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  • Fiscal Cliff Solutions: Soar Over the Cliff or Kick the Can

    Kicking the can is the least repugnant remaining resolution to the fiscal cliff. The only alternatives appear to be the Republicans’ unconditional surrender on income tax rates (and conceding their principles) or simply going over the cliff.

    The story is now a familiar one. Congress and the President conspire to delay every conceivable difficulty until after the election; not just Taxmageddon and the rest of the fiscal cliff, but also the farm bill and much more. With the election in the past, the man-made crisis unfolds on schedule.

    The essential lines in the sand in this conflict have not changed for years. The President’s position is simple—a “my way or the highway” approach under which Republicans must capitulate on income tax rate hikes and keep all other serious issues off the table.

    Never mind that Obama already raised taxes on upper-income taxpayers through the 3.8 percent Medicare surtax imposed under Obamacare. Never mind that tax rate hikes would weaken an economy stumbling so badly the Federal Reserve doubled its risky efforts to keep the economy from recession. Never mind Obama’s approach would likely put the kibosh on any hopes for tax reform. Never mind the resulting revenues would be a small drop in a very big bucket compared to projected budget deficits. Never mind that the only justification for higher taxes is spite and envy to be exercised through the extortive power of the federal government.

    In his view, President Obama ran for re-election on, and now has a mandate for, raising income tax rates. In fact, his mandate is solely to continue to press his case. Ours is not a parliamentary system, and Obama is not the prime minister. And so he faces the pesky reality that House Republicans ran opposing higher tax rates and they, too, were returned to Washington in the majority to press their case. Their mandate is no greater, but certainly no less than Obama’s.

    Nor does President Obama evidence any interest in dealing with the real budget issues facing the nation, namely our unsustainable entitlement programs. There is no real dispute except by the radical left that these programs demand serious, substantive, cost-reducing reforms. But President Obama is having none of it.

    So now we face these bleak alternatives—raise income tax rates or go over the fiscal cliff, both of which inflict the dual indignities of vastly higher taxes and an even weaker economy, possibly even recession—or kick the can into early 2013 in the hope of finding a more sensible solution.

    What exactly does kicking the can mean in this context? First, it means delaying the fiscal cliff, in its entirety, but not for long. Legislation keeping the government running, signed by President Obama before the election, expires March 31. Some legislation is sure to pass to prevent an indefinite government shutdown. That marks a good decision point for the fiscal cliff as well.

    Kicking the can means raising the debt ceiling, but only enough to allow the government to continue to operate until just after March 31. The President’s demand to set aside the debt ceiling is pure fantasy on his part.

    Kicking the can also means instating an Alternative Minimum Tax patch for 2012, thus avoiding an unexpected tax hike this spring averaging $2,250 for some 28 million taxpayers who otherwise would not owe AMT, and an average $5,500 tax hike for the 4 million who are stuck on the AMT even with a patch.

    And kicking the can means delaying the deep cuts to payment rates for doctors participating in Medicare. Despite the President’s see-no-evil posture, Medicare is in real trouble, but destroying the program by driving doctors out is no way to fix it.

    This strategy means we avoid the cliff and live to fight another day, as soldiers are wont to say. But it keeps the pressure on to negotiate in good faith and to come up with a resolution, because some legislation will have to pass by the end of March to keep the government in operation.

    Policymakers have put us in this terrible position through the nasty habit of kicking the can—avoiding difficult policy decisions. What is proposed here—another short-term kicking of ye olde can—is akin to the “hair of the dog” prescription for hangovers. It is not a good solution, but sadly, it is better than the only available alternatives.

    Posted in Featured [slideshow_deploy]

    5 Responses to Fiscal Cliff Solutions: Soar Over the Cliff or Kick the Can

    1. Johnny says:

      While the politicians in Washington try to come up with a palatable way to withhold Social Security and Medicare benefits from the American taxpayers who have paid into the system for years, they ignore the fact that there are many Federal employees who draw not one, but two civilian Federal retirements. I am talking about employees of what we now know to be a corrupt organization, the Secret Service. There are numerous retired SS agents as head of Offices of Inspectors General who are drawing Federal funded retirements and earning six figure incomes; after working a few years for an IG, these people can draw a second Federally funded retirement. To add insult to injury, these people have historically hired their retired friends (cronyism), their own relatives (nepotism), and children of their friends (nepo-cronyism). These are the people Congress and the President entrust to ferret out Government waste and abuse – it's no wonder we are headed over the cliff. Congress and Mr. President – clean up the mess in your own backyard.

    2. pete says:

      Go over the cliff and don't back up.

    3. M Matthews says:

      It is very frustrating. Makes you wonder if we should just give up, and let the people see what they re-elected. Problem is, if they paid attention, they wouldn't have done that.

    4. Rose, Texas says:

      Go over the cliff and perhaps Americans who when asked about the fiscal cliff are clueless as to what we are even talking about will get a first hand education. Perhaps those who think this administration walks on water will discover that while they walk they've tied the anchors to our feet and those of our grandchildren. Unfortunately no matter what we do, those of us who are paying attention and are supporting those in this country only interested in immediate gratification will also bear the consequences of leaders who are either deliberately fundamentally remaking America or are too lame to stick to their principals when it truly matters.

    5. Pingback: Merry Christmas : Morning Bell: Conservatives Stand Their Ground

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