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  • Fiscal Cliff: House Republican Proposal Abandons Core Principles, Gains Little

    The House Republican leadership has offered a substantive counteroffer to President Obama’s frivolous fiscal cliff proposal of last week. At first blush, it appears little more than categorical, pre-emptive capitulation.

    To be fair, the details of the Republican proposal are extraordinarily vague. Nor is much clarity or comfort gained from the three-page accompanying letter sent to the President and signed by Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), House Budget Committee Chairman Paul Ryan (R-WI), and three other senior members of the House Republican leadership.

    Much can and likely will come out in the days ahead clarifying what a few figures and labels on a single sheet of paper mean. One can only hope the additional clarity substantially improves the picture. However, it is very difficult to be hopeful.

    The fiscal cliff contrived by President Obama and the Congress over the past two years creates a tremendous opportunity for Republicans and Democrats alike to come together on some simple yet profound, widely understood and commonsense reforms to the real drivers of the nation’s fiscal troubles—Social Security, Medicare, and Medicaid. Beyond disappointing, the House Republican counteroffer appears at best to suggest incremental tweaks to these programs. Without real entitlement reform—not just spending cuts—we will never fix the underlying problem.

    Real, substantive reforms are badly needed, as the Boehner letter affirms in observing “these reforms are, in our view, absolutely essential to addressing the true drivers of our debt.” They then go on to observe, “we recognize it would be counterproductive to publicly or privately propose entitlement reforms that you and the leaders of your party appear unwilling to support” (emphasis added). Rarely in modern American politics have more counterproductive, more foolish words been set to paper.

    In exchange for these incremental tweaks to spending, the Republican plan offers up what it calls “revenue through tax reform.” One hopes this means revenue arising from the additional economic growth that would pour forth from pro-growth tax reform. However, references to the Bowles plan suggest otherwise. They suggest instead revenues through tax deform, an anti-tax reform program of reductions in the availability of certain deductions and exemptions—without offsetting reductions in rates. While preferable in general to raising tax rates, this proposal largely dooms future efforts at tax reform based on the sound principle of broadening the tax base to lower the rates. Instead, this proposal would broaden the base, not to lower rates, but to raise revenues. So much for improved economic growth.

    Despite these thoroughly discouraging aspects, the Republican letter includes two encouraging statements. The first is the reassurance that House leadership continues to support the elements of the House Budget Resolution passed last year by the House. The House Budget Resolution assumed a fundamental overhaul of the federal tax system and reforms to federal entitlement programs, “ensuring they are sustainable for the long-term rather than continuing to grow out of control.” This is encouraging because it suggests the House Republican leadership still grasps what real solutions look like. Unfortunately, the letter prefaced this reference by comparing it in its practicality to the frivolous Obama proposal of last week.

    The second encouraging statement in the letter was in reference to higher income tax rates, “which we will continue to oppose and will not agree to in order to protect small businesses and our economy.”

    Despite these encouraging notes, the Republican counteroffer, to the extent it can be interpreted from the hazy details now available, is a dud. It is utterly unacceptable. It is bad policy, bad economics, and, if we may say so, highly questionable as a negotiating tactic.

    Posted in Economics [slideshow_deploy]

    37 Responses to Fiscal Cliff: House Republican Proposal Abandons Core Principles, Gains Little

    1. Robert says:

      Don't know if this is a question or a comment, but here goes. Does anybody see welfare spending as a budget control problem? I know that SS and Medicare are close to insolvency, but welfare spending outpaced both those programs put together in 2011! Maybe I just have not read the article, but what is The Heritage Network's view on this?

      Thank you

      • Bruce West says:

        Could you define welfare spending? Medicaid? TANF? what? From what I saw welfare was 12%, medicare 24%, Social Security 20%. Where did young welfare outpace old welfare? Isn't SS and Medicare welfare also?

        • William Schumacher says:

          Social Security and Medicare are not welfare. I have payed into these programs all my working life. I now colledt social security of which they take out about $200 a month from our social security payments for Medicare for my wife and myself. If social security was run by a private concern they would be in jail for fraud.

