mike_K?
@VSSC – well, not so much as amazed – as an observation – there are always shallow people for whom what they get is the most important – (another reason for term limits) – and yes, more people go on welfare but the means of paying them all is about to end – one way or another.
On the “competent” pols – the other day I was comparing Pelosi to Boehner and have to say when the Dems are in power they know how to act (never mind that when in power (at least Congress) the people, upon seeing them acting, rebel)
How could Boehner be so stupid as to agree to “secret” negotiations – the way Obamacare was created.
There seems no way that this will end well. Nonetheless, a student this semester wrote a paper on limiting the time anyone not seriously handicapped should get food stamps. She had seen in her own life how they could be ennabling. But then my daughter’s friend complained of the scams pro-Saddam refugees shephered by her ngo were using for welfare in generous amounts (despite their profitable work in a gray economy). She, of course, wanted money to continue to her ngo – which I’m sure does much good work as well as enabling much largesse.
“Michael Kennedy: Are you the same person as Mike_K?”
Yes, I guess it depends on whether I am signed in.
Michael: Thanks.
Ginny: A song for you:
http://www.youtube.com/watch?v=WLzFhOslZPM
“Government Cheese” by the Rainmakers
Give a man a free house and he’ll bust out the windows
Put his family on food stamps, now he’s a big spender
no food on the table and the bills ain’t paid
‘Cause he spent it on cigarettes and P.G.A.
They’ll turn us all into beggars ’cause they’re easier to please
They’re feeding our people that Government Cheese
Give a man a free lunch and he’ll figure out a way
To steal more than he can eat ’cause he doesn’t have to pay
Give a woman free kids and you’ll find them in the dirt
Learning how to carry on the family line of work
It’s the man in the White House, the man under the steeple
Passing out drugs to the American people
I don’t believe in anything, nothing is free
They’re feeding our people the Government Cheese
Decline and fall, fall down baby
Decline and fall, said fall way down now
Decline and fall, fall down little mama
Decline and fall, decline and fall
Give a man a free ticket on a dead end ride
And he’ll climb in the back even though nobody’s driving
Too ******* lazy to crawl out of the wreck
And he’ll rot there while he waits for the welfare check
Going to hell in a handbag, can’t you see
I ain’t gonna eat no Government Cheese
“Either way, we are doomed to another depression.”
With the FC, there will be a recession in 2013. It won’t last long. (But then the ‘recovery’ never really went beyond Wall Street, save for some fortunate states, mostly from Texas to Notrh Dakota – certain of the so-called “Blue” states.)
Depression won’t come until the capital market’s decide that the US won’t be paying them back and demand unaffordable interest rates for any further borrowing. Then we become Greece writ huge.
This won’t happen for another 3 to 5 years, but if Greece’s experience applies here, then it will happen quite suddenly – over a month or two.
Then the US ‘Democrat’ evil scheme to borrow forever results in depression, 40% unemployment, no economic growth for years, and 50% wealth destruction. The end of the US as we’ve known it.
And because this ultimate end is inevitable, I’m going Galt. Why aren’t you?
And because this ultimate end is inevitable, I’m going Galt. Why aren’t you?
What does “going Galt” mean?
Does it mean you’re paying down personal debt? closing or downsizing your business? reducing your taxable income? moving to a remote cabin? leaving the country? some combination of the above?
Depending on how you do it, going Galt may have large personal costs. Yet the risks that going Galt is intended to reduce are highly uncertain. For example, while the near-term economic outlook seems bad, Intrade puts the risk of recession in 2013 at only 20%. What does that mean? Who knows. And different people have different personal situations and preferences that make it impossible to generalize. Heading for the hills might not make sense for someone who is running a large business or is taking care of young children or elderly parents.
As always, different courses of action (or inaction) make sense for different individuals. Everyone has to figure out for himself what to do. Boilerplate advice is worthless.
Are the rich inherently wicked: John Kerry (rich, wicked)–100% thus far; Obamas (rich,wicked)–100% thus far;Clintons (rich, wicked)–still 100%.. hmm. That’s enough proof. All Democrat Party politicians are both rich and wicked.
RE: …there are plenty of politically-saleable things that national leaders could do to address the problem by spurring economic growth. In the US, they could eschew destructive and draconian over-regulation of fracking and other energy technologies. They could rewrite irrational anti-small-business legislation like CPSIA. They could stop encouraging the very expensive higher-education bubble, and begin to seriously address the dysfunctional US public school system. They could end the too-big-to-fail treatment of large banks and reel in the excesses of the litigation industry. Etc etc.
In other words, all Americans have to do is vote for more conservatively minded (i.e. even Republican, I dare say!) politicians who even offer a shred of lip service (at least!) that they will do just that on every single one of those issues. All Americans have to do is at least start to think and vote that way.
And they had their chance, and they took a pass. They like the free stuff, that all comes from the Obama stash, I suppose, and they want a President who looks really kewl in that bomber jacket. And so every single idea you have to forestall the catastrophe went over the side. It seems that all the “wrong people” were for it, and I know, ‘cuz John Stewart told me so.
Don’t get me wrong, DF, you are 100% correct. It’s just not very helpful, I’m afraid.
Jonathan asks “What does ‘going Galt’ mean?”
It is a very individual stance – true.
The risk of economic collapse is uncertain, true. But I’ll argue very real.
The timing is very very uncertain. It only took two months for the cascade to start in Greece, and unlike Greece, we have no Big brother like Germany to bailout the US.
Is that comforting? No. That makes the debt-spiral overhang coming in four years (145% debt to GDP, with federal combined with state and local) even more worrisome.
The list of tasks in “going Galt” are outlined here:
http://www.fortliberty.org/going-galt.html
What’s worse and immediate right now is that the public dialog is increasing delusional, psychotic, and detached from reality.
(Google “drsanity” for a retired med school psychiatrist’s decade long coverage of this out of control threat to civic dialog.) We obssess about the trivial (gun crime and gun control, even the “fiscal cliff,” I’d argue) and ignore the eight-hundred pound gorilla in the living room, moving to the kitchen, threatening all of our livelihoods because it’s where we eat.
What’s worse for the long-term is that for those under 30 years old, those WHO DON’T believe in the fact of American Exceptionalism* is fast about majority of the young. How does anyone who accepts and understands the values advocated here, at chicagoboyz, stanch this tidal wave of rejecting Americanism?
Long-term, even medium term, this trend is impossible to reverse.
And without Americanism, does patriotic or libertarian America reality have any long-term governing future here? Only in shrinking pockets like the South, Texas and Oklahoma, the Mormon culture zone (ie, surrounding Utah), perhaps. And smaller or less populated locales (eg, Alaska). But not nationally.
So, yeah. Call me a pessimist.
*(Belief in American Exceptionalism has collapsed during the last decade among the young. 49% do not believe it, if memory serves, the last time I saw the Gallup survey on this question.)