Report: Some Dems would rather go over fiscal cliff than compromise on “balanced approach”

posted at 6:03 pm on November 16, 2012 by Allahpundit

Everyone was chummy and hopeful about a deal at the White House today, but if you’re surprised to hear that some Democrats are intent on driving a very hard bargain, you must have missed the polling data last night. They promised their base a tax hike on the rich and they can make it happen by doing nothing, with voters primed to blame the GOP for the economic fallout. Under those circumstances, why not go cliff-diving?

[The Gang of Six] reconvened on Tuesday, but the election results presented a new set of problems. Republican officials familiar with the talks say Democrats dug in on demands for tax revenue that Republicans are not willing to meet. Democratic aides say Republicans who had spoken abstractly about the need for more revenues are balking at the specifics.

“Things change. It’s not just a matter of the numbers changing, and they do,” Mr. Durbin said of shifting deficit projections, revenue forecasts and spending totals. “It’s also a matter of the political environment, and the landscape changing.”

Democrats freely admit they have shifted their stance from the defensive crouch of the summer of 2011, when they signed on to a budget deal that cut $1 trillion in spending with no tax increases, to now, when they believe the voters have given them a mandate to raise taxes on the affluent…

Both sides insist they want a deal before January, but a rising chorus of voices, especially Democrats, say they would rather go over the cliff than accept a deal that raised too few taxes while extracting too many cuts, especially to Medicare and Medicaid.

That’s the state of entitlement reform in America 2012, two years after a Republican landslide and a VP nomination for Paul Ryan. Here’s the question: How many Republicans would also prefer to go over the fiscal cliff (briefly), not because it’ll help them get what they want but because it’ll arguably make things politically easier for them to let Democrats get what they want? What I mean is, if Republicans make a deal now to raise taxes on the rich in exchange for deep spending cuts — even if they insist on limiting the rate hikes to millionaires only — they’ll be hammered by the conservative base for selling out. But if they go over the cliff and let the Bush tax cuts lapse, then agree with Obama to extend the old, lower rates for the middle class only, they can claim that (a) they didn’t blink under the pressure of the deadline bearing down on them and (b) technically speaking, they’re not responsible for the new, higher tax rates on the rich. In this post-cliff scenario, the new tax hike on the wealthy happens automatically, without any Republicans voting for it; the only vote Republicans would take would be to lower taxes, albeit only on the middle class. In practice, you’re getting the same outcome as you would if they made a deal now to reinstate the Clinton-era rates for high earners (plus, er, the initial fiscal shockwave from going over the cliff and the chaos afterward in trying to apply the lower middle-class rates retroactively), but in theory it’d be easier to sell politically because the House GOP would have avoided casting any votes affirmatively for new taxes.

Is that sort of posturing valuable enough to them to warrant going over the cliff, or is it just too risky given the likelihood of a new cliff-driven recession and the blame Republicans might get when it happens?

Oh, in case you’re wondering, here’s Boehner’s plan to make sure the government remains disciplined in tightening its belt if a deal is reached:

According to a Boehner aide, the speaker suggested that the leaders agree on long-term revenue targets for tax reform and spending targets for entitlement reform, as well as enforcement mechanisms that would kick in if Congress fails to act on either next year.

Sounds like part of the solution to the bind that the sequester’s left them in is … another sequester.


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Lawdawg86 While I think that your point about the 250K crowd was refuted by another poster, I do agree that there are quite a few in that range do vote Democratic. These are the infamous “White People” from 2008. They benefit alot from gov’t grants, jobs, etc. They’ve started to leech on govt benefits. I really think that the Rs could benefit from starting class warfare against White People. Why not point out the excesses and cut off the benefits for them while joe schmo successful business guy keeps his?

Illinidiva on November 16, 2012 at 7:30 PM

Perhaps you weren’t here during the Clinton years- those investments in paying down the previous debt paid off and resulted in strong growth. Lower taxes under Bush didn’t result in high job growth but did contribute to a massive deficit.

bayam on November 16, 2012 at 6:52 PM

There is no comparison between now and the Clinton years, except for the fact that it was the Republicans that forced Clinton to cut spending – despite what both Clinton and the Republicans claim, they did not have a surplus (and I can prove it).

