This page has been archived and commenting is disabled.
Call the Bluff
I damn near fell of my chair (laughing) yesterday watching Timmy Geithner on CNBC. When asked if the President was willing to go over the fiscal cliff if the tax RATE on the top 2% were not increased, the Treasury Secretary snapped back, “Absolutely”.
Maria Bartiromo was also floored by this; she spent the next hour telling the world she thought Geithner’s position was clear evidence that the US would be going over the cliff. She had big shot Senator, Richard Shelby (R- Al) on air. She showed him the clip with Geithner making an ass of himself; the Senator looked like he had swallowed a wad of tobacco while he watched.
I was convinced that Geithner had made a blunder, a slip of the tongue that would later be clarified or retracted. Not the case. Last evening, Treasury put out a Blog about what a great job Tim did on TV (link). I took this as a confirmation that Geithner did not make a gaffe on air, his words were carefully chosen. When he said he was “Absolutely” certain that falling off the cliff was in our future if tax rates don’t go up, he meant exactly what he said.
Given that Geithner will be out of his job running Treasury soon, I’m sure that he went on TV with the blessings of Obama, and he had a scripted message from the President. There will be no negotiations on tax rates, the top rate is going to 40%, or we will be sailing off the cliff. What an idiotic bargaining position.
At this point, I don’t think there is any significant opposition to increasing tax revenue from America’s wealthiest folks; the question is how to achieve it. Raising marginal rates is one option; cutting deductions can accomplish exactly the same thing. Geithner and Obama will not consider adjusting deductions; the reasons are a mystery to me. It appears that the President wants to “punish” some folks rather than to find a compromise that achieves the desired results.
So I agree with Bartiromo, unless the President backs off, we are going cliff diving in 20 days.
I believe the President has started a war, No real bullets or sabers in this war, but there will be casualties none-the-less. The question is, “Who is going to get hurt?” The thinking by all of the pundits is that a fall of the cliff will fall squarely on the shoulders of Republicans. If they stand up to the Administration on tax rates, the Republicans will get slaughtered in the Congressional elections two years from now.
The facts force me to conclude that Obama is, in fact, using the cliff negotiations to bend Republicans over and force them into submission. The goal is to destroy the Republicans, and have the House, Senate and the White House all Democratically controlled in twenty-two months. Harry Reid would be in charge of the Senate, Nancy Pelosi would be running the House, and the President would have the last two years of his administration with the government controlled by “friendly” hands. A disaster in the making.
If tax rates go up on the wealthy, as the President has demanded, then it will generate approximately $68B per year. Every year, taxpayers take advantage of $1.1 Trillion of deductions. Minimizing/eliminating deductions could easily achieve the same revenue increases that Obama wants. Nor would not be difficult to target the limitations on deductions to those who are enjoying high incomes. What the President wants can be achieved without raising marginal tax rates. So what is the problem?
In my simple mind there is no reason not to consider attacking the problem by limiting deductions. Therefore, I conclude that politics is the problem. The President does not want to solve the cliff or the budget; he wants to punish Republicans.
Two states, California and New York make up 20+% of GDP. These states have a big say in the makeup of the House, they have the biggest electoral votes. They have been solid supporters of Obama with both money and votes. And now Obama is going to piss on them.
Income taxes in lovely California are now at an economy numbing 13%; NY is slightly behind the idiocy in California at 9%. If Obama gets his way, the combined tax bite on income will be 52.5% in Cali and 49.5% in NY. Add to this mess the 3% surcharge for Obamacare, and the 8% sales tax in these two states. Welcome to Sweden.
The chips on the Obama plan fall heavily on NY and Cali. Another big state, Texas, will reap the benefits, as it has no income taxes. Texas is as “Red” as a state can get, so when Obama is saying he is supporting his base, he’s just lying.
I think the Republicans should call the President’s bluff. Lets take a walk over the cliff; see what happens when we get to the other side. It can’t be much worse than 50%+ tax rates in the most productive states in the Union. Will Republicans get hammered in the bi-elections as a result? Maybe. But one thing is sure, if the President gets his way on tax rates today, and we also have the Republicans lose the House in two years, it sets up the possibility for a return to a more conservative frame of mind for the country when the next Presidential election comes around. If Obama gets his way, the economy will pay the price. In the process, any legacy that Obama might have had will have been converted into something like Herbert Hoover’s. So who is bluffing whom?
