Liberals Don’t Need Revenue to Grow Government Anymore

Thursday, January 17th, 2013 and is filed under Blog, Economy, Issues

Once upon a time, liberals were somewhat principled in their pursuit of a utopian dirigisme.  Sure, they always liked to play a bit of class warfare, but they fundamentally believed in taxing everyone.  After all, if you want a cradle-to-grave government-run society, it’s got to be purveyed by the broad populace. There simply aren’t enough rich people to raise the requisite funds for a rapacious federal monstrosity.  That’s why Walter Mondale openly campaigned on raising everyone’s taxes.  “Look at em, we’re gonna tax their a**es off,” he declared privately after his 1984 convention speech.

However, three things transpired over the past 20 years that completely changed the dynamic.  First, deficit spending has grown from just a supplementary to the welfare state to an equal partner along with tax revenue.  Hence, liberals no longer need more tax revenue to grow government.  They’ll borrow the money.  Second, Republicans won the tax debate, imbuing hatred for more taxes in the hearts of the voters.  Why should Democrats risk sowing the seeds of disquiet with tax increases, when they can accomplish the same goals with deficit spending?  Lastly, thanks to the Reagan and Bush tax cuts, a number of people pay little or no income taxes.  Liberals are wise enough not to mess with that, and in fact, seek to grow that demographic.

Taken as a whole, Obama and the Democrats decided to beat us by joining us.  Not only have they eschewed their broad tax hiking agenda, they couch their plans in the parlance of tax cutting.  Despite their public arguments about the need to raise revenue to deal with the deficits, they know that they can never raise enough revenue from the rich.  Yet, they figure they can have their cake and eat it too.  That’s why they pushed for tax hikes just on the “super rich.”  To that end, they are able to continue their spending binge (through deficit spending) while focusing their tax hikes on such a small percentage of people, most of whom are unknown to the average voter.

It is clear that Obama wanted the $450,000 income threshold all along.  He knows that $250,000 is not so much money, and will affect a large chunk of voters in high-cost regions of the country.  Again, why sow the seeds of unrest with a broader demographic when you can accomplish the same thing with deficit spending, while still offering the façade to those low-information voters of sticking it to the rich and raising revenue?  Obama only used the $250,000 threshold as a smart negotiating tactic of asking more than you want (something Republicans will never understand).

This was never about raising revenue; it was about growing government, while showing the public that government has the power to take what it wants, albeit – by choice – only from the super-duper rich.

Many Republicans view the fiscal cliff tax hike as a victory for conservatives.  After all, the Bush tax cuts were extended for 99% of the population.  Here’s what George Will had to say about the fiscal deal last Sunday:

“I think people will look back on this [as a] deal where liberalism passed an apogee and went into decline for the following reason: The Bush tax rates were passed in two tranches, 2001 and 2003. In 2001, only 28 Democratic members of the House voted for them. In 2003, only seven did. And they did it for only 10 years they were to expire. Under this deal, 172 House Democrats voted to make Bush rates permanent for all but one half of 1 percent of American taxpayers. What that means is that they can no longer tax the middle class.”

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Thank Bipartisan Committee Work for Corporate Welfare in Tax Bill

Thursday, January 3rd, 2013 and is filed under Blog, Taxes

Throughout the tax debate, we heard righteous indignation from both parties regarding the need to close up special interest loopholes in the tax code.  Yet the special interest loopholes were the only items preserved in the cliff tax bill.  The entire package of over $40 billion in corporate subsidies and green social engineering was taken from a Senate Finance Committee Bill, which unfortunately, was supported by 6 Republicans last August – Orrin Hatch, Mike Crapo, Olympia Snowe, Chuck Grassley, John Thune, and Pat Roberts.

Included in the committee bill, which ultimately became a part of the fiscal cliff bill, was $18 billion worth of green energy pork.  The most prominent item was the Production Tax Credit, the equivalent of the Earned Income Tax Credit for Big Wind.