        • Bellerieve says:

          Bruce West, no Social Security is not Welfare, we, as employees have paid into Social Security all of our working lives ! You may consider Medicare a form of Medical Welfare, this was instituted in the '60's , I believe, however, America is one of the few countries which does not take care of it's elderly. Would you rather see our older generation starve due to lack of funds after retirment and then to be left to fall ill and have no medical treatment ?? There are a few areas in the Workforce where the employees do not pay into Social Security, due to their selection of employment, some employers' have opted out of Social Security. Our generation would not be in this position, had not the Government, in it's greed, raided our Social Security funds ! Our Social Security was used as a Slush Fund as they used those monies to fund other Government Programs or to delve out as they wished. I resent a Government who now tells us that it is OUR fault the country is now bankrupt and we are to pay for what they did ! No, no, I think the U.S. Government is where the blame falls, we, who have paid into Social Security have paid our dues and now we are being thrown under the bus !

      • mike says:

        So cutting something that is covered by a tax source and has not caused a penny to the debt is the place to start? So cutting the tax rate on those that make over $250,000 have saved how many jobs over twelve years? So those who made capital gains on a stock market that has gone from 6500 to 13000 over the last four tears do not want to pay taxes owed. So those who made profits on no competition bids on war move to other countries to avoid taxes. Those who have bought propery at fire sale prices and have rents and occupancy at record profits levels do not want to pay taxes they owe. So starting on the working class and taking SS and Medicare items they have paid for is the place to start? Figures do not lie but liers figure.

        • Bill says:

          Poor economics knowledge is very distressing and harms all of us. There is no government savings for SS. All SS is paid from the same source as any government expenditure; it is paid from the general fund. Today, we spend nearly twice revenue, creating new debt each year. Children and grandchildren are responsible for this inter-generational debt. Stock appreciation does not become real money gains until the appreciated shares are sold, at which time they are taxed. Crony capitalism is a problem with both parties and must be stopped. I look for good price deals all the time, don't you? SS is a ponzi scheme destined for collapse. There are better, smarter opportunities. You can read about them right here on Heritage's site, but you have to read them for yourself.

    2. Nate says:

      The Republicans should propose the needed entitlement reform along with tax cuts to the middle two income brackets, pass it in the House and call the Democrats on it when they refuse to cut the taxes on the middle class.

    3. hv franks says:

      why is everyone worried? The Fiscal cliff will never happen. If it did, major cuts in spending to the military industrial complex would take place. Do you honestly believe that the people who own Congress and the White House would allow that? This is just another ploy to ram higher taxes down the throat of the average American. You want to balance a budget? Stop policing the damn world, bring the troops home and put them on our borders (solve multiple problems there) abolish Homeland Security and the dispicable TSA. I'd say that would cut a few trillion with NO pain to the average citizen.

      • charles r. smith says:

        I'm with you. All that you said should have been installed on 912 after the WTC attack. Our troops first and formost mission is the defense of this country, not flailing away in lands of oil. We need to look for a person to lead this country that is not a politician.

    4. John East says:

      Why cant we get people in office with some back bone are they all corrupt? Stand up for right and wrong have some principles.We need to get rid of both parties and get common people to represent us who believe in what this country was founded on.

    5. John Decker says:

      How can the counteroffer be both "substantive" and "vague"?

    6. Franklin says:

      I swear I saw quite a few Mitt Romney commercials awhile back that criticized Obama for cutting spending on Medicare and also promised to restore that spending. I was, and remain, confused. I was of the impression that the GOP was interested in reducing spending, especially on entitlements, as this article supports. What does the GOP want in this area?

    7. Stirling says:

      The GOP is better off holding the line (as they did in the last 4 years). Any "compromise" will do more damage then standing their ground in both financial and reputation to voters (especially tea-party voters). If you don't stand on your principles you stand for nothing..

      • 848484 says:

        VERY WELL STATED!

      • Mike says:

        Now you're talking! No compromise. That's what the liberals expect of conservatives, not vice Versa. We conservatives are being told we must capitulate, not them. Nobody told them it takes two people to make a partnership, at least.

    8. BOB says:

      Give congress pay like they do on teachers, paid by job performace, in this case congress owes back to the American People their salary for the last 10+ years.

      • John Stolz says:

        Sorry Bob, but teachers don't get paid on performance, atleast not in Oregon. That is the problem. Absolutely zero government employees get paid on performance like in the private sector. You are dead on with your comment about Congress. They are the most overpaid, under performing group of people in this country.

