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Friday, December 10, 2010

I Have A Sinking Feeling That We Wuz Had

When the "framework" of the tax deal was announced, I wrote that Obama "had a pretty good day."

As the details of the actual bill are coming out, it looks like Obama had a great day, Senate tax bill lures Democrats with sweeteners:
But in the face of loud resistance from Democrats, congressional leaders and the White House agreed to add some sweeteners, including the continuation of a federal tax break for mass transit users, an ethanol tax credit and a grant program for renewable energy developers....

Senate Majority Leader Harry Reid (D-Nev.), in a statement Thursday, endorsed the plan for the first time.
Charles Krauthammer also points to the bigger problem:
In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years - which just happen to be the two years of the run-up to the next presidential election. This is a defeat? ...

At great cost that will have to be paid after this newest free lunch, the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012.

Obama is no fool. While getting Republicans to boost his own reelection chances, he gets them to make a mockery of their newfound, second-chance, post-Bush, Tea-Party, this-time-we're-serious persona of debt-averse fiscal responsibility.
I have a sinking feeling we wuz had. 

Which is why by the time it comes to a vote, Democrats will line up behind Obama, claim that they are falling on their swords in the name of bipartisanship and the middle class, and any Republicans who oppose this bad deal will be the bad guys.

It's make-or-break week, and I think it's beginning to look like break.

I'm coming around to the view that this Congress needs to be shut down before it can do more damage.  When the cavalry arrives on January 3, all these matters can be dealt with.

Update:  The comments are way too sparse on this.  Someone tell me I'm wrong.  Please.

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  1. I, along with millions of Americans want the Bush tax cuts to remain in place. However, whenever this liberal leftist majority in Congress is involved in anything, you know that they will sneak stuff into the bill that doesn't belong there!

    When Harry ReDUNCE comes on board, you know the bill is troublesome and the RINOS in Congress have NOT learned their lesson from the TEA Party protests and the Nov. election results!

    I'm so proud of Jim DeMint for being one of the first to recognize, and resist, this stink bomb for what it is!

  2. Maybe Republicans can announce that instead they'll raise taxes on higher incomes in exchange for dropping everything else. That would show a willingness to compromise while avoiding the bulk of this bad deal.

  3. As I said before (either here or on Rush Limbaugh's site.....I mix you two up sometimes ;)..... It's all kabuki. Obama is playing the victim and fall guy parts to the hilt. It's all Alinsky tactics - maneuver to get the compromise they want, all the while shouting and whining that they are OUTRAGED by this BETRAYAL. Bull.

    They get the Republicans to give them what they want, and cry out against this "injustice" as they follow Obama all the way. They get what they want, and fill up their legislation with goodies, masking it all with faux OUTRAGE.

    Seems like shades of the ObamaCare debacle last December, but this time the impact on We the People takes effect on Jan. 1st.

  4. Ugh. Special K churning sickenly around and around.

    It feels like deja vu all over again.

    Remember the holiday season last year. The lies, corruption and waterboarding Obamacare up our noses and down our throats. The horror to find out nearly every politician of both party was an unqualified imbecile.

    Well here we go again. Washington isn't listening and a 'legal insurrection' is in order.

  5. Well they don't call Republicans 'The Stupid Party' for nothing.   Krauthammer has a good take on Obama's latest 'success' today which he calls the:  Swindle of the Year.

  6. "I'm coming around to the view that this Congress needs to be shut down before it can do more damage. When the cavalry arrives on January 3, all these matters can be dealt with."

    Yes -- shut it down. Let the taxcuts expire and fix it in January.

  7. I hated the deal from day one. Republicans had ALL the bargaining power necessary to get the tax rates extended for everyone for 2-3 years without having to give away the farm with all this other crap.

    Another gigantic deal, negotiated behind closed doors between a handful of people. Minimal open debate. The only difference is instead of Pelosi and Reid twisting arms to keep everybody in line, it's McConnell and Boehner doing the arm twisting.

    I see no reason why we can't get a much more fiscally responsible deal done as the first order of business in the 112th Congress. While taxe rates will technically go up on Jan. 1, once the deal is negotiated they can make them retroactive to Jan. 1.