Other special interest handouts include the following:

  • A credit for energy efficient upgrades to homes.  It covers 10% of the costs of qualified home efficiency upgrades.
  • A credit to cover 30% of the costs for installing refueling stations for alternative-fuel vehicles at a home or business.
  • A cellulosic biofuel producer credit of $1.01 per gallon, which would be expanded to include fuel produced from cultivated algae, cyanobacteria or lemna.  Yes, this is Obama’s algae energy pipe dream.  There’s also a special depreciation allowance for cellulosic biofuel plants, which would be extended through the end of next year.   As we’ve noted before, cellulosic biofuels are non-existent on the commercial market, yet these subsidies will help strengthen the mandate to use this phantom fuel.  Oil and gas companies that decline to blend in this phantom fuel must incur penalties.
  • A credit of $1 per gallon for biodiesel, which would be extended through 2013, retroactive to the end of last year.
  • A credit for construction of new energy-efficient homes that provides contractors $1,000 to $2,000 per home. The credit would be extended through 2013, retroactive to the end of last year.  Talk about distorting the housing market.
  • Energy-efficient appliance credits that range from $25 to $250 per appliance for the production of energy-efficient clothes washers, dishwashers and refrigerators.
  • A 50-cent per gallon credit for alternative fuel mixtures, which apply to liquefied petroleum gas, compressed or liquefied natural gas, and coal-to-liquids fuels.
  • An individual income tax credit for plug-in motorcycles.

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The Coming of the Perpetual Milk Cliff

Wednesday, January 2nd, 2013 and is filed under Blog, Issues, News

Only in Washington could they concoct a scheme in which we are forced to increase spending on market-distorting subsidy programs lest we suffer the pain of further market distortions through government price controls.  Yet, that is the case with the so-called dairy cliff that would have been crossed had Congress not passed an extension of the current farm bill.

Last year, conservatives successfully blocked the enactment of a new 5-year farm bill, which would have permanently locked in Obama’s food stamp spending levels and would have created new crop insurance and price support programs.  Unfortunately, proponents of the bloated farm bill have always been able to hold an archaic bogyman over those of us who seek to stymie the farm bill.  Pursuant to a silly 1949 act of Congress, every time we fail to renew expiring farm programs, the government must begin imposing Soviet-style price controls on milk by decreasing supplies through massive purchases of milk, butter, cheese, and other dairy products.  Under permanent law, the USDA would begin purchasing dairy products at a rate of $38.54 per hundredweight, more than double the current price ($18 per hundredweight).  This market manipulation could double the price of milk, dairy products, and everything else up the food chain.

In a sane world, both houses of Congress would convene and repeal this inane and outdated law within a few minutes by unanimous consent.  That way we could debate a long-term farm bill without having the sword of the 1949 law brandished over our necks and forcing Congress to rush through bad legislation.

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Is There Really a Difference Anymore?

Wednesday, January 2nd, 2013 and is filed under Blog, Debt, Taxes

Twelve voices were shouting in anger, and they were all alike.  No questions, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.  [Animal Farm, last paragraph]

Republicans were ushered into power in 2010, buoyed by limited government populism spawned by the Tea Party.  They publicized a document called the GOP Pledge to America.  You should take some time to read it.  There are many interesting declarations in there.  You’ll find lectures about the need to let the legislative process work; about the 3 day legislative transparency rule; about not spending most of the time on banal suspension bills; about cutting taxes; about getting rid of Obamacare; about cutting spending.  Interesting indeed.

Republicans began their session in 2011 promising an immediate cut of $100 billion in spending.  They lied.  Ultimately, they only cut $352 million off of the FY 2011 budget.  How fitting it is for them to end the 112th Congress by increasing spending by $330 billion…along with hiking taxes, letting every aspect of the Obamacare tax hikes slide, and obviating our leverage with the debt ceiling by agreeing to a sequester trap to coincide with the next battle.

