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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.

 

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Wed, 11/14/2012 - 07:20 | 2979144 Mr_Wonderful
Mr_Wonderful's picture

$1.6 T over ten years = chicken feed.

The annual government deficit using GAAP instead of their mickey mouse accounting is $11 trillion per year.

 

Wed, 11/14/2012 - 09:07 | 2979306 Kobe Beef
Kobe Beef's picture

Math is racist. So is GAAP accounting. Invented by the white patriarchy to reduce everybody's free lunch. So it must be ignored. Unicorns! Skittles! FORWARD!

[sarc]

Wed, 11/14/2012 - 07:56 | 2979175 Oldwood
Oldwood's picture

We really don't need any military. Benghazi proved that point. All we need to do is send a few gay government employees over there every so often for the radical muslims to murder and they should be good. On the other hand, we might want to keep a few soldiers on hand so when Obama can get his supporters connected up to vote on their Obama phones, they will have the trucks to come to our homes collecting for the ever growing deserving public. Obama can ask for what ever he wants now as he has all those seeking their revenge on the wealthy lined up behind him. As we saw in the French revolution, those considered the enemy of the people can change radically in relatively short time. Those 60% poled at voting, claiming to want taxes increased, were likely under the impression that they personally wouldn't be the ones taxed. They will be shocked, shocked I say, to find their name on the list as well. But by then it will be far too late.

Wed, 11/14/2012 - 09:00 | 2979290 toomanyfakecons...
toomanyfakeconservatives's picture

Speaking of homosexuals, imagine this scenario. For sake of argument let's say 6% of the American population is gay. Imagine there is a shipwreck with 100 American onboard and they all swin to a deserted island. So, that's 3 gay men, 3 lesbian women, 47 hetersexual men, and 47 heterosexual women. Days turn into weeks and weeks begin to turn into months. People like to fuck and people like choices. So, who runs out of potential new sex partners first? The smaller homosexual population on the island or the larger (not to mention more diverse) hetersexual population on the island? Bingo! You win a prize.

 

Now, back to the real world. People like to fuck and people like choices. Homosexuals, being a single digit minority, have far fewer choices in potential new sex partners than heterosexuals. The only way to increase the amount of choices for homosexuals is to break cultural (or moral) barriers in order to widen the pool, meaning more inter-racial relationships and more inter-age relationships (meaning relationships with larger than usual age gaps, including underage teenagers). Yeah, homosexuals are more likley than hetersosexuals to dip into the cookie jar of 13 to 17 year olds.

 

If heterosexuals were in the minority, they'd be the ones doing it.

Wed, 11/14/2012 - 09:10 | 2979313 Kobe Beef
Kobe Beef's picture

You're just pedo-phobic. Give the Marxists another generation controlling our schools, and Sandusky will be a hero. If they haven't moved on to promoting necrophilia by then.

Wed, 11/14/2012 - 08:01 | 2979181 j0nx
j0nx's picture

I see it coming like a train in the night: the trap that the dems are setting for the repubs and how the repubs will retardedly stumble right into it. When this economy takes a shit nap the dems will spin it just so that the repubs take the FULL blame for everything and the MSM will carry their water. By the time it's all over, the repub party will be a long forgotten memory. Bunch of incompetents running the GOP show.

Wed, 11/14/2012 - 08:20 | 2979212 Catullus
Catullus's picture

You're dreaming.

The recession will come in the second term of Obama.  He's got no one to blame.  He even agreed to this fiscal cliff scenario in 2011 to prevent a bond default.  Republicans can just say "we're sticking to what the president offered in 2011." 

Wed, 11/14/2012 - 09:08 | 2979309 Zer0head
Zer0head's picture

jOnx You're not dreaming.

Republicans can say what they want but it will never be reported. Short of sending a letter to the Pres signed by Boner and Bitch giving him carte blanche, the repubs will take the fall for anything bad.  Problem  is they don't have the cajones to do that.

Wed, 11/14/2012 - 11:19 | 2979727 Catullus
Catullus's picture

So two years from now, when the president's been in power for 6 years he's going to continue the "bush's fault" and anyone will believe him? The guy is a half an hour from being lame duck and sitting around the White Hoise in his sweats all day watching Sportscenter.

Wed, 11/14/2012 - 08:10 | 2979193 the not so migh...
the not so mighty maximiza's picture

The solution is simple, tax everyone 100%.   Let Obama do it and take all the credit.

Wed, 11/14/2012 - 08:18 | 2979205 Catullus
Catullus's picture

Democrats obviously went full retard on this.  You just gave Republicans the out to not approach the table:  "we're sticking to the original agreement we made in 2011."