For the record, I do not believe in unified budgeting, which I consider to be an accounting gimmick; nevertheless, from the Washington Post:

“…But here’s the important point: the Clinton plan was never intended to achieve a balanced budget. After the bill’s passage, the Congressional Budget Office estimated that the deficit would decline modestly — from $290 billion in 1992 to $200 billion in 1998. In the phrase of the era, there were still “deficits as far as the eye could see.”

Indeed, the Clinton budget plan was actually slightly smaller, on an inflation-adjusted basis, than the deficit-reduction package signed into law in 1990 by President George H.W. Bush ($770 billion versus $830 billion).

Fast forward to 1995. The Democrats lost control of the House and the Senate, largely because of bruising budget battle. Clinton’s fiscal year 1996 budget again proposes $200 billion deficits every year for the next five years. So, again, the target in 1998 (when surpluses later emerged) was a deficit of $196 billion.

But Republicans immediately set the goal of achieving a balanced budget within seven years. After resisting for a few months, Clinton shocked many fellow Democrats by announcing that he, too, would embrace the idea of a balanced budget.

As The Washington Post editorial page put it at the time, Republicans had forced Clinton’s hand: “Mr. Clinton’s new position on the budget is much better than the old one. He should have taken it six months ago. The Republicans have driven him to say that he too wants, if not to balance the budget, at least to get the deficit into the neutral zone.”

Now, here’s the real kicker:

Clinton, in essence, was lucky to become president just as a revolution in computer and information technologies was unleashed.

From 1992 to 1997, CBO estimated, revenue increased at an annual average of 7.7 percent in nominal terms, or about 2.4 percentage points faster than the growth of the gross domestic product, the broadest measure of the economy. CBO Deputy Director James L. Blum in 1998 attributed only 1 percentage point of that extra tax revenue to the 1993 budget deal. The rest, he said, came from capital gains.

Between 1994 and 1999, realized capital gains nearly quadrupled, the CBO concluded, with taxes on those gains accounting for about 30 percent of the increased growth of individual income tax liabilities relative to the growth of GDP.

http://www.washingtonpost.com/blogs/fact-checker/post/barbara-boxers-gross-rewriting-of-history/2011/06/30/AGFGVqsH_blog.html

http://www.cbo.gov/ftpdocs/32xx/doc3277/EntireReport.pdf

And, finally, do you know what was happening to the economy in 1995, especially at the end of the year, and 1996?

Do you know what Clinton and the Republicans did in 1997 and what effect it had on tax revenues?

C’mon, Bayam. It’s two words, First word: 3 letters. Second word: 3 letters…No, 4 letters – I was suffering from Bidenism for a moment.

Resist We Much on November 16, 2012 at 7:33 PM

politics is irrelevant…

equanimous on November 16, 2012 at 7:33 PM

In other word Romney won the “Producers”… But I will say let the Republican give the President of the parasite class his tax increase on the job creators (those who make more than $ 200,000 a year) and let him own the misery that would follow…

mnjg on November 16, 2012 at 7:10 PM

8 out of 10 of the richest counties went for Obama…birds of a feather. Democrats actually like rich people…and a lot of rich people like them right back. Go ahead and raise their taxes…raise Hollywood’s too.

Terrye on November 16, 2012 at 7:33 PM

…why the picture of the two spendthrift losers?

KOOLAID2 on November 16, 2012 at 7:37 PM

The GOP will betray you

True_King on November 16, 2012 at 7:43 PM

The Republicans should just endorse and push Simpson-Bowles. Obama is naive, the media is corrupt, Harry Reid is dirty, and Boehner just can’t compete, so let’s make it easy and attack ourselves to Obama’s own bipartisan commission he ignored for years. Really, it would be fun to watch Obama and the media spin that one.

Oh, and be sure to publicly target Hollywood’s shady accounting. They should be paying their fair share.

Daemonocracy on November 16, 2012 at 7:44 PM

so let’s make it easy and attack attach ourselves

Daemonocracy on November 16, 2012 at 7:45 PM

Why should we fall on our sword over this and risk being blamed for hiking everyone’s taxes (an outcome Dems would find all too perfect)?