    I'm sending emails today to my two senators and my represetative urging them to kill it.

  8. The problem is that the government is spending too much, whether they borrow the money or raise it through taxation. The Bush tax cuts are a secondary issue in that the money that would be raised by letting them expire will have to be borrowed. So the genius president increases spending as well as extending the tax cuts. Cloward and Piven would be thrilled.

  9. Once again, the clueless GOP leadership falls for a Democrat ruse. They righteously march into the Oval office to negotiate a secret deal with Obama and declare victory when a bill that no one has read (surprise, another Trojan Horse) is "forced" through Congress. The Democrats play their role to the hilt and now Republicans find themselves painted in yet another corner.

    So long as the GOP leadership only allows liberal Democrats in their country club, this is what we are going to get.

    Third party baby. This party is over.

  10. you're right as usual. hopefully enough republicans will oppose and the 112th can deal with it.

  11. What "tax cuts"? The federal tax take has been going up, not down, every year.

    Taxes and spending are both too high. Get out the fiscal chain saw, House and Senate, and get to work. Else you will be outta work (except in Califoolia maybe) whether you're sitting on the Democrat or Republican line come the next election.

  12. I supported the original announcement but not with these add-ons. Too many conservatives make the same mistake as the hard-left progressives. When the Dems controlled the Senate, House, and White House the progs thought they could get everything they wanted. They misunderstood and thought a Dem majority equaled a progressive majority.

    The Republicans still don't control any of the 3 so NO we have little bargaining power. The best we can do is vote NO in the Senate to stop what the Dems are trying to do. The GOP already voted against and stopped in the Senate a bill that would extend the tax cuts for the middle class. If they vote against a bill that would extend them for everyone then the Dems can let everyone's taxes increase and blame it on the GOP.

    Next session the GOP has a majority in the House and a larger minority in the Senate but Obama still has his veto pen. If we can get an extension of the current tax rates for two years the GOP has a natural campaign issue; put us in complete control and we'll make the tax cuts permanent.

  13. The GOP is called the Stupid Party for a reason.

  14. You are not wrong, the same stupid Republicans who were there under Bush are still there until the new crew of 60+ Conservatives get there. They were big money Republicans then and they continue to be today.

  15. I disagree with Krauthammer's assessment that the R's were "rolled" and outmaneuvered by a "brilliant" move by Teh Won.

    First of all, the GOP is completely tone deaf on the spending issue. The American people have resoundingly stated that they belief the US government is out of control and want SIGNIFICANT slashing to the Federal Government, and a serious discussion about what the role of the Federal Goverment should be -- including the military -- seen as a core responsibility of the Federal Government -- but the overextension of our forces begs for a realistic discussion about what role the professional military forces should take.

    So, Obama was able to "snooker" the GOP with another round of stimulus. Really? I don't think so. The voters are aware that Stimulus I didn't work, but that Obama is committed to doubling down and has repeatedly called out for a bigger, better Stimulus II. This round of spending is NOT going to prime the economy any better than Stimulus I did, and in fact, I strongly suspect will trigger another huge anti-Democratic backlash.

    Teh Won cynically thinks all he needs to do is to continue to wash districts in $$$ and he can buy his way to victory. Stimulus I. Pigford. "Tax Deal/Stimulus II".

    No one is buying it. The voters aren't stupid, and they are FED UP. What people wanted to see was a continuation of the tax cuts so businesses could plan/project their expenses for next year (currently up in the air) and an extension authorizing the federal government to keep the lights on. Nothing else.

    Once again, Teh Won has miscalculated. This is not going to turn out well for the D's in 2012, and will only serve to be yet another rallying cry for the Tea Party. The more this nonsense goes on, the larger the Tea Party movement grows. More small businesses will fail/fold because of the additional tax burdens the UI extension adds to them, more people will be out of work, more people will lose their homes to foreclosure, MERS fraud aside.

    The economy, on many levels, is all about confidence. This is not the path to restoring confidence. The entrepeneurial class will continue to sit on the sidelines, or, move their money and capital permanently off shore.

  16. I REALLY wish I could say, "You are wrong!" But, no, you are right. The leftists got together and picked the best Bolshevik actors among them to carry the theater to their leftist base. It's all a sham.

