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White House caves on tax hikes in debt ceiling talks.

By: Moe Lane (Diary)  |  June 28th, 2011 at 11:00 AM  | 

RESIZE: AAA

Personally, I’m not entirely certain why the Obama administration is so adamant about raising taxes on small businesses, but they’ve at least abandoned their previous position where a possible early end to Bush-era tax breaks (now scheduled to expire in 2012) was on the debt ceiling negotiating table. Unfortunately, the White House is still adamantly refusing to accept the pesky objective reality that there are no Magical Revenue Generators that will allow the country to boost the tax-to-GDP revenue ratio to 25%, forever. In other words, the Democrats don’t want to even think about making spending cuts, and they’re reacting to exasperated Republican calls for them in precisely the same way that pigs react when you don’t refill the trough with swill.

I know that people out there get exasperated with the GOP some times, but if there’s been a better contrast in recent memory between Bad and Worse* than in the comparison of this Congress to the last one, I can’t think of it offhand.

Moe Lane (crosspost)

*More like Not Perfect and Hideously Awful, in my personal opinion – but I sometimes have to factor in a certain institutional pessimism when I write stuff for the VRWC.

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

    which is chosen. The GOP is the only hope to save America.

  • lineholder

    being presented by the left lately. One idea has been to end the Bush tax cuts at the end of this year replacing it with payroll tax elimination through the end of 2012 for both employees and employers. They believe that this is the way to get more disposable income into the hands of the American people, increase demand for products and services, and generate jobs.

    Congress cut the payroll tax from 6.2% to 4.2% for fiscal year 2011, believing that if they got more disposable income into the hands of the general public, it would generate an uptick in our economy. It didn’t work, and now they think the reason it didn’t work is because they didn’t go far enough with it.

    I don’t think it would work now either. There are enough of us out here in the real world of “commoners” who are paying attention to what is going on economically. We have no basis on which to establish confidence in long-term financial security at the moment. So folks are just exercising common sense by paying down their debts now.

    Payroll taxes are those contributions to Medicare and Social Security that come out of our paychecks, right? Medicare insolvency date dropped down to 2024 this year. Social Security is at 2036. Cut contributions to those funds even more, for the sake of increasing disposable income of consumers, and I’d almost bet that given the frame of mind a lot of folks are in, they’ll put the greater part of increase into paying their debts down even more quickly.

    I found information over at Town Hall saying that ending the Bush tax cuts early would decrease our GDP growth by 3% . Given that our GDP growth for this quarter is running at 1.9%, and projected at 2% for the next quarter, repealing tax cuts that would essentially reduce GDP growth by 3% sounds like one of the dumbest things I’ve ever heard. Purely political on the part of the Dems on that choice, isn’t it?

    http://townhall.com/tipsheet/guybenson/2011/06/27/debt_ceiling_white_house_urges_compromise,_pushes_$600_billion_revenue_increase

  • acat

    Food and energy prices are going up quite fast.

    Those who can save are likely doing so; demand for gold indicates those who can save in gold are doing so as well.

    I’d be willing to wager, though, that a big chunk of the payroll tax cut “savings” are going straight to the grocer and the gas station.

    Mew

  • lineholder

    involve federal tax contributions to discretionary funds, don’t they? Maybe the Dems are hoping that if they get the cuts repealed early, they can go on one last spending binge aimed at “fundamentally transforming America” before the election in 2012??

  • lineholder

    It’s been such an interesting situation, and the indicators are all there to provide evidence, not only of how people are spending their disposable income but also why they are doing so. I’m not an economist, but even I could figure this out easily enough.

    We do have a mild demand-side crisis on our hands, and provided that our leaders in Congress don’t do anything totally stupid, hopefully it will stay at the mild stage through the elections. We stand a chance of recovering if it stays in the mild stage. If it progresses to a higher level, that’s a whole different situation entirely, isn’t it?

  • http://moelane.com/ Moe Lane

    “We have no basis on which to establish confidence in long-term financial security at the moment.”

    This is not just a problem for consumers: business has the same worries.

  • acrucesalus

    beat the livin’ tar out of those dirty, nasty, lowdown, stupid Liberals. It is the only thing left. Trying to reason with them is akin to beating your head against the wall. They are simply too stupid and obtuse. What a bunch of dullards. Oh, I’m sorry, do I sound like a hater? Too bad. I feel better now.

  • lineholder

    It’s literally palpable, like something in the environment around us that we can sense and feel but don’t necessarily see, isn’t it? It isn’t a full-fledged all-consuming type of fear at this point, and I’m glad for that much. But it is obvious that it is weighing on people and influencing their actions.

    I’ll throw a thought out here for you to consider as to why Dems may be going after small business right now (other than redistributing the wealth and basic socialism). I may be wrong, but it is something to consider.

    One of the cost-reducing mechanisms that the Dems were counting on big time to come through for them regarding Obamacare was the implementation of ACOs (accountable care organizations). DHHS went overboard with the voluntary regulatory standards, causing even well-established ACOs that originally supported this venture to reject being involved in conforming to those standards. They aren’t feasible, Moe. Totally unrealistic.

    This is a very real blow to PPACA. Between this blow and the many waivers (and essentially the waivers result in a loss of revenue that was to be used to set up the Public Insurance Exchange prior to 2014), I suspect that they are falling way short of revenues needed to get their health care reform program up and running.