- advertisements -




and if all deductions are canned? Your point is valid in the current tax code and yes if implimented as you suggest it would make thing even less effficient. Fine with me MM, the faster it all implodes, the better.
How do you can business deductions ?
You're confusing two very different things.
You can restrict them somewhat, but not much.
Under US tax law, a C corp can basically deduct the kitchen sink in year one.
Not like other counrtys where I have run businesses where perks are un allowable.
and treated as the recipitents personal income.
"Not like other counrtys where I have run businesses where perks are un allowable."
You are optimistic that this "could never happen here." My hypothesis is that it will come to this or death of the dollar and a 60-70% loss in any dollar-denominated assets or dollars that you hold. The small business model is dead (we simply don't have the lobbying power) and the world kleptocracy is gaining momentum. ZH has been documenting the fact that the TBTF have become even bigger, not smaller since 2008. Unless lobbying has suddenly been outlawed, this is how I see it. Fuck, they are going to assimulate us all.
I believe you're confusing personal deductions with business deductions... the former may be mercilessly curtailed in the coming years... the latter, not so much. Sure, maybe limit 179 deductions (which has already started), but in general, it's going to be difficult to curtail business deductions.
Don't forget that because you have to collect sales tax from your customers and remit it to the government (assuming you live in a state with sales tax) and you have to collect payroll taxes from your employees and remit those to the government, you are also an uncompensated tax collector.
"Two states, California and New York make up 20+% of GDP. These states have a big say in the makeup of the House, they have the biggest electoral votes. They have been solid supporters of Obama with both money and votes. And now Obama is going to piss on them."
-------------------------------------
Tell us Bruce, are the budgets in these states balanced? Seems to me, we may have found the problem. If what you meant to say was "these two states have benefitted the most from the current fascism/crony capitalism", then you would be correct. Wake us when these fuckers can pay for all the promises they have made to their people.
I"m growing more confident that Krasting is just another bloviating imbecile by the day. As just one example culled from his latest missive, he apparently concludes that any given state's "productivity" can be captured as a mere, raw expression of the % of U.S. GDP it comprises.
First, Gross National Product is a far more relevant & accurate snapshot U.S. economic output, especially in the "global world" we now live, with Apple having relatively few employees in the U.S., but many employees (whether they work directly as Apple employees or are mere subcontractors at FoxConn) overseas, all things being equal (including flaws in the methodology used to compute various metrics such as GDP & GNP).
Second, and more importantly, much of the U.S. economic GDP is increasingly derived by a notional measurement of assets related to the FIRE (financial, insurance and real estate) segment of the economy.
Hmmm. How productive, truly, are many of these constituent component of this FIRE sector? Bruce would apparently have us believe that one can rest assured that the % of GDP captured by a snapshot of what I'd argue to be grossly inflated, and more relevantly, non-productive asset prices of things such as Manhattan real estate, is as good a litmus test as anything.
Alternatively, I'd argue that much of New York's contribution to U.S. GDP, regardless as to how it's measured, is actually a parasitic drain on the country (Goldman Sachs/MF Global/too-many-too-big-to-fail banks to list, anyone?).
+100
MexiPornia and NY residents get a Obam golden shower.
People here can spew the red team blue team but these Dem states like CA, NY, IL and a few others are totally insane with spending, graft, fraud and looting. Oregon and WA state are a bit better because they have lower minority and illegal populations.
Michigan is a state that is somewhat turning it around as Detroit dies. This is the destruction of civilization by the kleptocratic unions and liberals.
The point can not be emphasized enough.
If the Dems are successful in getting MSM to tar Repubs as being responsible for cuts the Dems agreed to last year then Congress goes to the Dems in 2 years.
2 years of unrestrained Obamanation without the consequences of re-election. Can any sane person want that kind of ineptness without some kind of check?
The result will be a new slogan, "Change you ain't gonna friggin' believe."
I shudder to think..
A Congress without speed-bumps is the same as no Congress at all and no matter what flavor you lean to or don't partake at all, if you didn't like executive orders then you're gonna hate what happens next.
Spare change is the new slogan
Actually, the new slogan will be, "Oh, we read your emails and tweets, you'll be bording the next boxcar..."