    Voila! We now will get another 1 trillion dollar stimulus--90% of which is pure debt/handout garbage. Chairman Oh! knows that the Bush tax rates are necessary to stabilize the economy and has played the Repubs to get more goodies.

    We are screwed. The election this last November meant NOTHING. When the new congress convenes in January nothing will change. The damage will have been done and it will be permanent. All we have to look forward to now is riots when the leftist/anarchist/union jackasses start clamoring for even more free stuff in a few years.

  17. I haven't the slightest notion of what Dr K is talking about. Why don't you go to tax law blog, pick thru the docs and point to something specific?

    I'm old fashioned enough to want to see text of a law when discussing it.

  18. We were both wrong. Krauthammer refers to low taxes as "spending". He's wrong. This is not a government spending bill.

  19. What I mean is that Republicans can address runaway spending, which is a legitimate issue, when they take over next month. Keeping taxes low is the right thing to do right now.

  20. If an ethanol subsidy is in it, I'm against it.

  21. Yeah, I'm with D on this one. First Fred "Squiggly-Lightbulb" Upton makes chairman of Energy and Commerce, and now this disaster. I didn't even see the Republicans *try* to fight this, except for the usual, DeMint and Bachmann and others. This all puts the lie to Boehner and his claims of "having heard us". They have not.

    These times we live in are much too serious to be playing the same old games, the ones which got us to this point. I had told myself that Upton would be the test for the Republicans after the election, and they promptly went and failed that.

    Then the jackasses what should be an easy call on preventing a tax hike. The writing is on the wall. The stakes are too high. At this point, I doubt highly that I'll be supporting Republicans in 2012.

  22. Here are two more dissenters from the Dr K view--two Just One Minute posters for whom I have great respect:

    I'm a big Krauthammer fan, but I can't support this:

    At great cost that will have to be paid after this newest free lunch, the package will add as much as 1% to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012.
    In the first place, his numbers appear inflated. The CNN link above gives ~315B over the basic tax cuts (admittedly too much), but his numbers are almost exactly double that. Second, that static analysis stuff is dubious, and in this case made even more so by the fact that a large chunk of it is in unemployment insurance (which has a significant though probably modest effect of increasing unemployment).
    Posted by: Cecil Turner | December 10, 2010 at 02:21 PM

    I'm reading the nine page list of possible financial impacts and there is certainly something there to enrage any sentient being.

    Since I don't regard money remaining in my checking account rather than in Tax Cheat Timmy's Plunder Account to be a "cost" to the economy, I fail to find a factual basis for Dr. Krauthammer's assertion.

    I will also note two things:

    1. There is no budget.

    2. The 111th Congress has no power to bind the 112th Congress.

    Speaker Boehner will have two years in which to reiterate the heartfelt remark made yesterday by a Democrat House member - and the full support while doing so of the 56% of the electorate responsible for placing him in his position.

    Posted by: Rick Ballard | December 10, 2010 at

  23. In Paul Krugman's column today, his biggest gripe appears to be that the stimulative impact will start to lapse after a year, possibly hurting Obama's re-election chances.

    That he's studied the proposal and is more concerned about it's electoral impacts and he isn't whining and hyperventilating about the actual policy is pretty much all you need to know that it is a disaster for conservative principles.

  24. Someone is being Rope A Doped, but I'm not sure who. With all the add ons, I hope Speaker Boehner now will say No Deal. It is also making the Dems look bad.

    Maybe they are trying to run out the clock? Remember Christmas Eve last year?

    I will hate it when my taxes go up next year, but maybe if the 10% rate goes to 15%, and gets taken out of the first few pay checks, people will wake up (and maybe that is what the Dems are afraid of)

  25. I think Charles K. is wrong on this one. I don't see how increasing tax rates would have reduced the deficit in a dynamic world.

    Step 1: keep tax rates where they are. Step 2: The next Congress pares spending.

    The easy part is over. Next year is the hard part.

  26. Sigh. As an economist, Dr. K makes a pretty good psychiatrist.

    Let's say it all together now: in the real world, money you don't receive is NOT a cost. Put another way, if a tax cut is giving money to taxpayers, then a sale gives money to customers.