Yes, we know…wait until March, and they will really extract concessions from Obama…just like they did $2.1 trillion ago.  Except that they have already said they will never “allow us to default,” and they have communicated that fact to the Democrats.

Here is a spreadsheet of the voting tally from the Madison Performance Index.  Take a look at it, and try to decipher the pigs from the men.  Many of those who got us into this mess in the first place, including Cantor and McCarthy, joined the free ride and gave out hall passes to vote no.

Parting question: will Cantor and McCarthy purge themselves from their committee assignments for voting against the leadership scorecard?

Cross-posted from The Madison Performance Index

The House Must Act Now

Tuesday, January 1st, 2013 and is filed under Blog, Debt, Taxes

Well, we really stuck it to the rich at 1:39 in the morning.  Whew, now we can breathe a sigh of relief.  The 40 Republicans who voted for Obama’s stimulus bill had to swallow hard voting for over $100 billion in new spending just in 2013, but at least those of us who are not super rich won’t see our taxes increase this year.

Oh wait.

The payroll tax rate will revert back to $6.2% for every worker.

Oh wait, the five Obamacare tax hikes, including the 2.3% tax on every medical device under the sun will go into effect.

So Republicans agreed to sell their souls to the devil for what?  It is being widely reported that they traded $41 in tax hikes for every dollar of spending cuts.  But it’s even worse than that.  This ratio comes from the CBO, which scores H.R. 8 as a $620 billion tax hike and a $15 billion spending cut.  Keep in mind that the CBO works with a ten-year budget frame.  So if Congress agrees to spend $100 billion in one day, yet offsets the cost over 10 years of projected savings, they would score it as deficit neutral.

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McConnell Fiscal Deal: Tax Hikes, Green Pork, Stimulus, Oh My

Monday, December 31st, 2012 and is filed under Blog, Debt, Obamacare, Taxes

Surprise surprise, they have a deal to avoid the politicians’ cliff.  Who didn’t see that coming?

Once again, just like with the debt ceiling deal in 2011, Mitch McConnell found his dance partner in Joe Biden to cut a bad deal for conservatives.

Here’s an enigmatic riddle for you: what happens when Republicans publicly obsess about the degree of tax increases they are willing to accept without a commensurate demand for spending cuts?  You get tax hikes and no spending cuts!  In fact, we will spend even more as a result of this deal.  Haven’t we seen this rodeo a gazzilion times?

As if on cue, negotiators have agreed to raise the top income tax rate from 35% to 39.6% on individuals earning more than $400,000 and married filers earning above $450,000.  They will also see their dividends and CapGains tax rates go up to 20%.  In addition, the Death Tax, which should be completely abolished, will increase from 35% to 40% on all assets above $5.12 million.  There will be a permanent AMT patch as well, as if there already wasn’t one anyway.

What about the spending side?  Here are the spending increases:

  • A $30 billion one-year extension of Medicare doc fix
  • A $30 billion one-year extension of 73 week unemployment insurance. Over the past four years, the federal government has collected roughly $192 billion in federal unemployment payroll taxes, while paying out $510 billion in benefits.  Evidently, that’s not good enough.
  • Stimulus Refundable Tax Credits:  Somehow, a 5-year extension of Obama’s stimulus refundable tax credits got inserted into the deal.  So he calls a tax cut a handout, and a handout a tax cut.  These latter three provisions alone will easily top $100 billion a year, dwarfing the $50-$60 billion in static revenue projections from the tax cuts on the rich.  So much for a balanced approach.
  • Green Energy Pork:  The irony is that while the rich earned every penny of their money, Obama refers to the current system – one in which the top 1% pay 37% of the taxes – as a handout to the rich.  Yet, this deal extends a true handout, the 2.2 cent per kilowatt/hour wind Production Tax Credit.  This is a refundable credit that can be claimed by any wind company that fails to generate a profit, of which there are many.

