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Left Rushs to Blame the GOP for S&P Downgrade

By: Erick Erickson (Diary)  |  August 5th, 2011 at 09:06 PM  | 

RESIZE: AAA

The S&P has downgraded American credit from AAA to AA+, the first time in history. The left is scrambling to blame the GOP for this and is fixated on one paragraph

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.

The issue here, however, is that while present law presumed the GOP tax cuts would go away, the policy presumption is that they would get extended. Likewise, this is not blaming the GOP. This is a statement of reality that the GOP wasn’t going to raise taxes.

Consequently, because the GOP refused to raise taxes, the alternative needed to be more cuts.

And S&P clearly believes that the cuts the debt deal made were not enough. And who opposed big cuts? Why yes, a guy named Barack Obama and the Democrats.

We view the act’s measures as a step toward fiscal consolidation. However, this is within the framework of a legislative mechanism that leaves open the details of what is finally agreed to until the end of 2011, and Congress and the Administration could modify any agreement in the future. Even assuming that at least $2.1 trillion of the spending reductions the act envisages are implemented, we maintain our view that the U.S. net general government debt burden (all levels of government combined, excluding liquid financial assets) will likely continue to grow.

The Democrats can spin this as blaming the GOP all they want since they clearly got outplayed and still saw a downgrade, but the S&P downgrade has nothing to do with any specific policy. In fact, S&P says

Standard & Poor’s takes no position on the mix of spending and revenue measures that Congress and the Administration might conclude is appropriate for putting the U.S.’s finances on a sustainable footing.

The whole focus is on the debt burden. And if taxes are not going to go up, as is reality, spending must go down.

The left, spinning otherwise, is simply trying to escape blame.

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COMMENTS

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  • pat09

    After Obama and the Dems wasted one year in an orgy of political maneuvering at all costs to pass their holy grail, Obamacare, and after wasting over $1T to keep government employees employed under the guise of stimulus………….. the only reasonable conclusion any reasonable person can make is that failure by the GOP to allow tax increases has caused this Historic Event to Happen to Our Historic President.

  • bk

    Remember how often we heard that phrase during Bush’s tenure? No matter what happened – 9/11 (which was to blame on the Clinton/Gorelick ‘wall’ more than anything else), Katrina (remember how Bush blew up the levees?), the global meltdown (which was due to people like Barney Frank more than to Bush), and on and on – we were reminded that it was “on his watch” … and therefore his fault.

    That phrase disappeared in January 2009. Obama takes the blame for NOTHING. It’s Bush’s fault. It’s the tea party’s fault. It’s the Eurozone’s fault. It’s the Japanese tsunami’s fault. It’s the GOP’s fault. It’s (fill in the blank)’s fault. He’s offered up more excuses than he has played rounds of golf.

    Also, did anyone notice that the market recovered a bit today when Berlusconi said he’d consider the Italian equivalent of the BBA? That would be same BBA that Obama and the Democrats have said belongs in the trash. Amazing.

  • RealQuiet

    This will put the final nail in the coffin of the Obama presidency. You cannot spin this. Fiscal Dems will be appalled by this.

  • roscopico

    CCB was the only solution, yet the “peace in our time” crowd successfully lopped us at the knees.

    The Boehners and McConnells of this world cost us an extra few or several trillion. Thanks for nothing.

  • RetiredFF

    Chicago’s….BEAR market and downgrade of the USA credit.

  • http://www.riversedgealliance.org Robin Smith

    Democrats hiding behind Barack Obama are the true holder of credit for this mess.

    However, I don’t want to hear any Member of this current Congress in either Chamber speak one word if they voted for the Continuing Resolutions that kept funding Obamacare, et al and supported anything other than CCB in the Debt Deal.

    Stop Spending!

  • http://charlemagne-the-hammer.blogspot.com/ DerKrieger

    Dems will scream even louder for tax increases but the problem remains the spending. We all know that increased tax revenues will just lead to more spending so the GOP cannot cave on this, ever. If the socialists would stop the class warfare, their assault on business, their anti-energy campaign, and their totalitarian impulse to micromanage our lives and just get the HEL! out of the way the federal government would soon find itself awash in cash. But the party of envy simply won’t allow it. These people must be crushed, not merely defeated but crushed and driven from the field of battle.

  • carolina

    I just read somewhere that S&P is concerned about the growth of entitlements, especially medicare.
    Changes are going to have to be made, no doubt.

  • carolina

    I just read somewhere that S&P is concerned about the growth of entitlements, especially medicare.
    Changes are going to have to be made, no doubt.

  • vamoose

    2/7/2010 – Jake Tapper
    So on THIS WEEK, during our exclusive interview with Treasury Secretary Timothy Geithner, I asked if the U.S. is at risk of losing its triple-A bond rating.
    He responded bluntly: ?Absolutely not. And that will never happen to this country.?

    3/16/2010 – The Hill
    Despite warnings from independent bond raters over the country?s unsustainable fiscal situation, Geithner told a House panel on Tuesday the bond rating is safe.
    ?There’s not a chance that’s going to happen to our country,? Geithner said in response to a question from Rep. Hal Rogers (R-Ky.).

    4/19/2011
    (Reuters) – Treasury Secretary Timothy Geithner said on Tuesday there is no risk the United States could lose its top-tier AAA credit rating as politicians move closer to agreeing on how to slashing the massive U.S. debt.

