Obama To Demand $1.6 Trillion In Tax Hikes Over Ten Years, Double Previously Expected

Tyler Durden's picture

If the Fiscal Cliff negotiations are supposed to result in a bipartisan compromise, it is safe that the initial shots fired so far are about as extreme as can possibly be. As per our previous assessment of the status quo, with the GOP firmly against any tax hike, many were expecting the first olive branch to come from the generous victor - Barack Obama. Yet on the contrary, the WSJ reports, Obama's gambit will be to ask for double what the preliminary negotiations from the "debt deficit" summer of 2011 indicated would be the Democrats demand for tax revenue increase. To wit: "President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. Mr. Obama, in a meeting Tuesday with union leaders and other liberal activists, also pledged to hang tough in seeking tax increases on wealthy Americans." Granted, there was a tiny conciliation loophole still open, after he made no specific commitment to leave unscathed domestic programs such as Medicare, yet this is one program that the GOP will likely not find much solace in cutting. In other words, all the preliminary talk of one party being open to this or that, was, naturally, just that, with a whole lot of theatrics, politics and teleprompting thrown into the mix. The one hope is that the initial demands are so ludicrous on both sides, that some leeway may be seen as a victory by a given party's constituents. Yet that is unlikely: as we have noted on many occasions in the past, any compromise will result in swift condemnation in a congress that has never been as more polarized in history.

From the WSJ:

Kevin Smith, a spokesman for House Speaker John Boehner (R., Ohio), dismissed the president's opening position for the negotiations. He said Mr. Boehner's proposal to revamp the tax code and entitlement programs is "consistent with the president's call for a 'balanced' approach."

 

Mr. Boehner hasn't specified a revenue target that would be his opening bid. He has said he would be willing to accept new tax revenues—not higher tax rates—if Democrats accept structural changes to entitlement programs, the ultimate source of the U.S.'s long-term budget woes.

 

The president's opening gambit, based on his 2013 budget proposal, signals Mr. Obama's intent to press his advantage on the heels of his re-election last week. However, before gathering at the White House with lawmakers on Friday, he will meet with chief executives of a dozen companies Wednesday. Many executives have aired concerns about the economic consequences of the looming "fiscal cliff"—and the risk of another standoff.

 

...

 

Speaking to reporters about Mr. Obama's plans for Friday's talks, White House spokesman Jay Carney said, "the president has put forward a very specific plan that will be what he brings to the table when he sits down with congressional leaders."

 

"We know what a truly balanced approach to our fiscal challenges looks like," said Mr. Carney, using Democrats' language to mean spending cuts combined with tax increases.

 

Republicans already have appeared willing to cut a deal that results in Americans paying more taxes if it averts the scheduled spending cuts and tax increases due to take effect at year-end.

 

"New revenue must be tied to genuine entitlement changes," Senate Minority Leader Mitch McConnell (R., Ky.) said Tuesday. "Republicans are offering bipartisan solutions and now it's the president's turn. He needs to bring his party to the table."

More here, but we can summarize it as follows: the lame duck congress will posture, prance and pout. And it is a certainty that in the 15 (see calendar below) remaining days it is expected to be session it will get nothing done. Which means, that once again, it will be up to the market, just like last August, just like October of 2008, to implode and to shock Congress into awakening and coming up with a compromise of sorts. Only this time, now that Bernanke has shown he will "get to work" at a moment's notice, the impetus to do anything as a result of even a market plunge will be far less. After all why lose face, and put your career in jeopardy when there is the Fed which, supposedly, can offset a market crash, courtesy of the shining example set by Chuck Schumer.

It is thus quite possible that this December, for the first time in history, we may get to a point where not even a 20% market drop will be sufficient to get a Congress, now habituated with the Fed bailing it, and by it we mean the market, out, to cross bitter party lines. The problem then becomes one of what we saw happen at 3:30 pm today, when the Fed's Chairman-in-waiting, Janet Yellen hinted at an even longer ZIRP, and... nothing.

To summarize: think the economy is doomed if the Congress doesn't get its act together? You ain't seen nothing yet.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Dr. Engali's picture

Like I have been saying, there will be no grand bargain. He wants us to drive off the cliff...it's in hs best interest.

TruthInSunshine's picture

Just cut the defense budget by 40% and we'll save 12 trillion over three decades (in real, 2012 dollars).