Of course, nothing is being done about the 5 major Obamacare tax hikes that are set to take effect this week, including the deleterious 2.3% tax on all medical devices, the millionaires’ surtax, and the 0.9% increase of the Medicare payroll tax.  It’s absolutely stupefying that Republicans couldn’t use this as a leverage point, after 16 Democrat senators, including Al Franken, wrote a letter requesting a delay in the implementation of this tax.

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Happy Debt Ceiling Day

Monday, December 31st, 2012 and is filed under Blog, Debt, Taxes

It feels like yesterday when John Boehner was bragging how he got 98% of what he desired from the deal negotiated to raise the debt ceiling in August 2011.  Yet just 17 months after Obama was granted a $2.1 trillion debt limit increase to preserve his reelection, we have breached the new ceiling.  In just 519 days, we’ve burned through $2.1 trillion in debt, for a total federal debt of $16.394 trillion.  Will Republicans grant him another lifeline through the end of his second term?

We are on the cusp of repeating the timeless mistake of raising taxes in exchange for notional spending cuts, or perhaps, not spending cuts at all.  We are also on the cusp of raising the debt limit yet again.  At the very least, we should admit that the debt deal of 2011 was a failure, so as not to repeat the same insanity.

Since we ‘solved’ our nation’s debt crisis last August, we’ve accrued over $4 billion in new debt per day, over $168 million per hour.  The amazing thing is that revenue has actually increased over the past fiscal year relative to the previous few years.  Yet we are still having this national conversation about raising taxes on a handful of millionaires, a proposition that would only net enough revenue to cover no more than 2 weeks of debt, even according to a static analysis that fails to account for economic effects of the tax increase.

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Legislative Lowdown: This Week in Washington

Monday, December 31st, 2012 and is filed under Blog, News, Taxes

Due to the Holiday weekend, we will not be sending out our weekly legislative bulletin, the Madisonian.  Nonetheless, this is a busy week.  Here is what we must prepare for.

This will be one of the most unique weeks in Washington.  For the first time in 4 decades, a previous Congress and a new Congress will operate during the same week.  Due to the eleventh hour work on the tax cliff spilling into the new year, the members of the 112th Congress are still in town, even as the new members of the 113th Congress are sworn in this Thursday.  This creates a double opportunity for politicians to stick us with bad legislation.

Tax Cliff – In the final day before the Bush tax rates are scheduled to expire, Republicans and Democrats are actually not too far apart in their respective positions, despite failing to strike a deal.  It’s amazing how they pretty much agree on all the fundamentals, even as they haggle over the minutia.  The bottom line is that they are both willing to raise taxes on upper-income earners while offering no meaningful spending cuts.  They have also agreed to let the sequester take effect for now.

Harry Reid is offering to raise the rates (income, capital gains, and dividends) on individuals earning more than $360,000 and families earning more than $450,000.  Republican senators countered with an offer to raise the threshold for individuals to $450,000 and families to $550,000.  Meanwhile, Mitch McConnell and Joe Biden are negotiating a deal which would use the threshold of $400,000 for individual filers and $450,000 for families. Republicans are still demanding that the current Death Tax rate – 35% at a $5 million exemption – be extended permanently, while Democrats want the rate to go up to 45%.  For their part, Republicans have agreed to drop their demand that Social Security benefits be adjusted to reflect a slower rate of growth as calculated by the “chained CPI.”  The emerging deal would also throw in yet another extension of the super long-term unemployment benefits without paying for them.

The irony is that none of these plans would bring in a significant amount of revenue, even for those who subscribe to the notion that we should deal with the debt problem through tax increases.  So once again, we are headed for a deal where taxes go up, spending stays the same, and the debt will continue to increase.  Remember that even the paltry sum of revenue that is projected to come into the Treasury from the tax increases is unrealistic because those estimates are not factoring in the damage to the economy created by such tax hikes.