    4/26/2011
    Fox Business reporter Peter Barnes began his televised interview with Treasury Secretary Tim Geithner two days ago with this question: ?Is there a risk that the United States could lose its AAA credit rating? Yes or no??
    Geithner?s response: ?No risk of that.?
    ?No risk?? Barnes asked.
    ?No risk,? Geithner said.

  • clintonformccain

    They all bailed in horror at the leftward lurch of the party in 2008.

  • snowshooze

    Not to forget to mention of Obamacare, which will absorb medicare and medicaid to strengthen it against challenge. ( That is the game..you get the Seniors in and you are bulletproof… constitutional or not )
    We want our rating back!! The only way to do that is walk the walk.
    Obviously, nobody is buying the talk, and that is all we got for our 2.5Trillion.. a buncha talk and empty promises.
    I pointed out at every single opportunity ( Here we go again…kicking the dead horse..) There IS NO such thing as a ten year budget.
    So those ten year cuts, are pure fantasy, a 2.5 Trillion dollar gamble, and a guaranteed loser because they will not…absolutely not cut one single thing other than projection numbers which they will inflate before cutting them to get to the desired outcome…

    They have in the days since the debt ceiling increase…already spent more than the ten year projected reductions.
    And we aren’t having any fun and we want our money back….
    We have a great battle cry here.
    We want our credit rating back.
    Unlike unilateral debt ceiling hikes, credit ratings are earned, not deemed by our fearless leaders. Nobody cares how much you think you can borrow, they care if you can pay it back.
    Grrrrrrrrrr…….

  • http://www.usdebateboard.com usdebateboard

    if you want to play along and blame the tax cuts, that is.

    How did they expect to pay for $1T more in new baseline spending?

  • dajeeps

    S&P includes in the analysis a comparison of GDP and inflation – included in the mix of factors is our ability to grow our way out in addition to condition of spending/taxation. And of course that accounts for many different regulatory/labor issues as well as the nationalization of at least a quarter of the economy (finance and healthcare). I think it is quite safe to assume that smothering the life out of the economy under the regulatory burden which has only grown exponentially in the last couple of years places the majority of the burden of this fiasco in the laps of Obama and his Democrats. If only they had listened to even the more moderate voices of warning against the huge outgrowth of the administrative state and demagogy of enterprise in general, it might not be such a bad situation.

  • Tbone

    Right now, the US borrows 40 cents of every dollar it spends. If the Bush tax cuts had expired, and that revenue was added, how many cents of each dollar would we have to borrow?

  • http://www.barrypopik.com barrypopik

    MSNBC’s Rachel Maddow criticized S&P for “bad math.” Barney Frank was called (he’s a financial expert, dontcha know) and he also blamed S&P.

    Austan Goolsbee was on Jon Stewart’s show a day ago, and he was so giddy about leaving on Friday (today). Nice timing, and don’t let the door hit you on the way out.

    OT: Maddow apologized for running a year-old Rush Limbaugh clip in a pointless. beat-a- dead-horse “brither” segment yesterday.(See Newsbusters.) She blamed World Net Daily for causing the error. As per usual for her “apologies,” she played a bunch of out-of-context Rush Limbaugh clips to make him seem as racist as possible. What a class broad in a class organization.

  • snowshooze

    Blame Obama.
    Well, I hope we don’t even have to mention that name, because it makes me mad every time I hear it now.
    Fortunately, this all can be corrected in short order, with real fiscal responsibility, intelligent tax strategies and a business friendly environment.
    If our gutless representatives do not again get into a popularity contest where they are more concerned with re-election, independents ( Who gives a flip about them? ) and being portrayed as some kinda hard nose conservative kitten drowning, tree killing capitalist. ( Guilty here… all counts )

  • dajeeps

    Because of the Laffer Curve. The government cannot get more than 18-19% of GDP in revenue. There have been rare years where it collected more, but it was generally the year an increase goes into effect, and then it drops below the average and levels out.

    The quickest way to get more revenue than the below average collection of the last couple of years (although I heard it had rebounded somewhat – but have not verified) is to get the economy moving and get people back to work rather than trying to extract another pound of flesh from those who can still pay. If the government tries that, we’ll see a dramatic shift in behavior just to avoid taking another haircut courtesy of Uncle Same.

  • Aaron Gardner

    I wonder why that is?

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    We are not Greece. A credit rating should be based on ONE thing: The likelihood that a borrower would default. Before the deal, it would have been justified to downgrade the US based on Obama’s threat to default and I guess you could partially justify same on the fact that such an irresponsible man is still in office.

    But to include the subject paragraph just shows how even S&P is captive to an unjustified static view of tax rates and history.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    S&P

  • jseville

    This is what I said on some of these issues in Google+ thread I was invited over to comment on–I hope it’s okay to paste–too much for me to rewrite Yours truly @ChampionCitizen:

    you said, “for doing your very best to screw up the US economy and wreck the retirement and college savings of millions of families. ”

    Those are strong accusations. So far you’ve not given them a shred of credence and are desperate enough to say tea partiers have racist motivations lurking in the background. How about if you man up and tell us how the tea party is trying to destroy college savings and screw up the US economy.