Cutting the incredible largesse that is the federal budget (especially laying off 1/4 to 1/2 the federal workers who do little to nothing for 2x the salary their private sector counterparts make, not to mention the incredible federal worker retirement benefits) could easily save another 5 to 7 trillion over a similar period.

Anyone who actually believes the Department of Education, as just one example, is a success, let alone that it's not an incredible failure, is DELUSIONAL.

Anyone who actually believes that ANY taxes should be raised to feed the beast of inefficient, damaging government, that rips civil liberties to shreds and acts as a drag on the resourcefulness and motivation of private economic entities and forces, is similarly DELUSIONAL.

Let's cut the silliness and just CUT THE BUDGET, TAXES & GOVERNMENT.

I'd doubt that nary 1 in 1,000 people, aside from government employees, will detect a scintilla of degradation in their standard of living, if the government budget was slashed by 40% across the board (quite the opposite, actually).

surf0766's picture

Make it 50% cut and I am in also.

SafelyGraze's picture

$1.6T?

puhleez.

make it $160T and *then* come talk to me. we've got way more bets than that to be covered.

IBelieveInMagic's picture

Not a snow ball's chance in hell.

The US economy is now heavily comprised of govt jobs, defence jobs, and services such as finance, education and health thru which liquidity is released and circulated to ensure consumption (The US economy's role in global trade is to be irrepressible consumers.).

So just STFU and do your part. Consume recklessly.

economics9698's picture

58% is entitlements.  Cutting defense will do nothing.

Sean7k's picture

It needs to be 1.6T a YEAR. 160 billion? What good is that, if you overspend by 1.5T? 

We probably should seek an amount whereby the people are willing to revolt. What is THAT amount? Death by a thousand cuts- the code of fascism.

Beam Me Up Scotty's picture

So Obamas grand plan is to raise taxes by 160billion a year. And how much will he raise spending? I say give him everything he asks for so when the ship sinks there is no question who is to blame.

ZackAttack3's picture

Exactly.  160 billion a year, that is soon to be our monthly budget deficit.  In 5 years that could be our bi-monthly budget deficit.

Colonial Intent's picture

I never understood why people called bush and now obama 'hitler' as history shows these guys are both far closer to mussolini's policies than hitler's.

Private enterprise and the military in bed together never ends well.

 

Joe Davola's picture

Private enterprise and the military in bed together never ends well.

 

Jeez, does everything have to reference Petraeus these days.

CrazyCooter's picture

... And Obama is still an order of magnitude short ...

<brace_for_impact/>

Regards,

Cooter

IllusionOfChoice's picture

Exactly what I was thinking looking at $1.6T over 10 years. Our budget hole is more like $1.6 trillion per YEAR. These guys just don't seem to be very good with big numbers.

MiguelitoRaton's picture

Boehner's response "Refund all tax payments for people making $250K+ for the last 10 years"...and the negotiations begin

hmmtellmemore's picture

The budget will not bebalanced because it cannot be balanced.   http://www.learnliberty.org/videos/what-can-we-cut-balance-budget

That leaves 2 methods: inflating away debt and defaulting on debt.  Since the vast majority of US debt is owned by US citizens, this is a double whammy against Americans.  I think this has to end in one way:  a US state tries to secede and martial law is declared.  The US will use emergency powers to try to prolong the game.  That will include seizing gold/silver ETFs.  

 

OpenThePodBayDoorHAL's picture

Oh I'm so happy I get to pay more of my income to fling bombs around the world, to pay bankers back for their gambling losses, and to make sure struggling companies like Exxon don't have to pay any taxes

IBelieveInMagic's picture

I am wondering if we include the export of the commodity countries (in USD), wouldn't our financials look less dire? 

j0nx's picture

Add in your list pay for Tyrone Jackson to sit on his ass in his 2000 sq ft section 8 townhouse eating his doritos paid for by food stamps and then yeah I concur with your sentiment.

Zero Govt's picture

@ Hmm  -  the US Govt grabbing Gold and Silver ETF's?

..like grasping at straws, there's nothing material/metallic in them!

bigkahuna's picture

we're getting what we deserve...getting what we deserve - OK! Get it over with already!

odatruf's picture

Not just what we deserve, but what we have been asking and voting for, too.

AGuy's picture

"Govt grabbing Gold and Silver ETF's? .like grasping at straws..."

