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  • Fiscal Cliff: Where Are Your Spending Cuts, Mr. President?

    The fiscal cliff debate has centered on talk of raising taxes on high-income Americans. The silence on spending cuts has been deafening.

    On Monday, as if on cue, came investor Warren Buffett’s rehashed—albeit flat-out wrong—proposal to raise taxes on the wealthy. Even though the Obama Administration has said both sides must make tough choices and put everything on the table, it has embarked on a photo-op-studded campaign for tax hikes. The irony is befuddling.

    Washington has a spending problem, not a tax revenue problem. Spending is well above its historical average level and is projected to remain high over the next decade. It gets worse thereafter, as entitlement programs and net interest costs send total spending soaring to 43 percent of the economy, up from 23 percent today. Meanwhile, tax revenues are projected to return to their historical level as the economy recovers and more Americans return to work.

    The Obama proposal to reduce the deficit by taxing the wealthy would kick the legs out from under a struggling economy by hurting the very job creators and investors that the economy needs most right now. According to a study by Ernst and Young, 710,000 fewer jobs would be created in the long run—that on top of the 12.3 million Americans out of work today.

    Taxing the wealthy to solve the fiscal cliff crisis and reduce the deficit just won’t work. Trying to close the 2035 deficit through the top two tax rates, for example, would mean raising those rates to 159 percent and 166 percent. Setting aside the economic damage that would ensue, notice anything odd? That’s right: Those rates are mathematically impossible. (continues below chart)

    Because that policy is unworkable, taxes would necessarily have to be raised across the board and kept high in perpetuity to pay for the projected increases in federal spending. That translates into a more than twofold increase of all tax rates, not just the highest one. (continues below chart)

    Even though no one is proposing to solve our fiscal problems solely through tax increases, no one—especially the President—is talking seriously about necessary spending cuts. White House press secretary Jay Carney recently pulled Social Security off the negotiation table, saying it should be discussed “as part of a separate track.” Senator Dick Durbin (D–IL) stated Tuesday that Medicare and Medicaid reforms should not be part of the fiscal cliff solution. Perhaps it would be news to Carney and Durbin that the main entitlement programs made the top four federal spending categories in 2012 and that delaying reforms will make decisions down the road more unpalatable.

    The President and lawmakers who constantly dodge opportunities to discuss and propose entitlement program reforms fail to acknowledge that spending on the major entitlements is untenable.

    No amount of tax increases can pay for the projected entitlement program spending increases. Entitlement program reforms must be on the table if we are to ever get our debt and deficits under control. It is time to reframe the fiscal cliff debate and focus on how to cut spending.

    Posted in Featured [slideshow_deploy]

    16 Responses to Fiscal Cliff: Where Are Your Spending Cuts, Mr. President?

    1. Jcal1 says:

      Obama isn't interested in cutting our deficit at all. He wouldn't be upset if the deficit somehow cut itself, but he is clearly looking to enact some trend in legislation that aims to put the squeeze on higher income earners and lower many obligations for lower earners. I really think it's politically motivated – i.e. – his "legacy", etc. – not about what he truly believes in – and most certainly not the deficit. In a typical presidential fashion, he is obsessed with history and how it will view him.

      On the other hand, it is very possible he wants all the tax measures of the "fiscal cliff" to hit with a bang on January 1. Obama, along with many Americans, will blame the Congressional Republicans. It would be win-win for the president. He would have all that extra revenue and therefore a whole lot more money to spend. Cutting down the deficit is a secondary priority for him. After all, you don't get written by history as a "revolutionary president" if you balance the books. He can then take some of that additional revenue and hand it back as he sees fit in the form of lesser tax breaks.

      Obama has risen to power mostly by harnessing empty promises, along with many minorities and many 18-24 year olds (easily swayed with empty political promises). He has vilified the "wealthy" by distorting tax rates and truths – to the point where very few Americans know what taxes someone earning over $250K REALLY pays. Obama has then used his best political weapon, the campaign, to rally people to a cause that looks good to them – but really is empty in that it does little or nothing to help this country. This is really all about Obama. The irony is that everyone will suffer as a consequence.