    While you’re putting those thoughts together I’ll put some material on the thread for those of us who have intellectual integrity and maturity to consider:

    1. S&P said, “We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade?” http://hotair.com/archives/2011/08/05/breaking-sp-downgrades-u-s-to-aa/

    Cliff notes version–they did what tea partiers and talk radio people said what they would do for weeks for the reasons we said–they downgraded us not over a fear mongering debt ceiling debate that was shamefully used by politicians to mislead people, but rather they lowered the credit rating because our spending is out of control and the agreement gave no sign to them that we are serious about reining in spending and reigning in runaway entitlement spending.

    This is in sharp contrast to your blaming this on GOPers and tea partiers no? Actually you can blame much of this on much of the GOP that also wants to SELFISHLY LIKE A TEENAGE PUNK kick the can down the road. The S&P was obviously hoping the reality of the tea party message of the dire need of limiting spending NOW and an aggressive bipartisan plan to do so would be embraced by all. It was soundly rejected by the establishment GOP and overwhelmingly rejected by the democrats and their supporters.

    So I think we are up to $46,000 on each of my kids heads now of debt thanks to the incessant desire to kick the can down the road and accuse those who are wise enough to confront the reality $$$ (tea partiers) of being racist. It’s much easier to accuse someone of racism than it is to take an honest and objective look at whether the policies one has been advocating are based on realism or a pathetic idealism i.e. whether policies are effective or failing. Realizing one’s preferred policies are failing definitely shakes one’s world up intellectually and most are not that brave. Better to say you’re a freakin racist.

    2. 5-6% unemployment during Bush years mostly? Or did it hit 7% Anyway that doesn’t sound like wrecking economies to me?

    3. Tax revenues to federal government shot up 44% from 2003-2007 after Bush tax cuts. Ouch that hurts. You see it’s much more effective to have a ton of taxpayers (employment) than it is to try to tax the wealthiest more. Because when you do the latter they just change their behavior–hide their money, not take risks in new businesses, work less, etc. ALL THIS TALK OF TAX CUTS AS HAVING ROBBED THE GOVERNMENT OF REVENUE ARE ONE OF THE MORE EGREGIOUS LIES/DECEIPTS BY A WILLING MEDIA that is going on today.

    Most liberals–now they’re calling themselves moderates it seems–are too ignorant to know how effective the tax cuts were in raising government revenue. The problem after record revenues…was record spending.

    AND WHO TOOK CONTROL OF CONGRESS IN 2007 — yes liberals did and away the spending went–even worse than Bush’s.

    +Kevin McGuirk now wants to blame bad economy on Bush. Well isn’t that special. It’s special if you’re head isn’t up your arse and you’re too cowardly or juvenile to research the truth.

    4. Tea partiers are in heavy support of Herman Cain. I think it’s because tea partiers are racists.

    5. Sort of a side note….many liberals don’t realize how raked over the coals Bush was on talk radio for big spending by conservatives aka tea partiers for his last couple of years. The principle and ideal of lower spending didn’t become important because a black President came into office. Only an idiot or asshole would make such an assertion.

    6. What is it now– 830 days since Democrats passed a budget????? That’s really responsible. And that’s the GOP’s fault too, right? Because Dems had all 3 branches at the time….

    7. Moody’s agrees that the spending cuts are not significant enough–that’s is more the fault of Dems than Reps. http://www.theblaze.com/blog/2011/07/30/moodys-boehner-reid-plans-dont-go-far-enough/

    8. Wrecking the economy???? Have you not figured out that Obamacare put deep skidmarks on hiring and has helped put an end to much hiring.????? This graph shows hiring before and after Obamacare was passed. http://www.heritage.org/multimedia/infographic/2011/07/the-obamacare-effect-on-employment It is not surprising. Anybody with a brain could have told you it was going to play out this way….

    8 b. Wrecking the economy??? Obama has put a MASSIVE blanket of regulation on oil, gas, healthcare, shale and finance the past 2 years that has effected the losses of 100,000s of jobs. Do liberals give crap???##!!!

    I don’t understand how uninformed people are about economics 077. You think O can idealistically throw regulations on industries and there will not be negative effects. You think you can spend and spend without consequence. And then when people say hey we need to get more responsible with overspending and over regulation you smear them and demonize them. And the willing media carries the Obama water shamelessly as Norah O’Donnell recently complained during a white house press conference, “?Where are the tax revenues??

    ?He gave them everything they wanted and we got nothing.?” Of course she is just reporting the news…she’s not biased.
    http://www.breitbart.tv/cbs-news-nora-odonnell-where-are-the-tax-revenues-we-got-nothing/

    9. President Obama has very dark connections in his past that the media never vetted….His extremism is not surprising when you know his past: http://www.investors.com/NewsAndAnalysis/Article.aspx?id=456584 Or the last several in the series on this page: http://www.investors.com/NewsAndAnalysis/SpecialReport.aspx?id=516621

    Those of you who defend the big spending and want to keep the status quo are some of the most cowardly and selfish people the planet has ever known…or just deceived by talking points and your hearts and sincere concern for others. What is sad is that often the most sincerely constructed policies to help people often end up destroying them instead in mass. That’s not social justice.

  • gekster

    I do wonder why.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    tax cuts is that these sunset extensions kill the usual incentives of tax rate cuts. Who starts a business due to tax cuts that are scheduled to last only one year? No one except t-shirt salesmen.

    But the main flaw in S&P’s analysis is the fiction that anyone’s predictions on marginal tax rates has ever been accurate.