Meanwhile, nothing is being done about the 5 major Obamacare tax hikes that are set to take effect this week, including the deleterious 2.3% tax on all medical devices, the millionaires’ surtax, and the 0.9% increase of the Medicare payroll tax.

Then there is the debt ceiling which will be breached this week, but the Treasury will enact “extraordinary measures” to maneuver some debt payments in a way that will forestall the deadline for another two months.  At present, neither party has proposed a credible plan to limit government in a way that will ensure this will be our last debt limit increase.  Conservatives must oppose any effort to raise the debt limit without such a plan.

Finally, we must remember that January 1 is not the end of the story.  It’s not a cliff.  Congress can always extend the rates retroactively, and if that is done within the first month or so, there will be only minimal disruptions to payroll.  The idea that there must be an agreement by midnight is absurd.

Farm Bill/Milk Price Controls

Conservatives successfully blocked the enactment of a new 5-year farm bill, which would have permanently locked in Obama’s food stamp spending levels and would have created new crop insurance and price support programs.  Unfortunately, proponents of the bloated farm bill have always been able to hold an archaic bogyman over those of us who seek to stymie the farm bill.  Pursuant to an insane 1949 act of Congress, if an extension of the 2008 farm bill is not passed, the government must begin imposing Soviet-style price controls on milk by decreasing supplies through massive purchases of milk, butter, cheese, and other dairy products.  Under permanent law, the USDA would begin purchasing dairy products at a rate of $38.54 per hundredweight, more than double the current price ($18 per hundredweight).  This market manipulation could double the price of milk, dairy products, and everything else up the food chain.

In a sane world, both houses of Congress would convene and repeal this inane and outdated law within a few minutes by unanimous consent.  That way we could debate a long-term farm bill without having the sword of the 1949 law brandished over our necks and forcing Congress to rush through bad legislation.

However, Congress is not sane, and they have no plans to repeal the law.  They are still trying to block the law by passing a new extension of the farm bill – yet another oblique and temporary panacea!  Last week, House leaders offered three options, including an extension of current farm programs until the end of FY 2013, along with two 30-day extensions as alternative options.  The problem with the extension is that it continues to offer direct subsidies to farmers, something that both sides have already agreed to terminate.  It also includes $850 million in dubious emergency funding, which is not offset with other savings within the fiscal year.  Furthermore, this bill contains its own version of milk price supports and dairy regulations, which were referred to as “Soviet-style” by none other than Speaker Boehner.  Finally, this bill does nothing to end the ridiculous practice of pairing food stamp spending with agriculture programs.

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It’s all About Trust

Friday, December 21st, 2012 and is filed under Blog, Debt, Taxes

If you listen to many in the Republican intelligentsia, you will hear this accusation that conservative rebels destroyed the Republican Party.  The reality is that nothing changed after the defeat of Boehner’s plan B other than Republicans not buying into the premise of raising revenue for the federal leviathan.

Before last night’s vote, we faced two possible outcomes; either we go over the cliff (which is not even such a cliff because rates could always be extended retroactively) or Boehner was going to cave on 90% of what Obama wanted.  The same thing applies now.  Boehner was never going to stand by his plan.  And if it was worth voting for Boehner’s plan, which according to their logic represented a tax cut for 99.81%, then it was worth voting for Obama’s plan, which, by the same logic is a tax cut for 99% of taxpayers.

This all gets back to the issue of trust, not the issue of compromise.  Most of us would be willing to compromise on some level if we knew there would be some point at which Boehner would hold the line and fight for his own position.  Instead, we saw him regress from no revenues to yes revenues, albeit through capping deductions; then form no marginal rate increases to yes marginal rate increases, albeit for over $1 million in income and no debt ceiling increase.  With Obama remaining firm against this plan, and Boehner giving away the kitchen sink at a rapid pace, why should rank-and-file members have trusted him that he wouldn’t pocket their huge concession on the tax issue for a worse deal?

Well, maybe we should have trusted Boehner anyway, you might say.

