A Day Late and a Trillion Dollars Short
"An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation." --John Marshall
Waiting until after the U.S. technically plunged over the so-called fiscal cliff on Jan. 1, Congress and the White House finally reached a "deal" on taxes and some spending. Call it the fiscal bluff, or perhaps the farcical cliff, but whatever its name, neither political party is happy with the terms. It also sums up what Ronald Reagan once said: "Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other."
Bipartisan majorities in the 112th Congress held their noses to pass the bill without even knowing what was in it. Senators received it about three minutes before voting. House Minority Leader Nancy Pelosi (D-CA), who before ObamaCare passed said, "You have to pass it to find out what's in it," called it "a happy start to a new year." That tells us an awful lot. Barack Obama's autopen signed it Wednesday while he was back on vacation catching a wave in Hawaii.
The bad news -- and there's plenty -- is that the deal contains $10 in tax increases for every $1 in spending cuts. In fact, the deal increases spending by $330 billion over 10 years while deferring sequestration cuts for two months so the 113th Congress can fight that battle again, along with raising the debt ceiling. Democrats call this a "balanced approach," but it leaves the U.S. facing yet another trillion-dollar deficit this year. Unfortunately, that pales in comparison to the looming crisis of $48 trillion in unfunded liabilities for Social Security and Medicare.
Congress raised taxes for the top bracket, which includes hundreds of thousands of small businesses, during what might as well be a recession. The Left's favorite target, the "rich," consisting of "millionaires and billionaires," now officially includes individuals earning $400,000 and couples that earn $450,000 (that's quite a marriage penalty, if you ask us). Capital gains and dividends taxes on these same taxpayers will rise from 15 percent to 23.8 percent (including the new ObamaCare surtax of 3.8 percent), and deductions will be limited for individuals earning more than $250,000 and couples at $300,000. The death tax also will increase from 35 percent to 40 percent, with a $5 million exemption. Obama wanted 45 percent, and it would have gone to 55 percent without a "deal."
Even as Democrats gouge the "rich," however, they offered numerous favors to their flush corporate friends. From a long list, the starving artists in Hollywood get a $248 million tax break, NASCAR track owners get $78 million, rum distillers can toast to $222 million and the wind-energy sector can blow through $12.1 billion. In the end, Democrats gave away much of the new taxes they will extract from the top bracket, while further complicating an already bloated tax code. Yet Obama had the chutzpah Tuesday to call for "further reforms to our tax code so that the wealthiest corporations and individuals can't take advantage of loopholes and deductions that aren't available to most Americans."
The deal doesn't just hit the "rich," either. Taxes will increase for 77 percent of taxpayers because the temporary payroll tax cut was not extended. This undoubtedly will surprise many middle-class and poor people when they see smaller paychecks next payday. The average family earning $50,000 will be gouged with a tax increase of about $1,000. And it's highly unlikely that Obama is finished trying to raise taxes.
The effect on the already stagnant economy almost certainly won't be good. The 155,000 jobs added in December are barely enough to account for population growth. Headline unemployment rose to 7.8 percent (which matches November's new upward-revised number), U-6 held steady at 14.4 percent and labor-force participation stayed at 63.6 percent, just above the 31-year low of 63.5 percent.
Despite all this, there is a small silver lining. The Bush tax rates are now permanent for all but the top bracket. Their temporary status was a significant GOP failure when the cuts were first passed a decade ago. We wish rates were even lower, but their new permanence means that any tax hike in the future will be transparently just that -- a tax hike. The Alternative Minimum Tax (AMT) is now indexed to inflation, making unnecessary the annual ritual of passing a "patch" to spare the middle class the extra tax. Obama did not (yet) achieve his desired tax increase on families earning $250,000 and had to settle for a higher threshold.
Perhaps best of all, House Speaker John Boehner (R-OH), who was narrowly re-elected as speaker Thursday, stated his intention never again to negotiate with Obama behind closed doors because the president has shown his true red colors. Republicans may find they have more leverage on spending and the debt ceiling, as well, but we're also not holding our breath for Obama to agree to real spending cuts.