No "IFs" about it, they showed how over the top they would get for Obama in this past election, plus the WH Progressive Media Czar has the daily message, full talking points to the whole "team"
Don't buy a house near a big city park. That's where the Obamavilles will be set up. We try to export Democracy to the ME but they will end up exporting refugee camps to us. Bush's fault though.
Only in America would we call a projected 19% increase in federal tax revenue and 0.25% reduction in spending a "cliff". More like a brick fuckin wall. For it to be a cliff, the numbers would need to be reversed. Newspeak!
Dem super-pacs dumped a boat load of cash into the Cali elections, creating a bulletproof super-majority of liberal Dems controlling both the Assembly and Senate and ALL being led by Gooberner Jerry Brown to the utopian promised land. Even more loopy libs have been sent to the US CONgress. The electeds don't even bother to obey the State constitution mandate for an annual balanced budget..they just make shit up ! This is how you get the lowest bond rating of the 57 states.
At least Planet D.C. has some token opposition left in the political process. California's has been destroyed...probably forever. Now the game is about tax and spend to infinity or insolvency. My bet is on the latter. Meanwhile, those with significant assets are plotting their escape ( me included ).
I'm doing my part rainman and fleeing the state of California for a Texas and will complete the move in 2 weeks. I can't wait to get out since every day the insanity gets just a bit more overwhelming. I don't bother to read any newspaper or TV since it's all just one giant shitshow. I came to CA almost 30 years ago and loved it because I had the ability to go to the ocean, desert or mountains in about 1 hour from where I live in So Cal, then add the weather and it was beautiful from my previous home in Illinois. Now I hardly recognize what this state has turned into and my family can't leave fast enough.
the blue corner of the state San Diego, just elected the first Democrat mayor. some other GOPers lost as well, Bilbray, in a district which has some of the wealthiest voters in the county. (there was a fundraiser for Obama in La Jolla, right wing protestors stood outside??) but if there is a demographics changes, it really more illusion, Obama is a status quo advocate, while the demographics age rises, voters become more conservative. the GOP becomes anti-statist, because otherwise you wouldn't know there was any difference. the fiscal cliff is a battle for the minds of conservative voters, the GOP wants fiscal conservatism, Obama wants to maintain the status quo, which is a bunch of programs which were originally considered progressive, but are now part of a third rail. and so the GOPs failed strategy to win the WH, doesn't mean they won't win the house, and it doesn't mean that the house will continue to play the Presidents tune, as the balance of powers shift back toward the original design. and Jerry Brown is not a liberal, he is barely a Democrat.
Bilbray lost in a redrawn district which approximately balanced voter registration % compared to his old one(more RSF than La Jolla, they were counting for a week before he conceded). Filner was more of a surprise, though the city itself leans Democratic, he is such a rat fuck dbag it was sort of astounding at least to me someone could vote for that weasel. That and voters passing nearly every bond measure, Prop 30,39 tax increases, voted down the budget tightening Prop, and gave Dems the super majorities(first order of business bill to triple vehicle fees). Dem Super Pacs like Bloombergs were even picking off less extremist Democrats in D vs D runoffs(Baca comes to mind, Bloomberg pumped $3M into opponent due to gun control position).
Progressive MSM will spin everything to blame Repubs no matter what, they showed their hand this past election, no more pretense of objectivity. Cali will pretty much be a dry run for the US.
yes but Bilbray lost as an encumbent in a heavily blue county. the city does not lean Democratic, the mayor has always been a probusiness republican. the issue is age demographics, and dems who are going after those voters, by running (Filner) a 70 year old liberal state politician and his trophy (fiance) who is half his age. what an odd couple. DeMaio was the perfect opponent (probusiness in populist garb) too bad the RNC threw so much money into negative ads with their name all over it. the new left (which is the old right) saw through all that, and Obama fundraisers in LA JOLLA?? really what's your explanation again. (with GOP supporters standing out in the cold, and Mitt Romneys LA JOLLA house getting bad press in the paper) bottom line the old Democrats are the New Republicans, and the old money buys into it. the Old Republicans try to sound like they're environmentalists (Bilbray) and community oriented (DeMaio) but they can't get traction. and there's anough new Democrats, hispanics, college students, who haven't figured out they've been sold down the river, to help pull the wagon.
but im only a disinterested observer, trying to make sense of it all.
You write that the GOP want "Fiscal Conservatism". LMFAO. Thanks. I needed that laugh.
George W. Bush, with his GOP Controlled Congress for SIX of those Eight Years...Doubles the National Debt in Eight Years.