  • dajeeps

    Because the Laffer Curve still applies. The Greek govt conjured up this pie in the sky austerity plan in 2009 that included dramatic tax increases so they could get their bailout commitment from the EU fund. They made the cuts in the plan but still missed their targets and needed the second installment much sooner than expected. That’s because while it looks good on paper to say “We’ll increase taxes by X% and get Y revenue as a result,” it hardly ever works out that way, especially if their tax structure is already burdensome.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    nt

  • 1stRichard

    The troll forums are full of it and this is interesting all the email alerts to blame the Tea Party came in at the same time. They must be in full panic mode!

    ?We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements?

    The blame ?growth in public spending, especially on entitlements? ?

  • http://www4.webng.com/rickbull/lostlucky/ rickbull

    Jim Cooper of TN actually (believe it or not) voted for Cut Cap and Balance.

    Please don’t take this as an endorsement, because 99.9% of the stuff he does I totally disagree with, but I do have to give credit where it is due. He is one of the few surviving Blue Dogs (most of them were humanely euthanized in the 2010 purge).

  • carolina

    didn’t want spending cuts as a requirement for raising the debt ceiling (just like BO).
    It is going to be easy to pound them.

  • carolina

    didn’t want spending cuts as a requirement for raising the debt ceiling (just like BO).
    It is going to be easy to pound them.

  • Tbone

    You see, this is the type of BS statement that means you can not make a point with the opposition.

    If they accepted the Laffer Curve there wouldn’t be an argument would there? Would there?

    It is no wonder that we can’t win a point with the Left, Some of us are dumber than they are.

    Now can anyone answer the question of how much revenue the Left THINKS that the expiration of the Bush tax cuts would add and how that addition would adjust the 40 cents.

  • 6eorge Jetson

    And the GSEs and Alan Bernanke were causes number 1 & 2.

    If I had a penny for every time a statist said “Bush”, I could pay off the national debt.

    Any time a statist brings up the name “Bush”, challenge them. We’re suffering the fallout from what economic event? And if you think that the power brokers in the top Democratic circles are benevolent regulators, go read “Reckless Endangerment”.

    It’s attributions of the causes of the crisis can be debated. That Fannie Mae wrote the book on regulator manipulation cannot.

    Finally, the Dems had carte blanche to do as they pleased while they had 60 caucusing Senators for almost a year. They had full authority to pass any tax laws they pleased during that stretch. We are operating under the tax policy of the unchecked, super majority-possessing 111th Congress.

    So if the Bush tax rates are “bad”, why are we still operating under those rates?

  • Wayne

    Finally, the curtains have been lifted and the idealogical divide between those that believe in individual freedom and those that do not will be meeting in the streets.

    A paradigm shift of tectonic proportions is about to take place… and it happened in my lifetime.

    In 2012 we pendulum turns… swings back..

    If you’re not a Constitutional conservative … you’re on your way out…

  • dajeeps

    They think food stamps and unemployment benefits create jobs and economic growth; and that we can borrow and spend our way to properity. There is no reasoning with those who don’t consider the obvious “cause and effect” and wouldn’t know the truth if it jumped up and hit them in the face.

    The principles behind the Laffer Curve come from observation, not something dreamed up in order to maintain a political talking point.

  • rbdwiggins

    And, Washington must learn to live within the constraints imposed by a $2.1 Trillion revenue stream.

    Federal pink-slips are required, they must eliminate at least 40% of the federal bureaucracy and they must begin immediately.

  • 6eorge Jetson

    nt

  • carolina

    5 is a pretty small number……

  • 6eorge Jetson

    while they had the supermajority between Arlen Specter’s defection and Scott Brown’s election.

    We are operating under the tax policy of the 111th congress. If these rates were so bad, why did they bequeath them to a divided 112th?

  • http://www4.webng.com/rickbull/lostlucky/ rickbull

    that the S&P downgrade of our bonds and treasury notes will get some potential voters to wake up and smell the coffee. We badly need more true fiscal conservatives in our government. The looters and the moochers are selling us into third world status while they take hard-earned money from producers and hand it to people who make bad choices.

    Thanks for listening, I know I am preaching to the choir.

  • noprisoners49

    Paradigm shifts do not happen cleanly, as in the example of a pendulum swinging back and forth, but rather explosively. There is no guarantee of the outcome, but it will be different.

  • 6eorge Jetson

    that occurs whenever new revenues are added.

    Why is it that the govt entities in most trouble today, the PIIGS, California, Illinois, et. al., are all high tax entities? If you put deficits on the left side of the regression, and tax rates on the right, you’ll find a negative relationship. Now I, don’t believe that it’s due to the Laffer Curve. I believe it’s due to the Laugher Curve (at those born yesterday who believe that additional tax revenues don’t get spent).

    As to the Laffer Curve, at the extremes–0% tax rate or 100% tax rate– moving toward the optimal point surely increases revenues.
    Greg Mankiw asserts that tax cuts (near the present level) partially offset the static scoring model effect.

    According to the researchers, the neoclassical growth model and all of its variants indicate that the dynamic response of the economy to tax changes is substantial. In almost all instances, they find, tax cuts are at least partly self-financing. The authors conduct some simple calculations, plugging in numbers that approximately describe the U.S. economy. They find that, in the long run, about 17 percent of a cut in labor taxes is recouped through higher economic growth. The comparable figure for a cut in capital taxes is about 50 percent. This means that the true revenue cost of a cut in capital taxes is only half of the cost estimated with static scoring.

