Sunday, December 23, 2012

Obama Drives House Over Fiscal Cliff For Holidays

After Boehner realized that most of the fiscal conservatives in the House weren't going to back his "Plan B", he pulled the bill.

Then again, Boehner thinks he is Tip O'Neil playing to Obama as Reagan. In reality, Obama is so far opposite of Reagan that one may call him the "anti-Reagan". Tip O'Neil had a backbone and, despite being a blue-dog Democrat, was further right-leaning than Boehner. Boehner has the spine of a wet sea-sponge. He is also a blue-dog socialist in RINO clothing. It was not Boehner's leadership that averted making a bad deal with the socialists. It was the hardline leadership of the TEA Party backed representatives who told him "no".

Most of the House socialists Democrats weren't going to vote in favor of is either. They were going to fall in lock-step with Obama can call for higher taxes on anybody making more than $400k a year. The reality is that the higher tax rates on households making over $250k a year would cover the out of control government spending for only about eight days.

So, without a compromise or a new tax bill implemented, the House of Representatives closed shop and headed home for the Holidays. Some of the rhetoric spoken as they headed out the door attempted to place the task in the socialist Democrat-led Senate.

Some readers have asked for an explanation on this "Fiscal Cliff". Before discussing where we are now and what we may see happen, let's examine what this "looming financial disaster" is.

I studied economics, but am far from an expert. I read the experts and apply some common sense to that data and analysis. So, this is my understanding of  the "Fiscal Cliff".

First, we have  a huge national debt. It is over $16 Trillion. Since Obama took office, it has increased by nearly $6 Trillion. The government is spending way more than it is receiving in revenues.

That fact is compounded by the fact the government has been operating without a budget for nearly four years now. In 2008, under President Bush, the federal legislature passed its last budget. That budget was meant to last until October 1, 2009. However, the so-called "stimulus plan" trumped that budget, tossing it in the fire pit.

Under Nancy Pelosi, the House pushed through a spending bill to allow the government to spend our money without a budget. This policy is known as "pay as you go". What it really amounts to is that, since 2009, the federal government has been spending paycheck to paycheck, taking out new loans and maxing out new credit cards to cover an ostentatious standard of living. Basically, it's been spending money it doesn't have. It is about the same as a college student taking out $50k a year in student loans, paying $20k a year in tuition, and using the rest to get drunk, party, buy a new car, and pay the rent while working 15 hours a week at minimum wage only to take out another loan that size the next school year. Well, school is over. The student had a barely passing GPA and has only "Senior Fry Cook" for work experience. Now the government is faced with those maxed-out credit cards and a huge debt with no source of income in sight to pay down that debt.

Well, the government has reached its credit limit. All of the cards are maxed-out and  it isn't eligible for any more loans. This credit limit is called the "debt ceiling". In effect, the government set its own credit limits through legislation,  because there are a few loan sharks out there, such as China, who may be willing to lend more, at ridiculous interest rates. Some wish the government to take out more loans from the sharks, which will lead to our government becoming indentured to those sharks. Others want to avoid that and hold onto national sovereignty.

In addition, during  the Bush Administration, they applied some supply-side fiscal policies in cutting tax rates. The cuts may well have been what kept the first recession dip from heading straight into depression. Each year, congress has renewed those tax cuts. In January 2013, they are set to expire unless renewed. So, there will be income and capital gains tax increases on everybody.

Well, not everybody. More and more people, due to harsh economic conditions and poor employment opportunities, are unemployed or under-employed. Many of them are receiving government subsidies for food, housing, and utility bills. Even more have given up seeking employment and are taking Social Security Disability checks claiming depression as their disability. Most of those people are not paying any income taxes. They may see the money taken out of their paychecks. However, come April, they see the federal government paying back the majority of that interest free loan. In many cases the "earned income tax credit" will return those withheld funds plus an additional amount. In those cases, they have payed negative taxes.

So, we have a record number of  people on the government handout dole. That means more government spending and less revenue.

Add to this the 21-27 new taxes, depending upon employment situation and income level, the PPACA contributes. Many of  those new healthcare-related taxes are set to start in January 2013. This will lead to increased health and medical insurance costs for many middle-income wage earners and up. Ben Howe calculated how much his will increase in 2013. The approximate increase he published on Facebook and Twitter was $3600.00 for the year. For many in the middle-income bracket, that is a month's pay in increased cost of living.