On balance, settling for this steaming pile isn't as bad as it could have been, but it's hardly satisfying. That's the consequence of losing the presidential election by running a weak candidate against a vulnerable incumbent, which is itself a consequence of failing to sell a majority of the electorate on the virtues of Liberty and constitutionally limited government
Quote of the Week
"I appreciate all the hard work that went into avoiding the so-called 'fiscal cliff.' I especially commend Senator [Mitch] McConnell's efforts to make the best out of a bad situation. Nevertheless, I cannot support the arrangement they have arrived at. ... Thousands of small businesses, not just the wealthy, will now be forced to decide how they'll pay this new tax and, chances are, they'll do it by firing employees, cutting back their hours and benefits, or postponing the new hire they were looking to make. And to make matters worse, it does nothing to bring our dangerous debt under control." --Sen. Marco Rubio (R-FL) on why he joined seven other senators in voting "no"On Cross-Examination
"I just wanted to thank so many on the other side after all these years for finally acknowledging publicly that 98 percent of the Bush tax cuts helped the middle class." --Rep. Louie Gohmert (R-TX)The BIG Lies
"I just wanted to take a minute to explain to everyone what we were able to achieve this week. In the face of looming deadlines that would have taken a big chunk out of everyone's bottom line, you know my top priority has been preventing a tax hike that would have hit 98 percent of all Americans in 2013, because the last thing middle-class families could afford now would be to pay upwards of $2,000 more in taxes this year. ... We've stopped that middle-class tax hike." --Barack Obama, who actually did hike taxes on most taxpayers
"[I]f you look at my track record over the last two years, I cut spending by over a trillion dollars in 2011." --Barack Obama, who presided over increased spending of $147 billion in 2011Looking Ahead
Now that Congress has dealt with the tax crisis, the debt ceiling looms as the next showdown in just a couple of months. We can hardly wait.
As one perspicacious politician said about our ever-increasing debt, "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies. ... Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."
That politician was Barack Obama in 2006.
Sen. Dianne Feinstein, using the caskets of the children murdered in Newtown as her platform, released the details of her new "assault weapons" ban, and it's much worse than the 1994 version. Among the details: It bans the sale, transfer, importation or manufacture of 120 specifically named semi-automatic rifles (including the M1 Carbine), as well as some semi-automatic handguns. Contrary to media myth, of course, these are not "assault weapons." Rifles with any one of a list of undesirable features would be banned. To help determine these restrictions, Feinstein said she looked at pictures of guns in 1993 and again in 2012.
The ban would extend to magazines exceeding a capacity of 10 rounds (which is lower than standard capacity for most rifles and handguns), and it would include guns with fixed magazines that can accept more than 10 rounds. Meanwhile, in the House, Democrats Diana DeGette (CO) and Carolyn McCarthy (NY) introduced the High Capacity Ammunition Feeding Device Act. This is a different bill from Feinstein's in that it will target only magazine capacity instead of the firearms themselves, apparently in the hope that if an outright assault weapons ban doesn't pass, one regulating magazines might.
Furthermore, Feinstein's bill requires registration of the semi-automatic rifles you already own with the ATF. Previously, the National Firearms Act (NFA) required this only for machine guns. ATF registration will require that you provide the gun's serial number and photographs of it; that you pass another background check and supply fingerprints; and that you obtain certification from local law enforcement of your identity and that your possession wouldn't violate state or local law. Registration also includes a $200 fee per gun. Again, this is all for weapons you already own. Then, most outrageously, when you die, your "assault weapons" are forfeited to the government -- they may not be passed down to your heirs.
Never mind that year after year murders committed with hammers and clubs far outnumber the murders committed with a rifle of any type, or that twice as many people are killed by hands and fists as rifles.
Feinstein's play here is likely to ask for more than she knows she'll get, but her real goal is also an outright gun ban. In 1995, she explained, "If I could have gotten 51 votes in the Senate of the United States for an outright [gun] ban, picking up every one of them -- Mr. and Mrs. America, turn 'em all in -- I would have done it." Now that she's renewed her efforts, it's certainly no wonder that December gun sales broke records.
We encourage you to contact your senators and representatives to express your opposition to this unconstitutional gun grab. One Marine did so, and his letter is worth reading. What happened in Newtown wasn't a "gun problem," and it won't be solved by taking away the Liberty of law-abiding citizens.
Dianne Feinstein and her fellow NeoComs in Congress aren't the only ones seeking to confiscate citizens' guns. Illinois state legislators are crafting a gun ban that would make Feinstein drool. The Illinois bill would ban all semi-automatic rifles, pistols and shotguns, as well as pump-action shotguns -- no exemptions and no grandfathering, meaning gun owners must turn their firearms in to police to avoid prosecution. Magazines holding more than 10 rounds must be registered with police. If it weren't so serious, this bill would be laughable, especially in light of the 2010 Supreme Court ruling striking down Chicago's handgun ban.
Likewise, New York's legislature is working on a bill to expand its own "assault" weapons ban. All semi-automatic rifles must be surrendered to police, as must all magazines with a capacity of more than 10 rounds. It upgrades the offense for possession to a felony.
Some years ago, a governor made a proclamation saying, "I have thought fit to issue this Proclamation to require all Persons who have yet Fire-Arms in their Possession, immediately to surrender them at the Court-House, to such Persons as shall be authorized to receive them; and hereby to declare that all Persons in whose Possession any Fire-Arms may hereafter be found, will be deemed Enemies to his Majesty's Government."
That governor was the British governor of colonial Massachusetts. As we recall, that effort in 1775 to confiscate weapons didn't turn out too well -- for the British.