Rep. Boehner's "Cliff" Deal Will Return Stupid Party to the Minority
Though the alleged "fiscal cliff" negotiations are ongoing, it appears the Republicans have yet again been duped by Barack Obama and the Democrats. When evil matches up against stupid, evil tends to win.
In this case House Speaker John Boehner has offered tax increases on incomes over $1 million in return for spending cuts that are essentially "to be determined." In short, Boehner offered Obama the one good thing anymore about the Republican brand (the Party's reputation for being viscerally opposed to tax increases) in return for spending cuts that anyone with a pulse knows will never materialize; that, or they'll be erased by bursts of spending elsewhere.
About spending cuts, it should first be acknowledged that they are stimulative. Supply-siders are no doubt correct that marginal reductions in tax rates provide more rocket economic fuel than do reductions in spending, but for some of them to presume that wasteful government spending is prized by the electorate absent tax cuts is for those same individuals to ignore basic economics.
Put simply, big government is itself austerity for government spending to varying degrees depriving the more productive private sector of limited capital. It's no mistake that the biggest recession most of us have never heard of (1920-21) is largely unknown precisely because Congress wisely slashed the federal spending burden from $6 billion to $3 billion on the way to a major economic boom. This was done without any major changes to the tax code. Spending cuts work when it comes to boosting economic growth.
The problem now is that there's not much definitive about the supposed cuts. Unless immediate they rarely ever happen given the tautological reality that future Congresses will not allow themselves to be hamstrung by deals made by past Congresses.
After that, implicit in the notion of future spending cuts is a static world free of global uncertainty, free of natural disasters, and free of poorly run banks and car companies suddenly in need of emergency cash necessary to "save" the financial system. Without getting into the U.S.'s wrongheaded role as the world's policeman, or into the similarly wrongheaded notion that local disasters should have national spending implications, or into the tragically wrongheaded view that commercial failure should be cushioned by the unwise hand of government, it's inevitable that the alleged spending cuts of tomorrow will essentially be sterilized by the war, natural disasters and financial crises that serve as food and water for the ever growing state.
As for Boehner's proposal to "only" raise taxes on incomes over $1 million, a proposal the Wall Street Journal's editorial page very oddly proclaimed to be "better than the scheduled increase on incomes above $200,000 a year", nothing could be further from the truth. Boehner of course thinks he's being clever here, that very few Americans earn over $1 million so we can raise taxes on them without tears and without a hit to growth. What a laugh, that is unless, you're poor, middle class, or in search of a job. Then Boehner's tax-the-rich scheme is not so funny.
Indeed, to raise taxes on top earners is to by definition lower the wages and job opportunities of the poor and middle class. Lest we forget, the rich, though very much a tiny minority, have by virtue of being wealthy the majority of disposable income which, if banked or invested, is lent to tomorrow's Microsofts and Intels. If that's not clear enough, there are once again no companies and no jobs without investment, and that small sliver of Americans earning over $1 million has the lion's share of funds for investment.
It's also true that $1 million earners and wannabe $1 million earners are the risk takers. They're the vital few, the economic activists as it were whose exploits make us healthier, more efficient and productive (think higher wages), and who are most likely to employ us. The problem now is they've been told yet again by the Party of Evil and the dependably clueless Party of Stupid that successful innovation and investment in same will be hit first and hardest by the tax man.
The above in mind, and from a purely economic point of view, the Boehner compromise provides us with a scenario that is worse than falling off of the cliff. At least with the cliff dive we were going to get some immediate spending relief that would somewhat mitigate the higher taxes (prices) placed on work.
Also, if the Republicans had held their ground and been forced off of the cliff, they would still be the Party opposed to tax increases. In this scenario President Obama would own the tax increases, and for having opposed them, the Republicans would have ensured their hold on the House (economies tend to do better amid gridlock) going into the 2014 elections. With the Boehner compromise, the Republicans will be signing off on the tax increases that will do the most to reduce growth, the spending cuts promised will of course never materialize, and then in 2014 a tarnished GOP brand will have to fight for the House with a greatly weakened, tax-increase dirtied hand.
Forgotten by John Boehner is that the electorate handed his GOP the House to ensure that tax-averse Republicans would hold the line on tax increases. Instead, Boehner and the stupid Party appear ready to cave not just on any tax increase, but a tax hike that will easily do the most to harm the economy at a time when it's still gasping for air. Welcome back to the minority, Republicans.