Wednesday, November 14, 2012

Democrat Deficit Reduction Rip-Off

It looks like President Obama wants to do another typical Democrat Deficit Reduction Rip-Off of the taxpayers.

Here is what he said at today's press conference according to the Associated Press.
At the news conference, he laid out a two-step process for an overall compromise — immediate extension of all the expiring tax cuts except the top rate, followed by a comprehensive agreement in 2013 to overhaul the tax code and the government's big benefits programs, which include Medicare, Medicaid and Social Security.
Notice that he expects the Republicans to agree to the tax increase now.  However, any overhaul of the tax code and entitlement spending reforms would wait until 2013.  President Obama has to be kidding.  If the Republicans agree to that deal they ought to just hand over the keys to Washington to Obama and the Democrats and go home.

The CBO estimated in August, 2012 that ending the Bush tax cuts on those making over $250,000 would result in increased revenues of $823 billion over the next ten years.  Combined with interest savings of $127 billion, this is projected to reduce the budget deficit by a total of $950 billion.  However, President Obama is now saying he wants $1.6 trillion in new taxes.   Is this a bait and switch or what?

White House press secretary Jay Carney said the president would bring to the table a proposal for $1.6 trillion in new taxes on business and the wealthy when he begins discussions with congressional Republicans, a figure that Obama outlined in his most recent budget plan. The targeted revenue is twice the amount Obama discussed with Republican leaders during debt talks during the summer of 2011.
Carney said the figure, combined with $1.1 trillion in spending cuts already signed into law, would reduce deficits by $4 trillion.

That is double the amount of tax increases he campaigned on.  Who is going to get stuck with that bill?
Bruce Krasting thinks that Obama is planning to expand the Alternative Minimum Tax.  The AMT is already in play for the 2012 tax year because the tax patch that limits its applicability ended at the end of 2011.  A one-year exemption was granted for 2012 but the exemption is not effective if it is not "re-patched" before year-end.  This was part of the debt ceiling deal.

Right now the AMT only applies to about 4 million taxpayers.  I am one of the lucky ones that get to pay it each year.  That number could go to 33 million if the patch is not fixed.  That tax bill would also be due for the 2012 tax year.  This is not a 2013 issue.

In addition, the President said he was interested in a balanced approach.  Simpson-Bowles and others defined that as involving at least $3 of spending cuts for every $1 in tax revenues.  History has shown that a ratio of at least 4:1 or 5:1 has had the most success in getting a country back on track that is in the fiscal shape we are in. 

It appears to me that with interest expense savings the revenue side of his equation is going to be about $2 trillion.  They are claiming they have already "saved" $1.1 trillion. (where is it?).  Does that mean that all the President is going to propose is another $1 trillion of cuts?  President Obama has to really be kidding.

I have stated countless times over the last two years that I am not opposed to revenue increases as part of a balanced approach to solving our budget problems.  However, if this is going to be done, it must be accompanied with real, substantive spending cuts and budget reforms.  These cuts also have to be real and they have to done unfront.  No more back end spending reduction deals.wwUnder no circumstances should any tax increase be traded for a future spending cut.  No way.  No how.

There clearly is a practical problem right now in that there is no time to put together any comprehensive tax or entitlement reform before year-end.  However, there is no reason that the Republicans should accept a tax increase for a promise. That is why I wrote previously that they should insist on the repeal of Obamacare in trade for any tax increase before year-end.  If the President wants the most important concession from the Republicans then he must be prepared to give his most important concession.

If the President is unwilling to make this concession and wants the tax deal before year-end, then Obamcare should be deferred for one year and the tax increase on the rich is only effective for one year conditioned on the tax and entitlement reform taking place.  If it occurs, Obamacare comes back on line.  If the reforms do not happen, it is permanently repealed as is the tax increase.

I am a reasonable man.  I have long been willing to accept some revenue increases to get to a fair and balanced budget plan..  However, I am not willing to accept a tax increase on a promise to do something on spending, tax reform or entitlement reform next year.  That is not reasonable.  If spending and reform issues have to wait, the tax increase can wait.  It is that simple.

It looks like we are on the road to another Democrat Deficit Reduction Rip-Off.  The Republicans better not let it happen.  They also better start making their position crystal clear to the American people.

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