Stopping at the Cliff

About the best that can be said of the much-ballyhooed “fiscal cliff” deal is that it could have been worse. The same can also be said of almost anything, including history’s worst calamities, but in this case the deal at least momentarily postpones the greater calamity that still lies ahead.
As a result of the last-minute accord there won’t be an across-the-board reversion to the Clinton-era tax rates, which even the Democrats conceded would have been a very bad idea, and it puts off for two months any “sequestration” budget cuts, which even the Republicans dreaded because they would have come mostly from national defense. This modest achievement was sufficient to fuel a strong rally on the stock markets, although it should be noted that the guys on Wall Street stage a big rally every time the United States or the European Union or any other flat-broke political entity comes up with another scheme to stave off bankruptcy for another few months. Everyone outside of Wall Street will surely find something to hate about the bargain.
The most rock-ribbed conservatives are infuriated that the congressional Republicans surrendered to a tax hike on “the rich,” which in this case turns out to be people making $400,000 or more in a year. Obama had originally insisted on a definition of $250,000 per annum, and given the public’s vengeful attitude toward the affluent the Republicans can claim a small victory, but the tax hike will still be a drag on economic growth and its effect on the deficit will be negligible at best, so the conservatives can be forgiven their grumbling. The agreement also allows a temporary payroll tax cut to expire for about 77 percent of workers, on the other hand, so perhaps one can take solace in the realization that such a large portion of the country can now be considered part of the hated rich.
More appalling yet to a conservative sensibility are the spending increases included in the deal. The wizards at the Congressional Budget Office somehow found a miniscule $15 billion worth of budget cuts in the deal along with its $620 billion of increased taxes, a 41-to-one ratio that the president would call a “balanced” approach to deficit-cutting, but they also concluded that the deal will wind up adding nearly $4 trillion to the national debt over the next ten years. Among the many provisions in the bill is a continuation of benefits to some two million unemployed workers, and one Democratic congressman was frank enough to state that the fiscal cliff bill basically means “an unemployment check is in the mail.”
All that gnashing of conservative teeth allows the president and his cheerleaders in the press to claim a rousing victory, and much of the public will probably agree. Obama resumed his Hawaiian vacation to celebrate, adding another $3 million of government spending in the process, and he seems not to have taking any of the public relations beating that George W. Bush used to take for a summer break in Crawford, Texas. Some incurably optimistic conservatives expect that the public will at long last be aware that the Bush tax cuts extended to the middle class and that soak-the-rich schemes don’t make a dent in the deficit, but the public’s imperviousness to obvious truths should have been made apparent by the last election. A typical Obama fan called into Sean Hannity’s radio program Wednesday to gloat about his guy’s big win the “physical cliff” negotiations, insisting that the president had thwarted a concerted Republican effort to raise taxes on everyone but the opulently wealthy, and he’ll likely persist in such misconceptions for the remainder of his days.
Still, the president’s political victory will prove short-lived, perhaps ending this week when the first paychecks of the year are issued and that 77 percent of workers hit by the restored payroll tax discover they are now the nouveau riche, and the more brazenly realistic liberals are already lamenting that the opportunity for tax hikes on everyone has passed. There’s another potential end-of-the-world imbroglio over the debt ceiling scheduled for another month or so, too, and by then even the press cheerleaders will find it hard to disguise the fact that Obama intends to spend on a level that will require more revenue than even the hated rich can provide. The Republicans won’t necessarily win that round, either, but the president will still lose another stash of political capital.
The president and congress will probably negotiate some sort of scheme to stave off bankruptcy, and the guys on Wall Street will stage another big rally, but ultimately the country will bump its head against a bond market-imposed debt ceiling that even congressional acquiescence cannot raise. The “fiscal cliff” deal does nothing to prevent that fateful day, and only hastens it.