Mr. "Deficits don't matter" Bush doubled the size of Government in Eight Years. That is "Fiscally Conservative"??? LMAO.
I know Obama and the DNC are NOT Fiscally Conservative. But neither is the GOP. Yet you write that? You do not really believe that?
Just because one does it a a slightly lower rate than the other does not mean that they are more "benevolent" They are both MALEVOLENT, one slightly more than the other.
Before you attempt to obfuscate by the use of "quantity" of debt in a vain attempt to justify an unjustifiable position it is the percentages, just like INTEREST RATE PERCENTAGES, that matter. I am more interested in the lacking quality of the onslaught that both of the disasters elected have bequeathed upon us.
You are so funny. I am LOL. One can be blinded by the false dilemma where one is locked into a choice between dumb and dumber while not seeing that smart can be a valid option. Open your eyes.
some of them do believe in fiscal conservatism, some of them voted against TARP. you need to get your head out of your television ass and pay attention
For 50+ years, the US has benefited from an increasing military Keynesian stimulus of the most excellent kind, with 25% of US production being used not to break windows, but to break whole countries and regions so they can be rebuilt. It has grossly enriched a cadre of corrupt politicans and bribers (lobbyists) and left a gaping hole in the budget.
This fiscal cliff drama is Kabuki theater for the MSM setting up the opposition party to take the blame for the coming US fiscal meltdown. I'm not sure what the endgame is on the US economy for connected sociopath insiders, but for the 99% it has reached its "Minsky Moment" and the Fed is simply adding just enough debt to pay off the interest on existing debt while waiting for ?. US government expenditures will drop in 2013 because the bond market is beginning to wonder wtf backs US Treasury debt. With continued import/export imbalances highlighting the structural problems of the US economy and no manufacturing to take up the slack, there is no hope for a painless outcome..
<---- The US economy will improve over the next 4 years
<----- The US economy will collapse sometime in the next 4 years
What wonder, 30 year Treasuries are now at record high ... 152. It doesn't look like anyone is questioning long term debt
i think they tried to break the southern states once before. the GOP has controlled the house for a couple decades at least, and the harder Obma plays his faux socialist plan, the more voters in those states will choose to back their own guy. if someone could figure out a way to protect intellectual property and not let the Asians reverse engineer all out technology we would have enough capital to back those treasuries and a lot more.
Senate and House Democrat controlled from Jan 2007 to Jan 2011.
right, a Pelosi (blue Dog) led majority. you have to back to Reagan to find a GOP president balanced with a Democratic congress. W Bush had all three branches of government, including SCOTUS, but he couldn't get everything from his Congress.
"couldn't get everything..."
Patriot Act
Iraq War Resolution
Bush Tax Cuts
Military Commissions Act
No Child Left Behind Act
Medicare Prescription Drug Act
FISA Amendments Act
Emergency Economic Stabilization Act
JFC, what else did he need!?
Well, and don't forget his best gift to all of us, Obama
Bruce Obama wants to go over the cliff and has from the get go, we are currently in recession and the set up is obvious , it's the Repards fault all you have to do is watch the MSM for 10 minutes and the talking points are all the same. I think a few weeks ago the Repards could have avoided this trap but now even if the cliff is avoided (and I think it will be as the Repards will cave) the recession that will be declared sometime next year will be positioned as their fault. We are just two short years away from the return of the Nancy and Harry show. Moreover Michelle is laying in wait for 2016, just watch how she manages her image and how the MSM positions her as the brains behind Barry.
The real cliff is the one Boner is leading what's left of his party over.
Right on Zer0head. Boehner's left nut is being squeezed by Obama and his right nut by the crazy wing of the Rep party. Few posters on ZH have ever taken the time to read the constitution. Outside of the veto, the President has no authority to appropiate funds or to raise taxes. End of story. This power resides in Congress - mainly the House of Representatives.
It is the responsibility of the Speaker (Boehner) to propose and pass a budget that is acceptable to all parties. If he can't do this then his ass needs to be thrown out and a new speaker chosen. It is hardly Obama's fault that Boehner has deal deal with a bunch of bat-shit crazy - tea bagging ball suckers led by Cantor (would somebody please slap that smirk off his face).