    2. Bobbie says:

      So far Obama only words his part that never gets done? Not much of a man of his word at all! America has expectations that doesn't reflect this type of ignorance or deception of a person let alone the President!

    3. Patricia A. Auras says:

      Obama is completely unqualified to manage anything so why cater to him.

    4. RennyG says:

      Hey, should we complain? He has control of everything, or I should say he does whatever he wants and "WE" stand by and talk about it. I wonder how much more money he could get if he lowered the amount to say about $50,000. This would now include his buddies, "THE UNIONS!!" Has anyone calculated what the union taxes would be. I say the republicans do nothing and let the chips fall. He is not going to cut anything, his words are cheap!! But how can we stop him from using the credit card and printing money????? The country will survive and even get stronger without his wisdom!!!

      • Wumingren says:

        The median union wage is $50,000, not counting the incredibly generous benefits, which often include "cadillac" healthcare coverage. Undoubtedly, unions will attempt to be excluded from paying the 40% surtax on their "cadillac" healthcare policies. There are unionized industries that earn a whole lot more than $50,000 a year, and unions take from 1.5% to 5% of union workers' pay.

    5. Lloyd Scallan says:

      Do we not yet understand Obama's agenda? Obama has never intended to cut anything, but keep on his course to buy voters until our economical system collapses and the people fully accept socialism. Yet the inept Republicans are already bending over, ready to accept tax increase without spending cuts. We know what Obama and the Democrat's intend to do. Our problems is the Republicans don't have the guts to fight for what they they were sent to Washington for. As conservatives, our problem is the Republicans!

      • Wumingren says:

        I say one of the Republicans' biggest problems is that true conservatives are abandoning the party to join a number of third parties. Too bad these conservatives didn't stick around and fight to cull the elephant herd of all its RINOs. I believe that if all those who abandoned the GOP on single-issue problems were to return as the conservative tsunami that they could be, all those RINOs would be quickly displaced. The Democrats, Communists, and Socialists understand that they can achieve a lot more in unity than they can in division. Just look at all the Democratic candidates who have garnered endorsements from the Communist and Socialist parties.

        When we had so many candidates fighting for the GOP endorsement back in 2008, I knew we were a very fractured party. I supposed that if the GOP continued fielding more than a few candidates that it would be an indication that the party would remain hopelessly divided. I was proved correct in the 2012 elections. Frankly, I don't expect the GOP to ever be a force again until it unites enough to field no more candidates than can sit at a breakfast table. If in 2016 we can't all support just a couple of candidates, then it is unlikely that we will prevail.

        The GOP must either be taken over by conservatives, or it must be utterly destroyed, and a new party must arise that will be the second party, not just another third party. This second party must have all current factions of conservatives join forces to both destroy the GOP and mount an effective challenge against the Democrats. I am willing to leave the GOP behind if it continues to ignore its core conservative base.

        The problem is that I cannot just join with the Libertarians, Constitution, or Independence parties, as they remain third parties. We need a new national party, call it the Tea Party or the Patriot Party, or something that will bring all conservatives under one banner. Until this new second party emerges, I am unable to do anything but vote for the man or woman that most closely follows my agenda. I am not a single-issue voter, so even though I hold strong views on a number of issues, not any single one of them will prevent me from voting for the most conservative candidate.

        The GOP is dead to me, though any true conservative who seeks office through the GOP will still get my vote. The GOP, however, will not get a dime in support from me. In fact, I have withheld my financial support to the state and national party organizations since 2000, and have only contributed directly to candidates that I believe in, even those who are in other districts and other states. The RINOs that control party organizations have withheld money from those candidates I support and provided money to those I do not support. I'm sure I'm not the only one who refuses to support the RINO establishment.

      • AlfromFl says:

        I'm afraid you're correct that the Republicans are retiscent to stand their ground for spending cuts. they're afraid they won't get reelected because they will be blamed for obstructionism. What they fail to realize is that if they do cave, their constituents will not reelect them so they might as well go down doing a good job and maybe realize a good outcome.