    Their ability to borrow the funds is obviously limited for the time being. They badly need the revenue increases, and it has to come in the form of discretionary funds. It occurred to me that maybe they are trying to draw a portion of those funds from other sources, such as taxing small businesses. Is this a legitimate possibility?

    I don’t know what it is going to take to get this through to the left, but even though this idea of “shared prosperity through shared sacrifice” sounds noble and all that…noble doesn’t pay the bills. Realistically, when it comes down to a choice between being noble and surviving, human survival instincts are likely to be greater by far than the desire to be noble. Human beings are human, nothing more and nothing less. They’ll go with survival every time.

  • YnotNOW

    Which is why “spines” are required.

  • acat

    The other little factoid is that small business owners may be looking at cutting health coverage .. but that means cutting *their own* coverage as well. They’re just as much a part of the group as the lowest paid employee they’re covering.

    The only way they’re going to go into the Obamacare pool is if they’re pushed… and taxing them out of business is just the ticket.

    Mew

  • acat

    Seriously.

    Mew

  • dmacleo

    thats all I hear from some friends.
    so when I tell them it also affected them it surprises them.
    my friends can be idiots.

  • dmacleo

    hit post button by accident.

    wanted to add we need to make sure to stress these cuts affected everyone whenever it is brought up.

  • lineholder

    at this point that the left is desperately in need of revenues and they are looking at small businesses as a potential revenue-generating mechanism.. I’m basing this on various opinions that have been put into different articles coming from people on the left in the past few weeks.

    If that is the case, taxing small businesses out of business defeats the purpose, doesn’t it?

    Plus, with unemployment among certain demographics black people at Depression era levels, Dems genuinely need small businesses in particular to pick up and start hiring again. The Dems want to go after DREAM Act again before 2012 election, but it is pitting blacks and Hispanics against each other where jobs are concerned. Two sectors of the population, and the Dems need both to be proactively involved going into next year’s election to assure that Obama gets reelected.

    So taxing small businesses out of business right now would be cutting their own throat, wouldn’t it?

  • lineholder

    when a business is hit with an increase in taxes, this is meant to be market-driver. In other words, the increase in taxes present an obstacle, and people who believe in Keynesian economics also believe that the appropriate way to respond is to spend more money for the purpose of making more money so that those obstacles can be overcome.

    They don’t always look at the feasibility issues involved or whether demand for the market genuinely exists and how these factors can play into the situation.

    And folks who believe this type of economic theory seem to make the error in judgment of believing that everyone thinks the same way they do, which isn’t even remotely close to be the truth.

  • acat

    very good about not assuming our opponents are stupid. That’s refreshing.

    That said, I’m not sure that all, or even most Dems think things through nearly as well as you have here… That is, the subset of Dems who recognize that they’re standing on the throat of the goose that lays golden eggs are still having to cut deals with (and watch out for the long knives from) the subsets who want the bird dead so they can have all of the gold right now… and if that happens to pit various blocs against one another, well, ya gotta break some eggs.

    I do agree, to be clear, that small business is what drives our economy, and that we’re not going to see the economy improve until we see small entrepreneurs hiring again. I suspect, though, that they’re going to be more cautious than we’ve seen ‘em in a long, long time.

    Mew

  • Goldwater_Conservative

    I think in the most simplistic sense Keynesian is about enabliing the middle class (through programs and tax breaks) at the expense of the upper class (taxing the hell out of them). They would argue that if the middle class had more disposable income, they would buy more goods and therefore eveyone will be better off. Obviously thats full of problems, but I think thats the basic theory behind them.

  • YnotNOW

    is that they have “excess” money sitting around and not being productive. So if the Government takes that away, they can then “invest” it in more productive ways – like giving it to crony capitalists on the government teat.

    The flaw, of course, is that business profits and savings are never “unproductive” but seeking the best investment. Making an economic decision on risk and reward. While the government that takes it away will invest for political reward – which is almost never economically efficient – and makes the entire economy poorer.

  • renny

    is that getting higher gasoline and energy prices that both little o and his energy people have expressed desire for is that they have curtailed some gas purchases and caused people to drive a little less (AAA predicts travel down 3% this holiday weekend), but the concomitant result is that by spending more on enegy, people have LESS discretionary cash to spend on anything, so consumer spending was worse for May than it has been since the spring of 2009. Not a good sign for another “recovery summer.”

    The ultimate answer is you cannot get blood from a stone.

    And the House is never going to vote o more taxes of any kind on anything, regardless of the conspiracy idea that because of playing golf Boehner made some deal with the devil that will be unleashed this Fri or the Fri. of Labor Day Weekend, whichever gives more cover.

  • Conservative_not_Republican

    There will be no tax increases without the assistance of Republicans.

    Consider:

    From 2008 to 2010, the Dems controlled both Houses of Congress (at times with 60 Senators) and the Presidency. Were the “evil Bush tax cuts” repealed? Why not?

    Note that yesterday Jerry Brown and the Dems in California threw in the towel on extending tax increase and will not even take the issue to the voters where they would have to defend their position.

    The Dems remember the 34 House members who lost in 1994 when they unilaterally rammed through a tax increase (including Marjorie Margolies Medvinsky who they walked down the House aisle to cast her vote).

    There will be no tax inceases unless the Dems have the cover of Republican cooperation.