But past experience is the best indicator of the future, and we’ve seen this exact same rodeo before.  Let’s review the story of the debt ceiling for the millionth time.  In 2011, Republicans had remained firm behind their Cut, Cap, Balance plan just like they did until now with H.R. 8 – full extension of the Bush tax rates.  And similar to what he tried tonight, Boehner unilaterally proposed a compromise “best we can get” bill that jettisoned Cut, Cap, and Balance (CCB), although it still had some saving grace because it forced a balanced budget amendment at least for the second tranche of the debt limit hike.

Despite the fact that we all warned that Boehner would never stand by the plan and that they’d be breaking their CCB/debt ceiling pledge for nothing, they passed his bill.  Yes, unlike this time, there weren’t enough intransigent, knucklehead, knuckle-dragging, Tea Party rubes who were willing to block it.  Even though not a single Democrat supported it, the bill passed 218-210.  They all rallied behind Boehner to “strengthen his hand” in the hopes of getting a good deal.  Well, less than 24 hours later, he announced the grand bargain, which gave Obama a $2.1 trillion blank check with no balanced budget amendment and a defense sequester trap that they are dealing with to this day.  Boehner said at the time that he got 98% of what he wanted from the deal.

Those of us with a head on our shoulders knew he had no intention of ever standing by his plan B back then.  The initial vote was merely used as a ploy to pocket the willingness of conservatives to break their pledge on the debt ceiling.  This bill last night was no different, except that the consequences of buying into Obama’s tax premise would have been much worse in the long run.  As Rep. Tim Scott said last night, “we must focus on cutting spending. If the conversation is starting with revenues, we’re having the wrong conversation.”

So you see, it’s all about trust.  Had Boehner acted in good faith and kept his @#$% on his own line last time, more of us would have supported a painful concession.  Had he stood by his deal last time, maybe we’d be willing to give in more on the tax issue, knowing that he’d fight to the death over the debt ceiling.  But he did not stand by his own plan for even one day, and that is precisely why we are facing yet another debt ceiling just 17 months later – one which he will never have the guts to engage in brinkmanship.

There’s always a need to compromise, but compromising on such important issues requires an inviolate degree of trust from the other side.  That trust is not there.  And none of the Boehner apologists who are denigrating us have given us any reason why we should have trusted him this time. It’s as if the debt ceiling fiasco never existed.

Cross-posted at RedState.com

Action Alert: Stop the Boehner/Obama Tax Increase To Nowhere

Thursday, December 20th, 2012 and is filed under Blog, Taxes

Later this afternoon and into this evening, the House will debate and vote on John Boehner’s plan to let the tax rates go up on millionaires.  This is a plan that was originally hatched by ultra-liberals like Chuck Schumer and Nancy Pelosi.

After 20 years of fighting against tax increases and rightfully arguing that we have a spending problem, Republicans are willing to buy into the notion that we must raise revenue from new taxes.  Worse, they are doing so in return for absolutely nothing; no balanced budget, no entitlement, reform, no reductions in wasteful government.

The new tax revenue will continue to be used to feed the rapacious appetite of the federal leviathan.  Moreover, Democrats will celebrate that Republicans have agreed to their premise of breaking their ‘no new taxes’ pledge.  They will pocket this concession and demand more tax increases now and in the future.

Finally, there is the problem of Obamacare.  Republicans have agreed to allow some tax rates to go up without demanding a cancellation of the 5 new Obamacare tax hikes that are slated to take effect January 1.  That is the real fiscal cliff.

Ignoring the Obamacare taxes as part of the final deal is outrageous.

The House will vote on the procedural motion to commence debate around 2:30 PM E.S.T. and will vote on final passage of the tax bill (H.J. Res. 66) at around 7:30 PM.  We can defeat this bill with just 25-30 Republicans standing on principle.  Please call your members of Congress and ask them to vote no on Boehner’s tax bill.  Here are some wavering members that need to hear from We the People:

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