Lawdawg86

Gee, I don’t know, liberty perhaps? Support for capitalism? Or maybe simply because it’s the right thing to do?

Here’s a thought for you….if Republicans are the ones at risk for getting the blame, why is Obama desperately trying to keep taxes from increasing on the poor and the middle class? You think it might be because he’s concerned that he’ll get the blame? Just because the media(who lies constantly) says we’ll get the blame doesn’t meant it’s true.

xblade on November 16, 2012 at 7:45 PM

Gee, I don’t know, liberty perhaps? Support for capitalism? Or maybe simply because it’s the right thing to do?

Here’s a thought for you….if Republicans are the ones at risk for getting the blame, why is Obama desperately trying to keep taxes from increasing on the poor and the middle class? You think it might be because he’s concerned that he’ll get the blame? Just because the media(who lies constantly) says we’ll get the blame doesn’t meant it’s true.

xblade on November 16, 2012 at 7:45 PM

No matter what happens, Obama will blame the Republicans. And you can be 100% certain that a lot of bad will happen. There is no compromise that can prevent an economic disaster. It’s all or nothing at this point.

So — since we know the economy is going to implode no matter what the Republicans do, and we know the Republicans will get blamed no matter what the Republicans do, then the Republicans should do NOTHING. Let them have what they want. The facts will be on the GOP’s side come the next election.

The Rogue Tomato on November 16, 2012 at 7:50 PM

As for me, I will continue to do what I’ve done since Obama took office. I will not work one hour for money even though I am 34 years old and have a law degree. I will continue to live off of my assets and arrange my affairs so that I pay NO Federal income tax. Finally, I will make NO investments in the United States…and, certainly, none that can benefit you and the rest of those that believe you are entitled to something that is mine.It’s called “Gone Galt” and there is a growing army of people like me…so you’d better figure out how to FUND YOUR UTOPIA WITHOUT US.Resist We Much on November 16, 2012 at 6:47 PM

So you come to my country, obtain citizenship simply to leech off the American people huh? You should be ashamed of yourself. Do yourself a favor and get a job.

HotAirLib on November 16, 2012 at 8:05 PM

Get out. Let it burn. Build it back. –a John Galt disciple

Decoski on November 16, 2012 at 8:08 PM

I think we’re going to go over something far bigger than the financial cliff.

A tax hike and a hike in unemployment is going to be the start of something a lot uglier.

Fundamental transformation.

CorporatePiggy on November 16, 2012 at 8:09 PM

Get out. Let it burn. Build it back. –a John Galt disciple

Decoski on November 16, 2012 at 8:08 PM

Saying let it burn is all fine and dandy.

But you own that line when you say it. And there probably will be physical casualties.

If you can square that with your moral calculus then so be it. If you cannot, you risk being seen as a blowhard.

Careful.

CorporatePiggy on November 16, 2012 at 8:12 PM

Saying let it burn is all fine and dandy.

But you own that line when you say it. And there probably will be physical casualties.

If you can square that with your moral calculus then so be it. If you cannot, you risk being seen as a blowhard.

Careful.

CorporatePiggy on November 16, 2012 at 8:12 PM

True enough. How about this concept.

Our debt is the most pressing matter. More pressing than revenue generation or going over the fiscal cliff. The “grand compromise” has got to be more than just tinkering around the edges. The GOP is ready to come to the table with ideas as to how we can rescue future generations from economic hopelessness and would like the President and his party to join us in a real discussion of the issues.

Happy Nomad on November 16, 2012 at 8:22 PM

Might as well go over the fiscal cliff now, it gets worse the longer we wait.

According to economist Karl Denninger, the structural imbalance in the debt was about 10% in 2000. So at the 2000 point in time, we needed to be willing to take about 10% off the economy, off GDP that is, in order to correct this, and about 10-15% off the size of the federal government in the budget.