    Seriously, this is like counting on a raise and then finding out that your salary is frozen this year. "Hey, I was expecting a $3000 raise! I didn't get it, so that action cost me three grand!" But that's not a cost like paying your mortgage and buying your groceries are costs. You don't have to borrow money to cover it unless you spend the $3K like you earned it anyway.

    As far as keeping the tax rates and temporarily cutting the payroll tax are concerned, none of that is pumping "borrowed Chinese dollars" into the economy. It's leaving American dollars in the private economy instead of pulling into the federal coffers to be re-spent. It's just a terrible error, and it absolutely destroys Dr. K's contention.

    Also, some pretty good stuff at Jonah Goldberg's post at NRO questioning Dr. K's math.

    Hope that makes you feel better, Prof.

  27. The idea that the Chinese are going to cough up another trillion is one that I just can't believe. They've had it. Everyone keeps talking about this like it is just a done deal...when, in fact, this could be the very thing that brings the whole house down.

    All the Chinese have to do is say no, forget it. You already owe us money you can/will never pay back except with massively inflated dollars, so we are cutting you off. When that happens, and it will at some point, it's end game.

  28. Slightly OT: Our side is also spending an exorbitant amount of time on the 'Death Tax' which I frankly don't care anything about. Heck, I'd be for a 100% estate tax. So the *children* of the Miami Dolphins deceased owner need to sell the team rather than keep it after inheriting it simply doesn't register on my list of moral outrages.

    Other benefits of 100% estate taxation:
    o Doesn't punish producers
    o Ends dynasties like the Kennedys

    I didn't attend tea party rallies because of the death tax and to defend the inheritances of the wealthy, let's please not worry about this now (Rush, DeMint, Chocola).

  29. Ok, here is why you are wrong.

    Tax breaks although appearing to be adding to the deficit, actually reduce the deficit. Yes, the government percentage of take is decreased, thus the deficit seemingly will rise but economic activty increases thus increasing revenue and reducing the deficit.

    Supply side economics, I am surprised Sir Chsrles missed this in his article.

  30. I just don't get the math. If Bush's tax cuts had cost $350 billion per year, he would have left in '08 with a 2.1 trillion deficit. Instead, it was just under $500 billion until he passed TARP.

  31. Professor,
    The Republitilians, once again, hung themselves with the rope Obama gave em.

  32. wouldn't worry to much. I like Charles Krauthamer most of the time but he gets overwrought. He is unfortunately one of those guys who constantly thinks that whenever the opposition does someone really stupid they are actually playing a really really deep game: "Obama is no fool" -- who's he trying to kid? And he seems to think no one but him sees this (and he often correct about that, just as Chicken Little was). So he writes columns to educate the Great UnWashed on things he deems obvious, but the perceived need to do this frustrates him, and this frustration makes him shrill.

    Therefore, put little credit in what he says about the deal. The tax deal is not ideal but that is not important -- what is important is that is has fatally fractured the Obama wing, made Obama personally look foolish and impotent (which he is) and it goaded him acting mean-spirited and out-of-control (which he is) before all the World. (Walking out on your own press conference 'cuz you have to go to a Party?!? Unreal... )

    These are the very simple obvious things that the People will remember. So if things improve over the next 2 years, the Republicans will get the credit for it by virtue of appearing to force Obama's hand; Obama blew his chances for making himself look good in this deal by having a tantrum about it and if he tries to play things up over the next two years, he'll look like and idiot (even more like an idiot) every time someone plays that tape.

    If things get worse or stay the same, Obama gets the blame for his semi-caving to Reid and Pelosi that "prevented" the Republicans from doing enough to get things moving in the proper direction.

    In short, Obama's straddle combined with his tantrum and bizarre follow-up behavior means he owns all the downside but cannot take credit for the upside, while losing what remained of his credibility and splitting his party. If Krauthamer didn't have such a deathly fear of good news, he'd see that.

    I offer no prognostications about how this will all work out over the next two years, but I am sure of two things: 1) Obama is toast, 2) it's going to be fun.

    Be of good heart.