    These results depend on a number of key assumptions, which are open to debate. Mankiw and Weinzierl acknowledge that current studies do not afford clear guidance about how best to apply the neoclassical growth model to the actual economy. Economists will need to focus next on evaluating which generalizations of the basic model are the most salient and then on estimating the key parameters. This task, the researchers say, is urgent. In 2003, Congress adopted a rule that requires the Joint Committee on Taxation to analyze the macroeconomic impact of any major tax cut bill before the House votes on such legislation. ?One conclusion is impossible to escape,? say Mankiw and Weinzierl. ?Difficult as it may be, the subject of dynamic scoring should remain a high priority for those economists advising lawmakers on issues of tax policy.

    But since the net deficit is
          Deficit = Spending – Revenues
                where
                      Spending = f(taxes collected)
                      Revenues(tax rate, ~GDP)

    those that were born yesterday should review the experience of the State of Michigan after it raised taxes in 2007

    Under pressure from the state?s balanced-budget requirement ? another crucial difference between Michigan then and Washington today ? and after a brief government shutdown on October 1, Senate Republicans warily agreed to a deal involving a mix of tax hikes and benefits reform. They agreed to hike income taxes by 12 percent and impose a new set of service taxes on select business activity, raising $1.5 billion. In return, Republicans got fragile promises of spending reform.

    ?This budget agreement is the right solution for Michigan,? crowed a victorious Granholm. ?We prevented massive cuts to public education, health care, and public safety while also making extensive government reforms and passing new revenue. With the state back on solid financial footing, we can turn our focus to the critical task of jumpstarting our economy and creating new jobs.?

    Barack Obama couldn?t have said it better. Did it solve the problem?

    ?Within literally hours of passing the tax hike,? recounts Mackinac Center legislative analyst Jack McHugh, ?the legislature passed bills spending the entire $1.4 billion.? By the time Granholm handed over the wheel to Republican Rick Snyder three years later, the deficit had ballooned to $2 billion amidst a stalled economy.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    can

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    due to less elasticity since most state taxes are for necessities.

  • Jack_Savage

    I told all my leftist friends that I really wished the full effect of Obama’s idiotic policies would occur immediately so that the bonehead 52% could have it jammed up their collective colons, but I had a feeling the hell we would have to pay would come after his term was over.

    Boy, was I wrong, and boy, am I getting my wish.

  • 6eorge Jetson

    The elasticity of federal taxe receipts would also go down if we simplified the tax code.

    If you grant special treatment, folks will look for the special treatment to dodge the taxes. (Just ask the berther John Kerry ). And the higher the level of the tax rate, the more incentive folks have to look.

  • runner12

    Let’s have a running list of who predicted this very thing if the House members did not hold the line and push for CCB.

    Erick Erickson
    Rush
    Hannity
    FreedomWorks
    Heritage

    I don’t know, but maybe, just maybe these guys might know what they are talking about. IMHO, those 38 Senators and House GOP Members who stood on principle and voted against that smoke and mirrors bill might have just assured themselves re-election for the next 15 years. The GOP membera who voted for it..well…they may have earned themselves a one way ticket back home come November.

  • runner12

    have some level of psychosis involved in their thinking. Anytime something happens it is always someone else’s fault, even if it was their policies that clearly caused the mess to begin with.

    They always have someone or something to blame.

    If it is blazing hot in the South in the summet it is global warming.

    If it snows too much in the North in the winter it is global warming.

    Anything and everything, including the common cold, is GW Bush’s fault.

    A downgrade on our credit rating caused by the most profligate spending President in history is the fault of the Tea Party ( the people trying to STOP said spending President from driving the country over the cliff by spending).

    There is no logic, no sanity to these people anymore. They must defeated if this country is going to survive.

    Or maybe we could take a more sympathetic approach. We could start a rehabilitation center for the poor Leftists. We would have to detox them first
    from HuffPo, DKos, MSNBC, and most importantly the NY Times. Then we could begin slowly introducing the sanity and wisdom of conservatism. Maybe start with a few Reagan speeches, then move on from there. Hey, it might work!

  • runner12

    The smoke and mirrors bill being referred to is the Boehner/Reid/McConnell garbage that the leadership touted as such a great deal.

  • bk

    When we increase spending, it’s all borrowed money because what we had is already allocated, right? Think about it – the more honest way to look at it (which means Dems and the MSM would never look at it this way) is something like:
    - Paying off the debt: 0% borrowed money, since we’d always pay that first from tax revenues.
    - Most of Defense and anything else we’d fund up front no matter what: 0% borrowed money.
    - Anything else: Figure out the ratio of whatever money we borrow to fund it after using whatever tax revenues were left over.
    - Anything added on top of that: 100% borrowed money.

    Every dollar of new Obama entitlements therefore means another dollar borrowed from China for all practical purposes.

  • bk

    As soon as the ink was dry on that debt ceiling bill the tea party was holding a gun to his head over, Obama jacked up borrowing by nearly a quarter trillion in one day. Coincidence, or did he know this was coming and tried to lock in some “cheap” borrowing?

  • bk

    If this will increase the cost of borrowing, and we are going to keep borrowing like crazy for the next year and a quarter, couldn’t this cause us to hit the debt ceiling before the election?