    6. Johnnie Hale says:

      It appears that the President has himself in a spot with the many people who have benefitted from his approach to redistribution through federal jobs and programs which favored various voting blocks. How can he, after the election, turn on a dime and start taking away all that he gave just as the 2014 elections come into view? His hope is to have fiscal negotiations fail and then blame the Republicans. This would allow him the opportunity to gain more Democrats in the Senate and House with the mid-term elections. Then the next two years will give him cover to implement and or remove other regulations, assistance programs, taxes and social reforms in an emergency that would never be tolorated outside of a crash of the economy. President Obama's actions are not about what's good for the US, it's about advancing the cause to fundamentally reform the United States into a nation of economically-dependant individuals who live under the direction of a federally operated country where we are all told everyone is getting their "fair share."

    7. Brad S. , Detroit says:

      I say – "Give him the rope !" Tell him that for every $5 he cuts out of the budget, he gets $1 in tax hikes on the wealthy. And, if he doesn't want to play that game, let him crash the economy by raising taxes on the wealthy. The wealthy are already making adjustments to their tax strategies ahead of this scenario, by laying off employees, adjusting capital investment, etc. Raising taxes and receiving less revenue will be on full display in 2013 and 2014 and he won't have anyone to blame.

    8. R Benson says:

      I like how Democrats are now saying that the discussion of spending cuts should be delayed until after the tax rate issue is settled. I guess we should trust that they will be open to significant spending cuts later. Maybe around the time the Senate passes a budget. I would disagree with using 2035 as the earliest example year for exposing the folly of closing the deficit with tax increases on two highest tax brackets. This has the appearance of being misleading since the tax increase would occur in 2013 some 22 years earlier. The chart should show what tax rate would be required in those two brackets to close the 2013 deficit. That would be startling enough.

    9. Ron Livaudais says:

      the democrats keep hammering taxes, taxes, taxes…the Republicans need to hammer spending cuts( not rate cuts), spending cuts, spending cuts!

    10. Steve Cariati says:

      GOP should walk away from any negotiations to avoid the cliff. Period. Gop will get blamed by the Dems for anything bad that happens to the economy-so walk away now.

      Obama is a SOCIALIST. Hello anybody home GOP? He wants to change America by destroying Capitalism. There is no basis for negotiating with an administration that wants to tax the rich even though that does not solve our revenue problem because the problem is spending.

      Walk away now as the Administration wants Soc Sec, Medicare and Medicaid off the table. Wake up GOP. This is who you are dealing with-European Socialists who are now bankrupt and apparently Obama wants the USA also to go bankrupt so he achieves his goal of “Change.”

      An administration that ignores almost $100 trillion of unfunded liabilities/promises is not one that deals with reality. So if the GOP continues trying to be rational when the Dems are unconcerned it would be best to talk to a wall.

      Walk away now with a nice speech explaining in people terms why you are doing so. “We refuse to turn America into a Socialist country.”

    11. William Montgomery says:

      Let's reframe the discussion to taxing wealth, not income, Say, at 2 or 3 per-cent per year.

      • Stirling says:

        That will take any "incentive" out people to accumulate wealth.. Obviously you haven't read any articles or books on "purposeful wealth distruction". (i.e – people will spend their wealth, rather then allow it to be subjected to tax.) This will cause less taxable wealth in the future till it causes a negative return. Or those with wealth will leave as they have been doing recently.. Class warfare never solves financial problems it only inflames it. Look at Frace as an example (75% tax rate) for failure in your thinking.

    12. Jim Molock says:

      Why have most of America just accepted the first year Obama spending level of 2009 for a so called one time emergency to now become the budget bottom base line. We are discussing cuts over 10 years! Why have we not reverted back to the “pre-emergency” budget levels or spending. We should cut 700 billion in 2013 easily and in fact should revert back to the 2008 budget level. Please start this national informational discussion. We are moving toward a socialist progressive state and please define these progressives in this manner. We are moving and, in fact are close to a position of bringing about the need to re-declare our independence from our current government. I surely hope this can be done at the ballot box starting in 2014.
      jimmjcpb

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