Wed, 11/14/2012 - 10:43 | 2979605 odatruf
odatruf's picture

As if most of the GOP really wants lower spending.

Were you not paying attending during the first six Bush years when the GOP also controlled both houses of Congress*? Have you not been paying attention to the GOP demanding that the military spending cuts they negotiated as part of the same 2011 deal you mention be undone?

Let's be honest. The GOP is just as fiscally reckless as the GOP when given the chance.

* except for a few weeks when the switch by Jim Jeffords put the Dems in control of the Senate.

Wed, 11/14/2012 - 11:14 | 2979705 Catullus
Catullus's picture

True. Republicans are reckless. But smart people spend their entire lives not being a Bagholder to shitty situations.

Wed, 11/14/2012 - 08:23 | 2979221 Donlast
Donlast's picture

The Democrats are irrational.   To cut spending is straight, clear and unambiguous.  And the US problem is a spending problem not a revenue problem. 

The raise rates and change Revenue deductions and loopholes is a leap into the unknown with manifold unintended consequences.  To do so at this juncture in an economy that can barely grow at all is madness.

Certain to trigger a long-lasting recession. 

 

Wed, 11/14/2012 - 08:43 | 2979264 nickt1y
nickt1y's picture

It's not irrational it's Cloward - Piven!

Wed, 11/14/2012 - 10:26 | 2979540 maximin thrax
maximin thrax's picture

No, they are being rational. They understand that the GDP of this nation is significantly proped up by federal borrow-and-spend. And Obama understands he can demand $40 Billion more from the millionaresandbillionares each year in taxes and still have the need, the priviledge, to borrow over a trillion dollars off the Fed's presses to further stimulate the Frankeneconomy.

Nicely played, Obama. Demand twice what you really want so you can settle for half and call it compromise. And nobody who has the ear of the masses will call you on it.

Wed, 11/14/2012 - 08:39 | 2979258 Catullus
Catullus's picture

So I think it should be addressed eventually: the so-called fiscal "cliff" is a term coined by a Keynesian at the head of the Federal Reserve, Ben "The Beard" Bernanke.  Is this actually a fiscal cliff that will result in a recession?  No, but then yes.  Why no?  Because the cut in spending is a cut FUTURE INCREASED IN GOVERNMENT SPENDING.  It's a cut in the projected increase.  To Washington DC rats, state worshippers, and academic Keynesians, Any decrease to government spending ever, even if a decrease to a projected increase, is cause for the most hyperbolic predictions of doom and panic possible. "HOW WILL I BE ABLE TO SEND MY CHILDREN TO A $20k/yr PRIVATE SCHOOL IN THE METRO DC SUBURBS IF I DON'T GET THAT PAY RAISE TO $160k/yr? STUPID, IDEALOGICAL REDNECK REPUBLICANS!  THEY HATE AMERICA." 

But why will it show up as a recession on GDP?  Because if some of you haven't figured out yet, the government has to spend $1.5 trillion more than it takes in an annual basis just to get 1-2% GDP growth.  Their deficit spending represents close to 10% of GDP. Which does mean absent their deficit spending, you'll just reveal how there's been no recovery and how the private sector has been contracting for half a decade.  By cutting the future increases in government spending, government economists are saying they don't know how the gap won't be made up in GDP.  Thinking backwards that any decrease is GDP is a recession, not understanding the that reductions in GDP are just measurements of what's already occurring.  Under their logic, any decrease to government spending ever is recessionary and all increases are expansionary. 

We won't "re-enter" a recession if we "go over the cliff", we've been in a recession for half a decade. 

Wed, 11/14/2012 - 09:08 | 2979277 NuYawkFrankie
NuYawkFrankie's picture

Always More Taxes....

 

I'm afraid Washington DC is just too profligate in its ways - with excesses now compounding exponentially. This has gone on far too long and there's no reforming it - it won't change now.

Only thing to do is to cut it off  - before it devours all of us.

Wed, 11/14/2012 - 08:59 | 2979293 Quinvarius
Quinvarius's picture

The unsolvable problem can only be dealt with by making it bigger.

Wed, 11/14/2012 - 08:59 | 2979295 tedstr
tedstr's picture

What are the odds this will end up just like the Bush 1 deal.  Finally agree to tax increases, then the liberal demtards go on spending like drunken sailors in a double cross.

Wed, 11/14/2012 - 10:22 | 2979525 Everybodys All ...
Everybodys All American's picture

... and then blame Bush.

Wed, 11/14/2012 - 09:04 | 2979301 Zer0head
Zer0head's picture

Obama won, which to him and his followers mean the rest lose, it's called democracy notwithstanding that we were living in a republic.

