Unless the fiscal cliff dilemma is resolved within the next two weeks, everyone’s taxes go skyward. Rich and poor alike will hand over $500 billion more to the Internal Revenue Service. The across-the-board spending reductions will amount to about $110 billion, with more than half of the amount coming from defense. It’s enough to plunge an already sputtering economy into a deep recession.
Conventional wisdom holds this is why House Speaker John A. Boehner must capitulate to Mr. Obama’s demand to raise taxes on “the rich” as the only means of securing an extension of the Bush tax cuts for everyone else. Mr. Boehner’s behavior seems to show he believes this is the only realistic option. The Ohio Republican has repeatedly and publicly urged the president to embrace a “balanced approach” on deficit reduction, calling for an increase in some tax revenues on those making above $250,000 in exchange for real spending cuts.
Mr. Obama, however, wants nothing of it. The president is convinced he’s holding all the cards and just needs to hold out long enough to secure a $1.6 trillion tax hike on upper-income earners. Yet, he also seeks more spending to fund favorite projects, such as education, infrastructure and another economic stimulus. Pushing for new taxes and spending proves he’s not serious about tackling our debt crisis, as the hikes on job creators would pay for just nine days of annual spending — a drop in the bucket when the debt is $16.4 trillion. The real problem is not lack of revenue. It is the opposite: runaway government spending.
The nonpartisan Congressional Budget Office agrees. It has said the source of almost all of the projected increases in federal deficits over the next several decades is the explosion in costs from Social Security, Medicare and Medicaid. These entitlement programs need to be brought under control. With nearly 80 million baby boomers retiring, taxes can’t be increased enough to pay for the current level of benefits.
Which raises the question: Why are Mr. Boehner and congressional Republicans even negotiating with Mr. Obama? The president is obviously not serious about bringing the budget under control. Mr. Obama seeks nothing less than the political destruction of the GOP by forcing its leaders to sign a budget deal that contains huge tax hikes, with important spending and entitlement reform proposals postponed for another day.
It’s a trap. By agreeing to raise taxes on upper-income earners, Republicans will have broken their no-tax pledge. Their base will be demoralized and dispirited. The public will view them (rightly) as no longer trustworthy. When the economy enters a tailspin next year, the GOP will share the blame. For Republicans, it’s bad policy and bad politics.
Sen. Rand Paul, Kentucky Republican, has a counterproposal. He’s urging House Republicans to walk away from the budget negotiations while making a clear statement that increasing taxes on any income group cripples growth and job creation. Instead of blocking Mr. Obama’s tax hikes in the lower chamber, he believes Republicans should vote “present” and let Democrats take sole ownership of the disastrous tax hikes. It’s an interesting plan, and certainly a better idea than stepping blindly into Mr. Obama’s trap.
The Washington Times
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