Fast forward to 2007. The total personal, government, and business debt has grown to $53 trillion (350% of GDP when it was about 125% of GDP in 1982). Much of it went into the stock market and housing. Instead of doing the right thing under George W. Bush, we did the wrong thing and blew another bubble, and now the correction that had to be taken was about 20%. Well, 20% is approximately equal to the decline that we experienced during the Great Depression of the 1930s from top to bottom, and it’s a horrific contraction both in the size of the government and also in the size of the consumer economy. Big government spender FDR cut Federal pay by ~25% to help offset the needed correction. Did Bush even consider cutting government pay? No! Will Obama? No!

We didn’t clear the bad debt in 2008 as happened in the 1920-21 decline, managed by none other than Warren G. Harding and the country recovered quickly, but instead essentially hid it by creating more debt to fund government, etc.

Now, put four more years on this with Obama. Today, the imbalance is accelerating and closer to 40%.

Just as important, large financial firms, banks that own the Fed and Wall Street companies, went from having about 20% of the size of the economy in debt in 1980 to over 120% in 2007, an expansion in relationship to the size of the economy of six times. From the start of the crash to today experts say this has contracted to right near 90%, which is still more than four times where it was historically.
In dollar numbers, if we can believe our IG, Neil Barofsky, this bankster credit(debt) peaked at $17.1 trillion in 2008. Today it stands at ~$13.9 trillion, or $3.2 trillion less. Mortgages, which are largely held by these same financial institutions, declined by ~$1.1 trillion during this time. Adding these together you get approximately $4.3 trillion. The Federal Government, on the other hand, added $4.7 trillion in debt during the same time.

That is, virtually all of the Federal Government’s deficit spending did exactly nothing to benefit main street (us) in 4 years; it all went to these large banks, Wall Street firms and other financial institutions. If Romney had made this point in the debates he might have really cornered Obama, especially in the Town Hall format.

What nobody can state exactly – is how long can this go on before people in the bond market, in particular, say, “We’re not going to play your game anymore.” Look at the situation today, Nov 2012. The Federal Reserve, through Operation Twist (announced in 2011), has essentially dumped all of their short-term securities (less than 10 years). So they own no short-term Treasuries at all for all intents and purposes, but they are 70% of the long-term bond market from 10-30 years out. That’s how America’s government Ponzi schemes are being funded.

A. All fractional reserve banking is a Ponzi scheme.
B. All money systems based upon an irredeemable fiat currency are Ponzi schemes.
C. All central bank systems are Ponzi schemes.
D. All Government retirement schemes like Social Security are Ponzi schemes.
E. All Government funded health care like Medicare and Medicaid are Ponzi schemes.
F. All Keynesian economic systems are Ponzi schemes.
G. All Government funded student loan programs are Ponzi schemes.

The 75 year unfunded commitments using GAAP of the Federal Government according to Boston University Professor Laurence Kotlikoff are $222 Trillion – that is money we need to have right now, today, and invested at about a 6% annual return.

Botom line – we are going over the fiscal cliff – the sooner it happens the less painful it will be.

Falcon46 on November 16, 2012 at 8:28 PM

HotAirLib on November 16, 2012 at 8:05 PM

don’t worry Hal

the commies are in charge

thank you commandante ogabe!

tom daschle concerned on November 16, 2012 at 8:33 PM

Mitt was not my first choice{ I have been on the Palin bandwagon since day one}
but he was the choice i had. My husband had never voted before,but i have opened his eyes about what has been going on in this country, so he voted for the first time, I have a 20 yr. old son who also voted for the first time for Romney. I live in a small town in Summit Co. Oh. where everyone is a Dem. All I saw was Mitt sighns so I really believed we had a chance! I say BURN. IT. DOWN!!!!!!!

lisa fox on November 16, 2012 at 8:34 PM

In other words, Obama and Clinton lied, and their excuse apparently will be that it was for our own good.

FerdtheMoonCat on November 16, 2012 at 8:48 PM

seesalrun2 on November 16, 2012 at 6:26 PM

I am doing everything I can to help the bottom drop out as fast as possible.

Philly on November 16, 2012 at 8:50 PM

LET IT BURN

xplodeit on November 16, 2012 at 8:58 PM

We’re past the point of no return, so let it burn. Rebuild from the ashes.