Not Really. They probably do it by raising the capital gains taxes on PMs and PM ETFs to 90%. Consider that there is a 28% capital gain tax on PMs already. Putting a significant tax increase is not very far fetched in my opinion. Its is not if the Sheeple will complain since the majority of them already cashed out there PMS (aka "Cash for Gold") during the 2008-2009 crisis.

zdk45's picture

As long as they stick to that "tax the rich" thing, that should balance it all out...

-sent from my Obamaphone

ACP's picture

I'm all for it...

...so's I can cut my personal defense budget, which has been rising the last several years...

SafelyGraze's picture

instead of buying your own low-end personal defense itemalia, you could buy a share of a tranche of a pool of high-end defense systems.

http://en.wikipedia.org/wiki/Defense_contractor

q: what's a terse and catchy name for the military-industrial-financial-media-twoParty-education-incarceration-sports-sickCare-regulatory-porn complex? so much to say! so many moving parts!

max2205's picture

Hear that? It's the sound of money leaving the country.....

max2205's picture

Why would I want to give more tax money to a govt that can't manage their costs. Fuck em. I ain't and won't pay. Drop out!

Seize Mars's picture

Dude: Vietnam was explicitly orchestrated to uberspend so they could take us off the gold standard. It worked, but it took a long time. The feed trough of corporate war profiteering was just a bonus.

Fast forward: 12 years of constant war in the middle east. They are trying to crash the dollar, but it's taking a lot longer than expected. It's harder because in effect our fiat dollars are securitized debt on everything, everywhere. So it's taking some time. So what so do? Hire some whacko to occupy the white house who will propose a spending binge that would blow your mind. Check! Done.

Dude they are trying to crash the dollar. Trying as hard as they can.

Why? So they can replace it with a one world fully digital currency.

Notice that they will need Europe to crash simultaneously, so the "one world" thing is necessary.

Nobody is interested in cutting spending; they've all been promised fiefdoms in the new regime.

TruthInSunshine's picture

There's no doubt in my mind that the elite who meet to beat want to reset the global commerce system around a global currency, whether that be SDRs or whatever other currency that's implemented. I must be a conspiracy theorist to buy into such a whacky concept that they've so poorly kept hidden.

But we went off the gold standard practically speaking a long, long time prior to 1971 or the inception of the Vietnam War. I realize that we, as a de facto matter, "went off the gold standard" in 1971.*

The technical crashing of the USD or any other currency can be done in an instant. The practical issues surrounding this are the complicating factors that make the task far more difficult; it's much easier to institute a smooth yet deep change with a simmer rather than a boil. A boil poses bringing about the types of reactions that threaten the establishment's grip on power.

 

*On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully fiat currency, backed by nothing but the promise of the federal government." This action, referred to as the Nixon shock, created the situation in which the United States dollar became the sole backing of currencies and a reserve currency for the member states. At the same time, many fixed currencies also became free floating.

CrazyCooter's picture

Never attribute to malice that which can be sufficiently explained by stupidity

Don't know who originally said that but I became much less paranoid after hearing it.

Regards,

Cooter

SafelyGraze's picture

you haven't met my shift supervisor

Boris Alatovkrap's picture

Yogi Bera, maybe? Perhaps Sandanista? Jim Morrison?

Boris Alatovkrap's picture

Robert J. Hanlon - "Heinlein's Razor"

Totentänzerlied's picture

The quote can be explained sufficiently as naivete. Malice is everywhere, especially when there's money involved.

IllusionOfChoice's picture

That explaination does explain why the central banks are concerned about BitCoin. If they go all digital, they sure can't suffer competing currencies, or the game's up!

SafelyGraze's picture

a fiefdom *and* a delicious steak!

You know, I know this steak doesn't exist. I know that when I put it in my mouth, the Matrix is telling my brain that it is juicy, and delicious -- http://www.youtube.com/watch?v=Z7BuQFUhsRM

 

AGuy's picture

"Vietnam was explicitly orchestrated to uberspend so they could take us off the gold standard."

The costs for the Vietnam war was one of the reason why the US was forced off the gold standard.  The other reason was that the CIA and other gov't institutions used large amounts of gold to fund black ops mostly to fund anti-communist gov't and rebels around the world during the cold war.