    This creates an interesting scenario. Obama and Reid wanted to get this off the table through the election, but I don’t know whether they had this downgrade factored in or not. If not, then there is at least some chance that Obama will blow all the money before next November, in which case here we go all over again – except with the pressure ratcheted up about 10,000%.

  • jimmyneutron

    as much like some of the republicans who voted against the current deal, it is hard to tell if those votes were real, sinceere votes or if they were simply allowed to vote the way they did so that they would ahve political cover.
    As far as CCB goes, the dems knew that it was going to pass the house and that no one was going to be able to stop it there, so the votes of those 5 socalled blue dogs were meaningless – probably nothing more than votes they can now use to convince the average sleeping voter that they really are fiscal conservatives.
    Same goes for the repubs – I recall reading that at least two of the SC reps waited until the last minute to vote NO – they waited until Boehner knew he had enough votes to get his worthless ‘deal’ through the house.

    This is why I have such a hard time believing all of those ‘conservative
    vote ratings. Face it folks, those people in DC are politicians who know how to play this game far better than most of us.

    The ones I trust are those who, like Bachmann, announce ahead of time how they will vote and then follow through.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    fever is starting to set in. Hoping this is the year we win the SEC.

  • Wayne

    that history repeats itself. What is little talked about in the realm of history repeating itself (as it relates to human suffering), is the geometric increase of proportions in each cycle.

    We’ve all heard stories of the great depression, famine, riots and violences, but they have always been aberrations taking place on distant shores. Now our generation gets an empirical lesson in why other governments that do not subscribe to the protection of individual freedom and personal responsibility have almost without exception lead to the suffering in large numbers of their populous.

    We have no one to blame but ourselves, through our own ignorance and lack of self discipline, the coming years will be the toughest we have ever seen.

  • Tbone

    Write a diary if you want to waste time arguing to change the “Narrative”.

    But, the current 40 cent narrative is the reality, so that is what you have to argue.

  • Tbone

    No, Sparky, telling the other side there “truth” is immaterial doesn’t work. You have to show them, very simply, the reality of their “truth”. You may as well argue Laffer Curve with your dog.

    The argument goes like this: We borrow 40 cents of every dollar we spend and you agree that is unsustainable so you want to raise taxes by letting the Bush tax cuts expire? “Yes”. However, even if we added that revenue in, we would still have to borrow (37) cents, where is that going to come from?

  • johnt

    did this for political reasons as some have suggested. The $$ numbers speak for themselves, as does the long term view. If anything, Obama & Dems got a PR pass up to now.
    The horror of it all is that the crazed left will not assume responsibility. And so things will get worse, even violent.
    Obama is winning, & laughing all the way.

  • http://www4.webng.com/rickbull/lostlucky/ rickbull

    you should never watch either being made. Unfortunately, the 24/7 media coverage and CSPAN have made the sausage factory that is our government much to available for viewing in our homes–and we have become disgusted with it, but it has served us better than any government has served its constituents in the history of civilization.

    I do not hold Jim Cooper on any kind of pedestal–quite the opposite, since I stated that I disagree with him 99.9% of the time–but he is an employee of the largest sausage factory in history, and, in this case, he did vote the way I would have voted, so I will give him one kudo: the rest of my kudos I will hold for the Tea Party candidate who runs against him next year (if we can find one in all of Nashville).

  • bk

    It’s how everybody talks about it, but no one seems to realize how misleading it is. I do wish that narrative would change as a general rule.

    Sorry for the distraction; now back to where we were…

  • aesthete

    “But the main flaw in S&P?s analysis is the fiction that anyone?s predictions on marginal tax rates has ever been accurate.”

    However, the reason for the sunset extensions is because a) John McCain was being his usual execrable self, and refused to vote for them, and b) George Bush and his economic team envisioned them as temporary Keynesian stimulus, rather than a long-term readjustment of the tax rates. They appear to have been a success in that light, and were not intended as supply-side measures in the first place, as evidenced by the large number of tax credits for those not paying federal income tax, and a few other stimulative measures in the two major tax cut bills. (They were advertised using supply-side rhetoric among conservatives, though.)

  • jazzycmk

    ……is that the left isn’t even logically consistent in their assessment of blame for the downgrade.

    They are taking up the White House call that S&P made a $2 trillion error in their analysis (which would be little more than rounding in a White House Analysis). I’m sure that will be followed by claims that the S&P is full of Republicans / Tea Partiers, or at the very least S&P is doing this with the intention of hurting Obama’s re-election chances.

    But they are also trying to cover their bases by saying the downgrade is the direct fault of the GOP / Tea Party.

    Can’t have it both ways. Either the S&P is wrong or the downgrade is the fault of GOP / Tea Party. Not that logic ever gets in their way of assessing blame to everyone and everything but the Obama administration.

  • aesthete

    is that, while every tax cut or tax increase predicts a certain amount of revenue, *every* act of government spending guarantees some expenditure (and conversely, every government spending cut is a guaranteed deficit reducer). I don’t believe that we’re on the right side of the Laffer Curve as far as income taxes go, and I imagine that we could make some money by raising marginal tax rates on almost everyone. However, what amount would be raised is an open question, especially in an economy where a) our GDP is struggling, and b) as a result, citizens have an incentive to look for ways to keep the IRS from taking their cash.