So, everybody's taxes are about to go up. Companies and single-proprietor small businesses won't be able to afford to hire new people. In fact, they will probably have to cut back. That will mean less revenue for the federal government. Then you have out-of-control spending with bills about to come due. That is the fiscal cliff, as I see it.

This is exactly what Obama and the socialists want. They hope it will lead to uneducated and ignorant citizens rising up and calling for him to step in and save them from themselves and the evil conservatives who would love to see them work, prosper, and achieve. He wants this as license to continue to spend the country further into bankruptcy and fiscal ruin. He wants this so he can claim that capitalism doesn't work even though it is socialist infringements upon capitalism that have caused the problems in the first place.

So, what is the answer?

Well, first the government needs to live within its means and stop spending money it doesn't have. Next, it needs to find a source of revenue that will provide enough for it to make payments on what it owes and to meet the costs of living, the basic necessities.

According to Article 1 Section 7 of  the US Constitution, all tax legislation must originate in the House of Representatives. With "Plan B" being tossed, the House has left the so-called "Bush Tax Cuts" to expire. So, tax rates will go up. This will not raise the revenue needed to cover even the basic costs of living, much  less the ridiculous spending on non-essentials.

The Senate can propose appropriations bills. In essence, they can still pass a budget and cut spending. That bill could still go to the House. However, they cannot propose a tax bill to increase revenue.

With that in mind, the House not passing a "bad deal" that would raise taxes on just one segment of the population is not a bad political move as long as they do the job of publicizing why. No, there will not be an increase in federal revenues overall. There will be for a short time until the economic conditions deteriorate and more people drop out of the workforce. Companies will not expand. GDP will not grow. It may even shrink.

This forces legislation in the near future to concentrate on budgeting and cutting spending.

That leads to the next round of arguments.

Many would  say that handouts and subsidies are necessary spending. That will be the drumbeat of the left. It will pull on the emotions of those on the public dole. We need to feed  those unwilling to feed themselves, right?

The US Constitution outlines what necessary spending really is. It states that congress must appropriate and budget for national defense and  the military. It also states that congress may appropriate in order to defray the costs of running the government. All other spending is discretionary.

That brings the arguments of Social Security and Medicare. Well, people are taxed for those things outside of their income taxes. However, the federal government is stupid enough to drop those funds into the "general account". In reality, it owes that money back to those who paid it once the time comes. For Social Security, that is sometime after those who paid into it reach 65 years of age. That money is not federal revenue. It should not be appropriated as though it is. In reality, those are private funds that the federal government has been mismanaging for 50+ years. If a private financial manager treated retirement fund investments the way the federal government treats Social Security, they'd be tried for fraud and embezzlement. Then they'd be jailed for decades. The same goes with Medicare if treated as though it were a Health Savings Account (HSA). That is why conservatives do not want to cut either. Socialists don't want to cut them because they falsely propagandize these funds as though they are the government taking care of our senior citizens.

So, Veterans' Benefits, Military Pay and Benefits, Military Training and Readiness Funds, Social Security, and Medicare are off the table. That leaves trillions of dollars in wasteful spending up to debate. Now, the socialist Democrat-led Senate will have to sit down and look at its daily expenses and start deciding what it really needs, and what has been part of decades-long of irresponsible borrowing and spending.

So, this coming year, citizens can look forward to a lot less disposable income even if their base pay rises by 10%. The government will have less revenue to play with and nobody to borrow from, at least responsibly. It's time to cut that budget. It's time to see if Congress is willing to run the government the way most middle-income-bracket households run their homes. Food? Check. Electricity? Check. Gas? Check. Rent? Check. Car loan payments? Check.  Gun, car, and home maintenance funds? Check. Healthcare fund in case Joey gets sick or breaks an arm? Well, no, we cannot afford the co-pays with the rise in premiums and increased deductibles. Let's pray nothing happens. Jilly needs braces. Crap. Do we have enough to go to Six Flags? No. But we might be able to afford to renew our Netflix subscription if we cut it to 2 movies at a time rather than five, and that's if we cut out our weekly splurge at Starbucks. 

Chances are that they will go to Six Flags, Sea World, Disneyland, and Legoland. They will splurge on buying everybody funnel cakes and overprices greasy pizzas. Then they will spend the next 3 years borrowing to make the mortgage payments.