    9. RAV says:

      Does everyone forget that the tax rates were cut, so in essence this "tax increase" is just doing away with the TEMPORARY tax decrease that was set? Cutting taxes is not a solution to all financial problems the country faces anymore than simply raising taxes is the answer.

    10. James says:

      The only thing that will hit the wealthiest is to cut and limit the deductions. Raising the rates only hurts those of us who don't have the luxury of high mortgage interest deductions and enormous charitable and religious deductions. Limit deductions to $50,000.00 and you will see immediate increases in the revenue flowing into the Feds without raising tax rates. The president's plan offers essentially no significant cuts in spending, but only a "promise" to address the matter in the future. We know how his promises work – vote "present" and let someone else take the heat!

    11. Hopefull says:

      Does anyone know the first year congress spent more money than what was in the US checkbook?

    12. John Stolz says:

      I disagree with those saying that closing/limiting deductions is not a tax increase. Of course it is. It increases the tax we pay which is a tax increase. We don't have a tax problem. We have a spending problem. The sooner our administration understands that, the sooner we can begin to solve our massive economic problems. CUT WELFARE/UNEMPLOYMENT/FOODSTAMPS and all the other social welfare programs incrimentally EVERY year and that will resolve many problems.

    13. Bobbie says:

      Tax the rich. A little more taxes on the rich. We need to tax the rich!! What that says to working class that eventually we will apply to government for our basic necessities since taxing the rich will have a triple down negative effect in employment, economy, revenue, income, freedom and independence. Why else tax the rich? What reason does he have that he couldn't correct the problems within government control by constitutional discipline instead of absolute denial?

      Why would any of the rich support taxing their money to government to take a cut from to give less to the needy? The freedom to give to the less fortunate as Mitt Romney and many good will of Americans charities are sincere examples until it loses all value going through the hands of government strangers to be dispersed discretely by government strangers, first. Why does Eva Longoria and other wealthy celebs trust the government over their fellow Americans?

      Obama doesn't have a governing right to force sacrifice and punishment with slander on anyone for the faults neglected in his governing control and to target the Americans that are exemplary to America's well being as if it's their fault is America the beautiful turned ugly by anti American forces.

      His only focus isn't on any solutions but tax the rich which isn't an option for America's recovery but a con to extend government power and control. America wouldn't be here if she were led by qualified people who respect to protect the American people's constitution.

      Just think if America had strong leadership in all respects of a constitutional government compared to what we have slipping in rules of their own. Under the American peoples' constitutional government we'd have no government costs or control involved in any aspects of our livelihoods and obligatory taxes would only reflect constitutional costs with a lot more freedom to live our own lives within our means our freedom acquires. For state government to have safety nets is one thing but to mislead people into an optional lifestyle depending on government, is traitorous. Stop the rule maker Obama and make him follow the rules made! We the people don't want it Obama's way! We the people want America's way! Follow her rules, man!

    14. The Rouge Element says:

      I posted this on other websites and I wish the repubs in the house would get in front of a damn camera and expalin it to the public. Here it goes: If I own a small business in which I make $500k in a good year and come tax time I file it on my personal income tax because it is my own small business. After all my deductions are taken for the business and its costs I am left with around $80k. Out of that I put a majority of it right back into the business so I can at least try to stay in the black. When the idiot in the white house wants to raise the taxes on the rich "people makein more than $250k a year, that is less money I have to run my business with. I employ 3 people and if taxes go up on me I will have to cut at least one to break even. I am not a millionaire but I understand that those making more than me do the exact same thing I do. Put the money they earn into their business that provides paychecks to those that work for me. Republicans have never been able to explain this to the people like they should. We the people want straight talk. Give it to us and we will listen.

    15. Carol,AZ says:

      "Core principles : Little gain?
      Oh come on: Just say the obvious..
      The Rep Party morphed into the party line of inaction.
      Certainly they have done this before , over this issue and many other issues., beginning with Speaker, Boehner. If you're looking for common-sense, think again.
      I look at the entire scenario as two evils that , by the minute, can't be differentiated, which one is, the lesser.
      By now we must understand that the differences, are very marginal .
      Do you really think that the small window of opportunity between now and the coming holiday , something solid will be put in place ?
      That belief is for kids who still believe in Santa Claus.
      We have fallen over the fiscal cliff and the news will be heard with the ringing in of the New Year.
      It's called no leadership, period.

