Wednesday, January 2, 2013

What I Really Think About the Fiscal Cliff Deal

Ok, let's get the preliminaries and disclaimers out of the way.  First, let's stipulate that I would prefer that taxes be raised on no one, and also that we actually balance the budget.  Let's go further, still--I wish we would even PASS a budget at all.  Let us also agree that the deal passed last night does nearly zero about the deficit.  It really doesn't, $620 billion over 10 years is a rounding error when we're looking at annual trillion-dollar shortfalls.

All that said, fine.  We are dealing with the possible here.  As I have said elsewhere and repeatedly, I'm not a big fan of utopian fantasies, whether of the progressive or libertarian flavor.  If you allowed me dictatorial powers, I would do LOTS of stuff different, but that's not an option.  And in terms of the POSSIBLE, this deal is about as good as it gets.

Here's why: it locks in the Bush tax rates PERMANENTLY for everybody under $400k per year.  Admittedly, that does zip to reduce the deficit.  But that's a spending issue anyway.  And since we apparently are not serious at all about paying the bills, why screw over most of America?  I'm happy to share some sacrifice, if we get serious.  But this whole tax charade reminds me of nothing so much as the old "global warming" deal--asking America to drive cars made of tinfoil and pay gazillions in carbon taxes while India and China keep on churning out coal smoke and make those sacrifices meaningless.  With those rates permanently locked in for over 99% of taxpayers, the whole issue of holding everybody hostage every few years while we argue over what rates should be on those making upwards of $400k goes away.

But wait, you may say.  I thought you were a supply-sider.  How can you be so nonchalant about jacking up taxes on small-business owners, job creators, etc.?  Well, I am (read my post from a couple of days ago).  And I think it's a dumb idea. But it's a dumb idea that my side cannot defeat.  ALL the     rates were going up.  And had we gone over the cliff, I have zero doubt that the endgame would have been a restoration of low rates below $200 or $250k, with even more damage done.  And let's face it--$400,000 is nothing like $200,000 in the real world.  I hate class warfare, and have no desire to stick it to "the rich."  But that's what the country voted for.  And a case can be made that $200k is not rich--it's a high school principal married to a police lieutenant.  And particularly in areas with a high cost of living, after you pay taxes on $200k, it's hard to live "rich."  If you tithe, put a kid or two in college or private school, and live in a nice (but not ridiculous) neighborhood, it's easy to imagine a married couple at that level driving a used Benz or a new Honda, but not a brand-new Lexus.  Those guys may live a lot better than most (better than me), but they are not the yacht and caviar club.

On the other hand, at $400k, you're talking real money.  At that level, even after taxes, you can live on water.  You can vacation almost anywhere.  You can pay sticker price if your kid gets into Yale.  You might not can do all three at the same time, but you are in an entirely different ball game at that point.  Now, I happen to believe that raising those taxes is a dumb idea, will detract from economic growth, and will likely hurt small businesses and cost jobs.  But such an idea is not sellable to our current electorate.  Maybe if they see the consequences, they can learn.  I doubt it, but it's possible.  Regardless, it is impossible to have that discussion so long as everybody else is held hostage over the rates in the other brackets--least of all when the party that (allegedly) champions tax cuts is in the minority, and also in political disarray.

So what should the GOP do from here?  If Hemlock is not on the menu, I suppose they can use the debt-ceiling ad the sequester to get some spending cuts.  With taxes now permanently off the table, the battleground is more favorable to them on those two--just like the rates were going to rise if nothing happened, giving any tie to the tax-hikers, on the other two items a tie goes to ending-cutters.  Actually, I kinda like the sequester; for all the and-wringing about draconian cuts, spending still goes UP.  If you let me be in charge, I would do a true budget FREEZE.  No cuts, but nothing goes up, nobody gets a raise, you just have to find a way to only spend what you did last year (the horror)!  Sounds tough?  No tougher than what many families (mine included) have done the last few years.

But again, that's future stuff, and assumes a fact not in evidence: that politicians can do math.  For now, this tax deal was about as good a deal as we were going to get.

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