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Call the Bluff

Bruce Krasting's picture




 

 

 

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?

 

 

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Thu, 12/06/2012 - 11:20 | 3039243 4exNinja
4exNinja's picture

Until that stupid revolving door in Washington is closed nothing will ever change for the better. 

As long as government employees can be bought as they are now, we're looking at endless theft. 

1) Guy joins the military and works his way up the ladder.

2) Guy reaches the top (general).

3) Guy starts working as a lobbyist for defense contractors.

Replace "military" with every single other government sector and you realise why we are setting taxpayer money on fire by having this system in place.

Funny enough none of the 2 parties seem to even mention that...instead they focus on tax increases (partially justified) and cutting services for the middle class (which would hurt the economy). 

They're all bought by now...so the SYSTEM needs to be fixed. Electing GOP/DEM doesn't matter, they're all bought. 

Thu, 12/06/2012 - 13:24 | 3039637 moroots
moroots's picture

"Replace "military" with every single other government sector and you realise why we are setting taxpayer money on fire by having this system in place."

Says the guy who wants to give the government more tax revenue.

Thu, 12/06/2012 - 10:01 | 3038958 Water Is Wet
Water Is Wet's picture

"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."

I hate this mentality.  Obama's second term hasn't even started yet, and people are already talking about the next Presidential election.  Gag me.  Anything to distract from the present...

Thu, 12/06/2012 - 10:46 | 3039084 I am more equal...
I am more equal than others's picture

The economic skills of Hebert Hoover while mirroring the leadership skill of Jimmy Carter with the appearance of Alfred E. Neuman all the while reenacting a Wylie E. Coyote moment. 

 

 

Waiting to fall....

waiting...


Thu, 12/06/2012 - 09:41 | 3038892 williambanzai7
williambanzai7's picture

DUELING HOOVERS

Thu, 12/06/2012 - 21:10 | 3041241 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Like Hoover Vacuums,

they both SUCK!

Thu, 12/06/2012 - 13:54 | 3039698 machineh
machineh's picture

'DUELING HOOVERS' -- nice double entendre!

In Britain 'hoover' refers to vacuum cleaning.

That is, THEY BOTH SUCK!

Thu, 12/06/2012 - 14:27 | 3039838 Louie the Dog
Louie the Dog's picture

They may both suck but only one got elected.  It might be time for you to come to grips with reality, it's Obama that's going to fuck you up.  Beating up on Romney only makes you feel a little better for wasting your vote on Paul.  My guess is come about mid 2013 you'd be willing to crawl over broken glass to have Romney in the WH, whether he sucks or not.

Thu, 12/06/2012 - 10:53 | 3039125 Cycle
Cycle's picture

Excellent.  One blows and the other sucks, thereby equalizing the pressure for change.

Thu, 12/06/2012 - 10:14 | 3039000 bank guy in Brussels
bank guy in Brussels's picture

You have it, WB ... you know and understand the fakery of the two-party system

But our dear friend Bruce Krasting still does not see it ...

BK does not get the big macro picture of the USA

That the two 'parties' are the same party, both are working for the oligarchs, and that this whole fiscal cliff - budget bla-bla is a devious game for the sheeple

To take America 'over the edge' for their own purposes

Astonishes me a bit that Bruce Krasting still believes the rhetoric of this 'party conflict' ... he can see the small, discrete items of corruption ... but not the mega-picture.

BK will get there eventually, tho ... probably for all of us, it has been a 'road of learning' ...

Thu, 12/06/2012 - 11:26 | 3039273 TahoeBilly2012
TahoeBilly2012's picture

Tax rate debates are for chumps. You think the .001% cares more about this, or taking down Assad, Iran and getting their drones up worldwide? This is a friggin sideshow.

Thu, 12/06/2012 - 10:49 | 3039097 Daily Bail
Daily Bail's picture

Bank Guy in Brussels

Sheesh.  Bruce gets it for crying out loud.  Give him a break.  This piece was about calling Geithner's bluff, which I agree the GOP should do.  Until Geithner/Obama come to the table with a few trillion in REAL spending cuts, there is absolutely no reason to negotiate with the lying punks.

Thu, 12/06/2012 - 11:26 | 3039271 Navigator
Navigator's picture

There is no negotiation necessary DB.  Boehner has zero leverage.  This was over before it started and any idea that the Republicans have anything to negotiate with is just CNBC optics and Teabagger wishful thinking.  

The law says taxes go up on Jan 1.  That's Boehner's reality.

 

 

 

Thu, 12/06/2012 - 17:57 | 3040645 DosZap
DosZap's picture

The law says taxes go up on Jan 1. That's Boehner's reality

The reality is Everyone that has a jobs taxes are going WAY up.(think for ONE second the taxing the rich is where HE stops, what a joke!)

End goal, is total breakdown of our society as we have known it, so the new Gastapo can corral the wild panicked in the streets IF Socialism were the only end goal, we would be damned lucky.

Unfortunately the end goal is a dicktaterchip.

We just went throught the last election ever in Hamelika.

We are in the bottom of the 9th,last time at bat w/ 2 outs, and no balls,w/and 2-0 count.