  • aesthete

    The philosophical conceit of the left is that any inequality or discomfort is an “injustice” that must be corrected, by force if necessary. Neither conservatives nor liberals particularly enjoy the existence of either, but a conservative or libertarian realizes that a broken leg or losing one’s job in a recession is a *misfortune*, not an *injustice*, since neither can be attributed to the wrong-doing of another. The left sees any and all misfortunes as evidence of wrong-doing; as such, it is unsurprising that they will find convenient targets as the wrong-doers.

  • acat

    For instance, when Illinois charged $100 to license someone as a “used car dealer”, there were many who got the license and moved a handful of cars a year.

    When the State raised the fee to $1000, most of them stopped getting the license. They also stopped reporting their income. They did not, however, stop buying and selling cars…

    Regarding any tax increase, asthete, I don’t think raising taxes on those who currently pay a fair amount makes a whole lot of sense. It would make more sense, to this cat, to look to those who currently underpay or don’t pay…

    Insert a “floor” rate of 1% on any and all income. No deductions. Deductions can reduce your tax rate to the floor, but not through it.

    This will increase the number of cheaters as well, but .. it will also increase the number of people who are shouldering the weight of government, and that’s a win.

    I could see getting the same result by introducing something akin to a national sales tax of 1% on all goods and services except food and medicine, i.e. the FAIR tax without the prebate, but .. with a 2/3 of both houses of congress required to raise the rate.

    Mew

  • snowshooze

    With the credit rating downgrade, I can see where the ” Tax Commission” may line right up behind it.
    So the Democrats wind up with the triple crown.
    They refuse to accept the fact that there are two sides on the balance sheet. And they are already screaming bloody murder that the Tea Party Taliban is at fault and taxes MUST be raised.
    If we handed that to them, they would have so much fun spending it, we would wind up in reverse. ” Whaddya think we should do with all this money?? programs!!! agencies!!! Yeah, let’s spend it on stuff that helps fix the problem! ”
    Last I heard, the Government was still hiring, no layoffs there.
    Paying the bills is no fun.
    We have to control the debt and spending.
    The only way we can do that is to cut the government.
    Additional taxation only feeds the beast.
    There is no other way out.

  • acat

    Raising taxes in a recession is FUBAR.
    Raising taxes without anything resembling spending cuts is SNAFU.

    However.

    45% of adult citizens pay *no* income taxes. That creates an unstable society.

    Either the idea of an income tax “floor” or the idea of a 1% VAT better balance the burden of government. Insisting that we have “no tax increases” leaves the load fully on half the people.

    Mew

  • gr29az

    our first DEAD BEAT president ! he’s going to wear this one forever.

  • Wayne_A_Schneider

    It is a myth that the rich are the ones who are “job creators.” It is, in fact, consumers who create jobs. Wealthy people may create businesses that hire people, but they don’t create those businesses for the sole purpose of creating jobs, they create them to meet a consumer demand for some good or service. When consumer demand for that good or service grows, businesses often hire more people to meet the increased demand. When consumer demand falls, businesses fire people they can no longer afford to keep on the payroll. And it isn?t just rich people who create businesses. Less wealthy people do it all the time. In fact, many people who ended up rich (and not through inheriting their wealth the way the Koch Brothers did), will proudly, and rightfully, tell you how they started with nothing (or a loan from a friend or family) and worked hard to make their millions. Most people, however, do not become millionaires and while they are able to keep their businesses going, the consumer demand for what their business offers is not enough to hire more people. Fewer than ten percent of ?small businesses? would make the kind of profits subject to the taxation rates being discussed by the Left.

    The primary reason jobs are not being created is because consumers do not have enough spare cash to buy things that will spur businesses to hire more people. Rich people do not take their money and spend it all, they keep it for themselves or their children and grandchildren. And they certainly don?t hire people just for the sake of hiring people, they only hire people when there is a job that needs to be done. A very large percentage of the wealth in this country is in the hands of a very small amount of people, and they simply aren?t spending enough of it to spur economic growth. When the private sector won?t spend the money that needs to be spent to spur economic growth, the government is the only entity that can, and it must.

    One of the best ways to spur economic growth is for our government to invest in infrastructure projects. The government doesn?t have its own construction companies, it hires private sector firms to do the work. More work for the private sector means more people getting hired, not simply to build the things that need to be built (we have a lot of highways and bridges that need repair), but to do the support work that goes with it (filing paperwork, answering phone calls, etc.) rather than reducing government spending, we should be increasing it, and not just on building military weapons, but on building something useful to the average American (like a bridge that won?t collapse in the next five years, as many of ours will.) But to do that, we shouldn?t borrow all of the money, we should raise taxes on the richest Americans who haven?t been spending their money. After all, they benefit from the infrastructure projects, too. If their employees (if you insist on claiming the rich are the job creators) need to have well-paves roads on which to drive to work. Potholes cause car damage that average workers have to pay for, and this takes away disposable income for them to spend in other ways.

    ?Starving the beast? may sound like a politically-pleasing strategy, but at the end of the day, it?s your friends, neighbors and co-workers who get hurt by it. And the rich just keep their hoards of money and remain largely unaffected by the economic downturn. Whose interests would you rather see protected? Your friends? and neighbors?, or the rich people who couldn?t care less about you?