Let. It. Burn.

glockomatic on November 16, 2012 at 8:58 PM

CorporatePiggy on November 16, 2012 at 8:09 PM

I agree. We’re already seeing a huge amount of layoff announcements (more than 140,000) and warnings from large companies about cutting hours to beat Obamacare mandates and taxes.

Next year will usher in a very scary time to live in this nation, especially if you need a job. Wait until a decent amount of the people who lost their jobs or had their hours cut end up on Medicaid. That was all part of the plan.

I am going to spend only what I need to live in the next year, and I have been spending much less to begin with since the recession hit. Ish got real. There will be drastic budget cuts in my budget, and I will not be feeding the economy.

Philly on November 16, 2012 at 9:02 PM

I think we’re going to go over something far bigger than the financial cliff.

A tax hike and a hike in unemployment is going to be the start of something a lot uglier.

Fundamental transformation.

CorporatePiggy on November 16, 2012 at 8:09 PM

Thread winner!

Who is John Galt on November 16, 2012 at 9:46 PM

Folks, we’re being played for fools.

Do you see what’s happening here? Here’s a hint…a headline 2-3 years from now:

Obama cuts deficit in half; keeps promise to American people

From $1.3T to $600B

No one will care that the deficit was ~$300B when he first took the oath. He gets credit for halving it, while in reality he doubled it. And that doubling is structural, not limited.

BobMbx on November 16, 2012 at 10:05 PM

Here’s the question, are the Democrats willing to go over the fiscal cliff and take responsibility for the results? With the worthless media we have, I doubt they’ll be held Responsible, so we’ll need to force them to take responsibility for the results of their folly.

bflat879 on November 16, 2012 at 11:17 PM

Perhaps you weren’t here during the Clinton years- those investments in paying down the previous debt paid off and resulted in strong growth. Lower taxes under Bush didn’t result in high job growth but did contribute to a massive deficit.

bayam on November 16, 2012 at 6:52 PM

Perhaps you weren’t here during the Bush years. Defecits were far lower and job growth much better than what we have not. Not even close.

Chuck Schick on November 16, 2012 at 11:20 PM

bayam on November 16, 2012 at 6:37 PM

Why do leftists cheer higher taxes? What virtue lies in having the government consume more of the people’s productivity?

stvnscott on November 16, 2012 at 11:41 PM

So you come to my country, obtain citizenship simply to leech off the American people huh? You should be ashamed of yourself. Do yourself a favor and get a job.

HotAirLib on November 16, 2012 at 8:05 PM

The hilarious part is if Resist We Much were illiterate, poor, and Mexican, you’d be screaming that remarks like yours are racist.

Obama supporters like yourself are slave traders and importers who convince yourself that your plantations and encomiendas are necessary to civilize those dark-skinned people who you know are inferior to you.

And you profit off their votes. It’s a win-win situation.

northdallasthirty on November 17, 2012 at 12:05 AM

Why do leftists cheer higher taxes? What virtue lies in having the government consume more of the people’s productivity?

stvnscott on November 16, 2012 at 11:41 PM

Because leftists are the ones doing the consuming.

After all, you can’t expect insider-trading multimillionaire Nancy Pelosi to pay for her own liquor- and gourmet food-stocked airliner, can you?

northdallasthirty on November 17, 2012 at 12:07 AM

It’s the same game.

Was it just a coincidence that the entire panoply of fiscal issues all came due in Jan 2013?

Was it just coincidence that the fiscal consequences of ObamaCare just happen to start in Jan 2013?

We know the drill. Tax hikes will be immediate and spending cuts will be vaporous and not take effect, to the extent that any of them are real, until 2017. We’ll save another trillion dollars by not going to war in Afghanistan. Heck, we could save $10 trillion by not going to war with China. That’s $10 trillion that we can spend on windmills!

MJBrutus on November 17, 2012 at 6:07 AM

So you come to my country, obtain citizenship simply to leech off the American people huh? You should be ashamed of yourself. Do yourself a favor and get a job.

HotAirLib on November 16, 2012 at 8:05 PM

everybody pays taxes, moron.

sesquipedalian on August 29, 2012 at 6:08 PM

rogerb on November 17, 2012 at 9:00 AM

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