– Bud Norman

Fiscal Cliff Notes

After careful consideration of all the possible “fiscal cliff” outcomes we have concluded there is no way that President Obama can lose or the congressional Republicans can win.If your only rooting interest is for the country at large, well, that also doesn’t look good.
For those who have been blissfully unaware of the goings-on in Washington, the fiscal cliff is what the country will fall off of if the Bush-era tax rates are allowed to expire at the beginning of next year. This would mean a tax increase for nearly everyone who actually pays federal income taxes, which almost every conservative economist believes would result in a severe recession, and it would also cut $1.2 trillion from the federal budget over the next 10 years, which every liberal economist believes would not only cause a recession but also push the earth out of its orbit and send it hurtling into the sun.
With such near-unanimity of opinion that the fiscal cliff is not something any sane nation would want to go over one might expect a quick agreement on the matter, but alas, this nation is insane. The original sticking point was on taxes, with Republicans preferring to retain the current rates for everyone and Democrats absolutely hell-bent on a tax hike for the hated top 2 percent of earners, but now comes word that the president’s list of demands has grown to include $255 billion in “stimulus” spending and no more congressional authority over the government’s credit limit. Although the demands might seem outrageous, if you consider the president’s personality and political position it is more surprising he didn’t insist on an immediate repeal of the twenty-second amendment and a new constitutional arrangement along the lines of what his pal Mohamed Morsi has decreed for himself in Egypt.
Why not? If the Republicans capitulate, always a distinct possibility, Obama will enjoy unprecedented spending power to buy all the votes needed for that third term. If the Republicans resist even at the price of going over the fiscal cliff, they’ll be widely blamed for the dire economic consequences.
That the Republicans would lose in the court of public opinion is a foregone conclusion. Not because of Obama’s vaunted rhetorical powers, which have proved wildly overrated, but because the still-powerful Washington news media and their colleagues on the comedy shows will constantly reiterate that Republican intransigence forced the country into an avoidable recession. The newly unemployed will get louder and more sympathetic than at any time in the past four years, with every sob story conveying the familiar message that Republicans care only for the rich. What little there is of conservative media will argue on the Republicans’ behalf that it would have been irreparably disastrous to hand Obama an unlimited line of credit, but they made the same sensible argument during the election and the result is what has led the country to its current sorry condition.
Nor should the Republicans doubt that Obama is entirely willing to take the country over the fiscal cliff, a destination that looks quite acceptable from his unique perspective. Taking the fiscal cliff dive would allow Obama to raise taxes on everybody, a Democrat’s dream, and do so without political consequences, something beyond the Democrats’ wildest dream. The automatic budget cuts will come mainly from national defense, which Obama has always wanted to gut anyway, and the rest of the spending can quickly restored by the Democratic House that is installed 2014. Spending cuts can always be rectified, but the tax money will never be returned.
The estimable Charles Krauthammer has argued that Obama won’t want his second term marred by a deep recession, but we fear that on this rare occasion he gives the president too much credit. A lousy economy that persisted through his first term didn’t prove sufficiently harmful to Obama’s political standing to prevent his re-election, and he has no reason to believe that his uncanny luck will change now. What’s more, a second recession will give him the same opportunities that the first afforded to push pork-laden stimulus spending and extraordinary money-printing to pay off his loyal constituencies.
There are the millions of Americans who will suffer greatly from the loss of jobs and wealth if the fiscal cliff recession comes to pass, but we doubt their plight will trouble Obama much during his upcoming multi-million dollar vacation. If their suffering helps the president achieve his dream of expanding the welfare state even further he can always console himself that it was well worth the price. We realize this is a very harsh assessment of an American president, but four years of watching his actions, rather than just listening to his lofty speeches, have led us to this conclusion.
No matter the outcome of the current negotiations, the country will continue its headlong rush toward financial insolvency. If the government can’t stop short of this relatively shallow fiscal cliff, don’t expect it will avoid that grand canyon.

— Bud Norman

Ryan Gives Hope

Vice presidential selections are usually of little interest to us, as the office is typically of such little consequence that even Joe Biden has done only minor damage with it, so we’ve happily refrained from the constant speculation and debate of the past weeks about the possible choices that Mitt Romney might make. Now that Romney has chosen Rep. Paul Ryan, though, we must say that we’re just pleased as punch.

There is no one currently active in American politics that we hold in higher regard than Ryan. He has the clarity of vision to see the economic calamity the lies at the end of our fiscal path, the broad imagination and hard-earned understanding of budgetary details needed to devise a workable solution, and most importantly — and most rare — he has the courage to confront his countrymen with harsh realities and offer his plan despite the fury he knew it would provoke. By selecting Ryan, Romney has demonstrated that he also understands the overriding issue of this election and is also bold enough to confront it.

The choice is not without risk, of course. Human nature is such that most people are disinclined to hear the kind of hard truths that Ryan proclaims, and millions of Americans will no doubt prefer the reassuring fairy tales of never ending and ever expanding entitlements that the president has so successfully peddled for the past four years. The complexities of baseline budgeting and other arcane tricks of the politician’s trade will permit Ryan’s opponents to convincingly lie about the prudent and necessary spending he has proposed, and when compared to the opposition’s false promises of government largesse at somebody else’s expense the Ryan plan will seem a most bitter medicine.

Still, the risk is justified by the possible benefits. The inevitable attacks on Ryan will only serve to focus attention on the issue of the government’s looming insolvency and the Democratic ticket’s conspicuous lack of a plan to prevent it, and Ryan is uniquely qualified to win that debate. Although his speeches rarely reach the level of rhetorical loftiness that characterize the president’s orations, Ryan’s style is grounded in hard facts, clear logic and plain logic. His fans still recall how Ryan left Obama speechless and seething during the health care debate, and the upcoming vice presidential debate against Biden promises to be the most fun Republicans have had in many years.

Critics will quibble that Ryan doesn’t have the ethnic appeal of a Sen. Marco Rubio, who would have also been fine choice, or isn’t as likely deliver an important number of electoral as Ohio’s Sen. Rob Portman would have been, and he was good, too, but these are mere quibbles. Having a man of Ryan’s stature on the ticket is a good thing.

— Bud Norman