  • http://www4.webng.com/rickbull/lostlucky/ rickbull

    infrastructure projects are funded by fuel/road-use taxes, which do not fluctuate with marginal tax rates. And “shovel ready” projects generally are “bulldozer” and “backhoe” ready. The days of the WPA and putting 200 workers with shovels to work on a road project do not happen any more. Automation and machines do the work of 95% of what used to be manual labor back in the FDR days.

    Second, the rich do not sit around on couches and mattresses stuffed with cash such that said cash is not available to the economy: usually it is in lucrative investments, i.e. it is “lent” to businesses for use in growth.

    Third, marginal tax rates have been as high as 94% and as low as 30%, and the most the fed has ever been able to acquire in revenue is 17-19% of GDP, even when tax rates are at their highest.

    Fourth, the Kennedy tax cuts, the Reagan tax cuts and the Bush tax cuts have all resulted in immediate and sustained GDP growth which, in turn, resulted in federal revenue growth.

    Fifth, you need to really take a GOOD course in economics (taught by a Milton Friedman student, not a Paul Krugmann student). Reading some opinion pieces by Thomas Sowell could be a good starter course for you, because economics is obviously not your strong suit.

  • http://www4.webng.com/rickbull/lostlucky/ rickbull

    infrastructure projects are funded by fuel/road-use taxes, which do not fluctuate with marginal tax rates. And ?shovel ready? projects generally are ?bulldozer? and ?backhoe? ready. The days of the WPA and putting 200 workers with shovels to work on a road project do not happen any more. Automation and machines do the work of 95% of what used to be manual labor back in the FDR days.

    Second, the rich do not sit around on couches and mattresses stuffed with cash such that said cash is not available to the economy: usually it is in lucrative investments, i.e. it is ?lent? to businesses for use in growth.

    Third, marginal tax rates have been as high as 94% and as low as 30%, and the most the fed has ever been able to acquire in revenue is 17-19% of GDP, even when tax rates are at their highest.

    Fourth, the Kennedy tax cuts, the Reagan tax cuts and the Bush tax cuts have all resulted in immediate and sustained GDP growth which, in turn, resulted in federal revenue growth.

    Fifth, you need to really take a GOOD course in economics (taught by a Milton Friedman student, not a Paul Krugmann student). Reading some opinion pieces by Thomas Sowell could be a good starter course for you, because economics is obviously not your strong suit.

  • http://www.gmsplace.com/ civil truth

    Efficient allocation of private capital is what creates jobs. Consumers via their spending decisions in a free market send the appropriate signals for making decisions as to how to allocate that capital.

    The problem with government is that it misallocates these resources by taking them from market actors and reallocating them according to political criteria based on too-limited information, thereby reducing their efficiency.

    And even where government expenditure is appropriate, such as defense, it needs to act by common consent, not by coercion and expropriation, which is where we’ve arrived. When you think of government owning capital and money rather than borrowing it from private citizens, you’re headed down a rathole.

  • http://www4.webng.com/rickbull/lostlucky/ rickbull

    NT.

  • Xasteius

    nt

  • JSobieski

    Assuming that simply stealing from others is out of bounds, the only way to consume anything is to either produce it yourself or to provide something of value to someone else in exchange for the good/service that you want.

    The job creates the consumer. Consumers who don’t spend everything can become investors. Investors create jobs.

    If you buy $1 worth of widgets, little of that widget is profit for future investment. In the auto industry, margins on parts for example can be in the 5% range for mature components. So a $1 purchase really represents a $0.05 for future use, such as new equipment, new hires, etc. In contrast, a $1 investment represents $1.00 for new equipment, hires, etc.

    There is no financial incentive to “hoard money” unless the owner of the money doesn’t have a profitable alternative for the money. No rational person is going to sit on $1,000 if they can use the money to make another $1,000. The problem is that liberal economic policies make the prospects of future profit sufficiently bleek that the risk/benefit analysis supports holding back.

    However, even if the money sits in a bank, the money counts towards the bank’s reserves, and enables additional lending by the bank.

    Bottom Line: You are dead wrong in what you are saying. Consumers follow the economy, they don’t lead it.

    The best business to be in at the moment is a small business that can save large businesses money.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    resolution

  • lineholder

    when it comes to spending money wisely. It doesn’t matter where they get the money from. They squander it like a gambling addict playing high-dollar poker.

  • Menlo

    If that were true, we would not have a nursing (and doctor) shortage. Obviously, that is not the case.

    In terms of highways and bridges, you’ll be glad to know California did create some jobs in China by outsourcing work on the Bay Bridge. They “promised” it would survive a big earthquake. Nancy Pelosi must be proud! New York City has taken a similar tack with its subway system.

    For the most part, the roads seem fine to me although the ones in Texas could use expansion. The biggest problem is that too many perfectly good roads are coned off for no apparent reason. Once while visiting California, I actually saw the workers having a picnic in a coned-off road.

  • al003

    It is amazing that our Historic President somehow could not force the S and P to follow his orders to ‘NOT’ downgrade the U.S. debt.

    But the best move by a single Democrat, Prince Harry of the Senate, was the trifecta of ‘ObamaCare’, ’1T in spending in fake stimulus’, and the ‘table of the only bill that would have stopped the down grade’. Three Screw ups in a row to go along with whatever the Keystone Kops are going to do next. And we thought Jimmie Carter was the clown, Obama with his crew is right up there in the running.