Lets remember how we got the Bush Tax Bill. It was passed in reconcilliation, because the Senate was afraid the bill would be fillibustered and the Reps did not have the necessary 55 votes for an overide. By this time most economists were not longer drinking the supply side kool-aide and the consensus was that the Tax Bill would increase Federal deficits. Even Greenspan thought the cuts were a bad idea, but he later recanted after he was taken to the Whitehouse woodshed. The Tax Bill was due to Sunset in in 2010 under the Senate Byrd Rule. The Byrd rules basically states that bills that are passed in reconcillation must end in 10 years if they add to the Federal Deficit or if there are not specific offsetting budget cuts.
In Bush's first State of the Union he declared that budget supluses were going to be used to pay down the National Debt. The Peterson Institute, Heritage Foundation, Koch Brothers et. el. took Bush aside and told him the way things really are; and ergo the 2001 Tax Cuts.
IMO the Fiscal Cliff is just a MSM news creation to give their talking heads a news subject. The side effects will not be as dire as predicted. Cuts are incremental and the Bush Tax Bill never had that much popular backing. The economy will do just fine with the end of the tax cuts. The President is definitely in the driver's seat on the Fiscal Cliff issue and the opposition knows it. Since election night, I actually enjoy watching Fox News from time to time to see these bastards (Rove, Norquist, Mitchell, Cantor, Boehner) squirm on TV.
What's the difference between an American politician and a Greek one? None, zero, nada. These bozo's will gladly piss on each other, in the mean time oblivious to the horror and misery they are causing their citizens.
If Obama gets his way, the combined tax bite on income will be 52.5% in Cali and 49.5% in NY. Add to this mess the 3% surcharge for Obamacare, and the 8% sales tax in these two states. Welcome to Sweden.
Aka "victory".
What do you think he meant by “fundamentally transforming” America – making it more like Hong Kong?
Obama doesn't care about GDP or the debt; he wants to flatten everybody out and make a majority of voters heavily dependent on a government that has more or less total control over everything.
BTW, this was evident to some of us in January, 2008.
The gentleman's life depicted in the documentary Snow on the Bluff would bring real change to Washington. At least it would be entertaining.
I think going over the cliff is 1 option....but I think the better option is for the House to bring up Obummer's plan....Let the Dems vote in favor and let all the Repubs vote "present"....Continually telling the public the plan stinks, they don't agree with it but the American people elected the liar in chief and it is his plan. Let Obummer have it all (on taxes) and he can have the results as well....
Already didded ... in the Senate:
http://thehill.com/video/senate/271255-mcconnell-calls-for-vote-on-obamas-ridiculous-deficit-reduction-plan
Reid blocked the vote, basically called holding a vote on the administration's plan, as-is, a "stunt". To the extent there's a cliff in front of us, rather than behind and above us, we're going off it; the Dems will see to it. In addition, it's clear they will be left with clean hands by the media, who will ignore the fact that the Obama plan was brought up in the Senate for a vote and blocked by Obama's own left-hand-man in the Senate.
http://www.youtube.com/watch?v=YsgnG-TNXPk
Yup, Baraak HOOVER 0blahma.
He TALKS a good fight, but he's a no-balls wussie.
AMEN!
"...when the next Presidential election comes around."
As if...
We are going over the "cliff" - becuase that's the only solution that's a win / win / win
Democrats - "win" becuase they'll get to blame the intensifying deflationary collapse on the Republicans desire to service the super-rich (Wall street class)
Republicans - "win" becuase they'll be able to achieve spedning cuts that are otherwise imposssible to agree upon
Geithener, et al - "win" becuase it will appear to the bond markets that the US is finally going to do something to save the US Dollar.
Republicans don't want true spending cuts.
What spending cuts?
Seems the so called pundits have already made their determinations, probably already have the stories ready to go to print.
Honey Badger O don't give a shit-the 47% just made him King.
Obama Legacy?....making America even fatter than before!
The problem is spending. Raising taxes or cutting deductions gives them more to spend. Off the cluiff? Fine with me, I have been getting hosed - let asset prices crater as the eventually will - sooner the better.
You presuppose that "off the cliff" means they're actually cutting spending...
'Welcome to Sweden' is probably the wrong comparison. It should read 'Welcome to France'. Sweden has high tax rates but is a pretty liberal country and Obama's track record (Obama Care, GM, subsidies for all, etc.) reminds me more of a socialist than of a liberal president.
Another cog in his legacy is moving through the revolving door...again.
Great catch, thanks.