    16. Joe Kaltz says:

      I think it is time to throw the Establishment Republicans out of the Republican Party or start a new party of Consttutional Consevatives who have the back bone to stand up for the Declaration of Independence, Constitution, Bill of Rights and the Federalist Papers. We need a party of leaders who put what is best for the country as founded and the "American Citizen" ahead of their own ambition and who do not care about being popular with the liberal media or the Washington Elites. Otherwise this country is lost and it will be just a matter of time before we are broke like Greece. The new Party could be called "The Constitutionalists Party".

      Joe, MI

      • Dan Meucci says:

        Amen, Amen!!!!!! Thanks Joe!

      • Kenet says:

        I agree, Joe, what is needed is "the Constitutional Party", which our so called President and Congress know nothing about the Constitution. Boener is now pushing the House to accept and love our Unconstitutional President. Personally, for my way of thinking, any President that totally ignores the Congress, the Senate as well as the House, that he ignores his obligations, and only knows how to spend trillions without any obligation or budget. Since taking office Obama has yet to provide a single budget. That act alone is showing the American people he is commiting acts of failure to abide by the Laws already set, and will continue to do so as long as he is in Office. I personally do not see even how the Democrats could tolerate such a "noodle brain President". I am sure there are a lot of Democrats that would like to see him gone too.

      • gm1919 says:

        Exactly. Check my post. i agree. I am sick of the establishment. Repubs and dems alike are in on the ruination of our great country. If we do not have a constitutional conservative party future generations will be living under tyrany not liberty.

    17. Chet Arthur says:

      I agree with Joe Kaltz; however, having a "third" Party would just insure that the big government liberials remain forever in control in DC. I suggest that we the people start a movement that would require any individual running for federal office pass a indepth exam on all of the documents Joe has listed. It least then we would know the individual at least knew how American became what we are; the greatest undertaking in the history of mankind. I am a registered R, however, when asked my stance I explain that I am a "Constitutionalist"!

    18. Ed Watson says:

      We need to move immediately to citizen representative and senators. These folks, chosen to serve similar to the way jurors are chosen, for a limited term and then return to their working life "back home". No more lifetime leeches on the government dole. They would be paid a salary like an officer, say a colonel in the military, while serving and then go home after their tour of duty. No more D's or R;s behind their name, rather an A.

    19. Dan Meucci says:

      Does anyone think, that our current RNC leaders have a clue as to how to communicate the problems of this failed administration? Our first problem is not either republicans or democrats but the idea that Washington has career politicians who spend decades on the public dole. Hence before worrying about our country and its
      core values, they worry about re election. So our Republican party continues to support a group of tired old politicians who continue to waterdown core values for votes..results instead of clearly communicating our conservative positions the people vote against us…
      Reagan communicated effectively to all people. Obama stick is strictly a community organizers strategy.
      He represents everything the conservative movement does as motivated by the greedy white rich against the blacks, latino, and poor, gays, women etc….They have effective used our inability to communicate effectively as a tool to show we have a hidden agenda…
      We need a new leader (like a Reagan) who can communicate effectively to all people and be brave enough to tell the truth about all facets of our problems….til that happens we will continue to fail!

    20. Blair Franconia, NH says:

      Ronald Reagan cut taxes from 71% to 28%. He did it by closing loopholes and doing away with deductions. Not
      by raising rates.

    21. guest says:

      The so called idea and wrong policy of taxing the rich amounts to hurting the small business owners of this country. Since when is making 250,000 a year exactly rich. Obama's policies are very clear and it is called create a wedge between the haves and the have not in this country. Why do we continue to hurt our small business owners in this country. Obama's policies hurt our country and when will people realize this!!!! Small business owners create our jobs. Obama is just against business because he believes that big big government can do it all. Well I for one think that hard work and a savings plan will help the individual. What we need is less food stamps, less welfare, and less government handouts!!!!

    22. Bellerieve says:

      The American People had better wake up and soon, we are headed down a path which some will still deny. Our Consitiutional Rights are being infringed upon at every turn ! I too believe that our elected officals are lining their own pockets and frankly could care less about the average Joe Blow Citizen, as long as they get their cut ! We do not have anyone on the Hill who has a back bone,they say one thing and do another.

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