"Notice that they will need Europe to crash simultaneously,"

I don't think the finacial crisis leads to a one-world-gov't. Its causing the opposite as the people around the world are revolting and are pressing for a breakup (consider all of the spanish provinces that wish to become independant. Financial crises lead to destabilization and revolution. Something that TPBT wish to completely avoid. The bottom line is that gov'ts over promised and are heading for a collapse that will result in anarchy, and war. History has identified this consistant pattern: Debt Crisis - Financial Crisis - Trade Wars - Currency Wars - Political crisis - World War.

 

you enjoy myself's picture

or, to sum up what you just said in a pithy slogan that's been making the rounds, if you want the clinton tax rates then adopt the clinton spending.  christ, even 2005 spending would be a massive, gigantic reduction (and we had 2 wars going to boot) - which is a point that needs to get made more often.   absolutely no one remembers 2005 as a period of austerity (or even for a want of anything), but yet suggesting we pare down to 2005 spending levels is equated to lining the middle class up and shooting them all in the head.

New_Meat's picture

No representation without taxation!

- Ned

{not my original, still good}

ShrNfr's picture

Look at the debt clock. http://www.usdebtclock.org/cbo-omb-gop-budget-estimates.html# Saving 400 bn a year won't make a dent in stuff. We are accumulating further obligations at the rate of 11 Trillion a year. http://www.bloomberg.com/news/2012-08-08/blink-u-s-debt-just-grew-by-11-... Your 30 years of cuts would hardly cover more than one year of future obligations.

 

First we had the Raw Deal

Then we had the Grate Society

Then we had "compassionate conservatism' run amuch.

 

Bottom line, though, is that it will be money (fungible time) that is removed from those who work and delivered to the retirees. That is true no matter if the government does it in taxes, or the individual does it by selling assets. The estimate is 85% of the GDP to take care of boomers like me when we officially retire. That, my friend, is truly scarey. The population Ponzi has run out of new suckers.

Bobbyrib's picture

That's why I'm thinking of emigrating. To make me pay the same for Social Security while slashing the benefits by raising the retirement age to 70 (five years before the average male's life expectancy) is in effect raising my taxes. As was seen on previous articles, I am in my mid 30's and I am lucky to have a job. My employer is trying to pay me as little as possible, so I'm making less than the Boomers when they were my age. To raise our taxes will probably be the straw that breaks the camel's back. My generation is fucked.

j0nx's picture

You're making FAR less if you factor in cost of living and inflation into the mix and it's been that way pretty much since the late 80's and getting exponentially worse every decade.

Kobe Beef's picture

Do it. Do it now. Never look back. (Except to post your dissidence on ZH)

I did it more than a decade ago, and though the USSA disgusts me, it cannot destroy me.

Colonial Intent's picture

Never happen, even RP didnt have the balls to take on the MIC,

War is peace and ignorance is strength.

MIC dont give a fuck who you put in charge as long as they pays for protection.

Capone should of been a general.

Chuck Walla's picture

TruthinSunshine is absolutely correct. Except that so much electoral money and power is invested in those government slugs that the leeches cannot let them go lest they lose their cushy jobs. Nope, it has to all go down the drain to shed the parasites and get the attention of the electorate, if they are still allowed to vote.  Obama may just declare himself emperor ala Napoleon and crown his'sef.

Side benefit, the parasites will reduce their own numbers in the quest for resources after the EBT cards go TILT.  Well armed, they will succeed in the short run, the long run is dicier. We'll see after that....

 

Got Glock?

 

FORWAD SOVIET! FORWARD GULAG!

Dr. Engali's picture

There isn't much that government does well, but the empire is very efficient at propoganda and distraction.....oh yeah and spend money.

Colonial Intent's picture

Obama ad buy was $1.83 per vote recieved Romney spent $6.35.

American Crossroads spent $105 million on its campaigns nationally.

Restore Our Future, the pro-Romney super PAC, spent $143 million.

Just those two groups, combined, spent more than the 2000 Rove-led presidential campaign of George W. Bush.

Karl Rove has now redistributed more money from billionaires than Barack Obama has.

 

Orly's picture

Cut and paste.  Cut and paste.  Gee, Mr. Olson, this reporting thing is kinda easy!

"/

Orly's picture

These thread-jumpers are getting a little out of hand.  Hard to have a coherent conversation when everyone's trying to be at the top of the board...

Jus' sayin'.