Wed, 11/14/2012 - 10:27 | 2979548 falak pema
falak pema's picture

I never see you write anything solid, just spout platitudes. It would be nice for you to show a clear perspective which does not hide behind intellectual negativity and denial. What can  a libertarian do to solve the problem the neo cons have created since Nixon days and how can a political program be formulated that reconciles debt deleveraging with avoiding a depression of unspeakable magnitudes. Either you don't understand how big the hole is and how deep the consequences of puling the plug on the financial system will be or you have no idea what "the rest lose" really means. 

The rest lose whichever way the wind turns...unless you have a rabbit in your libertarian hat!

So tell us what bugs bunny looks like! 

Wed, 11/14/2012 - 09:28 | 2979359 nantucket
nantucket's picture

Question: When will the govt ever collect "enough" in taxes?

Answer: Never.  Whatever they get, they always want more.  The size and scope of govt never shrinks, it always grows.  And it never learns from its mistakes, in fact errors and mistakes are reinforced and multiplied.  politicians claim the failures of their policies are because they didn't go far enough in taxing, controlling, etc. so more oppressive taxes and laws are the claimed remedy for failed policies.

until it all implodes. 

Wed, 11/14/2012 - 10:47 | 2979621 odatruf
odatruf's picture

The flip side question is: When will the citizens ever want fewer services?

Answer: Never. Whatever is done, more will be asked. Rember that it is people who come in the doors of Congress and ask for things, not companies or interests. Yes, they may represent them, but they are still human people. 

Wed, 11/14/2012 - 09:38 | 2979385 bugs_
bugs_'s picture

my fellow Americans we worked harder than we've ever worked before but the only solution to our problems is to do more of the same.  we must tax you more, dilute your wages more, inflate your savings away, move your jobs overseas, and destroy the future of your children in order to save it.

Wed, 11/14/2012 - 09:38 | 2979387 Madcow
Madcow's picture

why not just send an spot tax invoice to every family in the USA - for $100K.  If you can't pay it, Gitmo. Or lose a daughter. Or a hand or foot. 

Make it $!MM for "the rich" 

Wed, 11/14/2012 - 09:42 | 2979399 mendolover
mendolover's picture

You can't keep buying votes without continuing to increase spending.

Wed, 11/14/2012 - 10:10 | 2979483 jplotinus
jplotinus's picture

I hate to say this, but if ZHers were in Congress, things would be just as bad, equally muddled, or worse than they are now.

Obama may be the only rational player we have.

Wed, 11/14/2012 - 10:18 | 2979514 falak pema
falak pema's picture

you are right to be forthright and not pander to politeness; sincerity is a cardinal virtue of free speech. ZH is full of prejudice, often devoid of rational thinking. But now I'm being repetitive.

Wed, 11/14/2012 - 10:52 | 2979633 odatruf
odatruf's picture

I submit that most of Congress is quite rational, too.

With reelection rates typically above 95%, how could could they not surmise that the voters want them to continue as they have been?

The voters are very clear that they want more of the same and they will get exactly that. Rationally.

Wed, 11/14/2012 - 10:30 | 2979559 hedgehog9999
hedgehog9999's picture

1.6 T won't make a dent in the deficit. We need minimum 1T/year.

Wed, 11/14/2012 - 10:34 | 2979574 post turtle saver
post turtle saver's picture

$160B per year for ten years? I don't mean to make light of the situation but, in real budgetary terms, that's couch cushion money.

Wed, 11/14/2012 - 10:43 | 2979607 maximin thrax
maximin thrax's picture

It's a tax-the-rich statement that conveniently doesn't get in the way of borrowing a trillion dollars each year to spend into the economy for optimal GDP print. Borrowing money that Americans can't or won't borrow is 90% of Obama's economic miracle. The other 10% is simply watching unemployment drop as the discouraged quit looking for work by the millions, and hoping nobody notices.

Wed, 11/14/2012 - 12:04 | 2979918 Antifederalist
Antifederalist's picture

Deck chairs and Titanic come to mind.  The third class cabin is flooding.  Man the lifeboats!  Er, au and ag.

Wed, 11/14/2012 - 12:18 | 2979987 dadichris
dadichris's picture

this is the policy he was saving for his second term - a policy so unpopular that it would be political suicide but serve the Private Bankers behind the Fed. i wouldn't be suprised if obama also privatizes social security to free up even more money to service our exponentially growing debt...

Wed, 11/14/2012 - 12:48 | 2980169 allocater
allocater's picture

Seems like Obama finally learned how to negotiate. Demand double and compromise on 100%. Instead of starting with a compromise of 50% and get nothing, like he did the last 4 years.

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