Thu, 12/06/2012 - 12:34 | 3039486 Urban Redneck
Urban Redneck's picture

The taxes go up across the board, and discretionary and military over-spending gets cut- whether or not Boehner has leverage is predicated on which side has a higher PAIN TOLERANCE.

My experience is that rich fat people in developed countries usually have a very low tolerance for pain.

Thu, 12/06/2012 - 12:56 | 3039549 Navigator
Navigator's picture

Boehner's only choice on tax rates for those who earn less than $250k is to leave them at the curret rate, or infuriate 98% of the population and lose the House in 2014.

Reduced military spending is what the vast majority of America wants and what they voted for.

That's more of Boehner's reality.

Thu, 12/06/2012 - 13:24 | 3039636 CIABS
CIABS's picture

Since the U.S. has already moved so far toward borrowing and/or printing money to fund its budget, I think we ought to nationalize the central bank and cancel income taxes.  I'd be willing to see the government give a certain amount of that printed money to the lower classes and let the voters vote 'em out if it's too much.  With income taxes cancelled, the elites would do just fine, unless the government were to print so much currency and hand it out as to shift the balance.  That would take a lot of printing and debasement, and the voters might not stand for it.

There would be a lot of fear about this approach, but what we do now is no good.  We shouldn't be afraid to try something different.

Thu, 12/06/2012 - 15:07 | 3040017 12ToothAssassin
12ToothAssassin's picture

Obviously the elites have been doing just fine for a long time yet they always want more.

Thu, 12/06/2012 - 16:39 | 3040400 CIABS
CIABS's picture

Yes, but don't you hate the tax code and the fact that the political debate over tax rates is pretty much guaranteed to go on forever?

Thu, 12/06/2012 - 11:41 | 3039326 earnyermoney
earnyermoney's picture

The war is to raise taxes, remove all mandatory cuts to all federal agencies except the defense department and propogate the entitlement lie.

Thu, 12/06/2012 - 13:09 | 3039590 CIABS
CIABS's picture

Navigator:  I would assume that Boehner will use whatever leverage he has.  If we don't see it, it probably doesn't exist, as you say.

Thu, 12/06/2012 - 11:10 | 3039182 Chuck Walla
Chuck Walla's picture

Obama only makes sense in the light of "what will do the most damage to the most people?".  Kill the job creaters, creating more unemployment means continuing to overload the system with tax eaters.  He cannot "fundamentally transform" the nation without a crisis as severe as Weimar or the Depression.  So, he works to that end. His every move sows it.

 

Obamacare, whle destructive, is only a control mechanism. The revolution, like all communist revolutions can be sped up in contemporary thinking. Screw Marx & Hegel and their dalectic BS, I wanna dictate NOW!

From the mouth of the Master Marxist Hegelian:

 A revolution is impossible without a revolutionary situation; furthermore, not every revolutionary situation leads to revolution. 

Vladimir Lenin


If Socialism can only be realized when the intellectual development of all the people permits it, then we shall not see Socialism for at least five hundred years. 

Vladimir Lenin

 "Socialized Medicine is the Keystone to the Arch of the Socialist State."

~ Vladimir Lenin

 

“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”

~ Vladimir Lenin

 

FORWARD SOVIET!

Thu, 12/06/2012 - 13:53 | 3039691 Mercury
Mercury's picture

"Socialized Medicine is the Keystone to the Arch of the Socialist State."

~ Vladimir Lenin

This may be true now but I doubt very much that Lenin (or Marx whom I've also seen this attributed to) ever said or believed such a thing.  Salvarsan, the first ever engineered drug, has barely been around 100 years as of today. The farther back you go before WWII the less effective, more dangerous (but cheaper!) "heathcare" was.  It's very hard to imagine what exactly would have to happen for someone to run up huge doctor/hospital bills in Russia circa 1917.

Thu, 12/06/2012 - 11:10 | 3039210 dexter_morgan
dexter_morgan's picture

Never waste a crisis, and in fact, if things are moving too slowly then create one. But it's all the fault of those bat-shit crazy creation believing repubs apparently.

Thu, 12/06/2012 - 11:15 | 3039226 metastar
metastar's picture

Dueling Hoovers.

They Both SUCK!

Thu, 12/06/2012 - 12:45 | 3039509 NotApplicable
NotApplicable's picture

Looking over this article, and the thread below reminds me of the age-old wisdom, "If you can get someone to ask the wrong questions, then the answers don't matter." The idea that these puppets are actually fighting is ridiculous. It's all about appearing leader-like, and thus relevant to the disaster du jour.

Next thing ya know, Bruce is gonna be yelling back at the TV, "Lookout, he's got a folding chair!! He just pulled a rope out of his tights!!! Why isn't the ref watching!!!"

Oh wait, that's a different traditional American reality show.

 

Thu, 12/06/2012 - 17:54 | 3040647 BigJim
BigJim's picture

Hoover? I don't recall Hoover granting himself extraordinary new powers... like the authority to kill US citizens without any judicial oversight.

OBomber is FDR's disciple, not Hoover's. 

Fri, 12/07/2012 - 16:16 | 3043725 Leopold B. Scotch
Leopold B. Scotch's picture

Hoover was FDR-lite, for God's sake.   Much contrary to the myth that he was some kind of Libertarian minimalist.

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