I find the sudden enthusiasm for everything is going to be okay a bit peculiar. To me, it appears that you have two somewhat dug in sides. The Republicans, back before the election, thought they were going to win the presidency. They did not take a Grand Bargain. Now, they are in a corner. If they do nothing then taxes go up rather dramatically. Now the Democrats are pulling all spending cuts off the table it would appear. In fact they want more spending to stimulate followed by nebulous military and other cuts later on with entitlements off the board by most people. So it is back to old tax-and-spend but only on their priorities. This could end ugly.
Let me be clear: if nothing is done about entitlements, there is no way to balance the budget over time. You really do have to means test all programs while raising copayments. You probably need to raise eligibility ages, too. Or, raise taxes. Ultimately, the worst thing that could happen to the top 5% would be to subject more income to Social Security and other taxes on the premise that the government would keep their future benefits the same. Then as problems get further out of hand, you cut those benefits. So you are taking a Social Security program which generally gives you back what you put in with some redistribution hidden in the system, although known, and making it far more redistributive. In this manner, the Democrats think they can get everything that they want. You cut the deficit on the backs of the 2%, both in terms of taxes and ultimately fixing entitlements through means testing. Of course the other 98% is going to go for this.
Look at the Obama plan.
- Raise taxes for the top 2% back to Clinton levels.
- Restrict deductions for the top 2%.
- Do something nebulous, perhaps, on spending.
The Bush tax cuts for the rich equal about a quarter of total decreases. Obama wants to double that with the deduction restrictions as well as some changes on capital income. So in return for keeping the middle-class tax cuts, Republicans have to agree to double the increase on the rich. Obama wants about half of the total Bush cuts revenue back but all on the backs of the top 2%.
I personally would prefer to simply have the Bush tax cuts expire for everyone. I think the cliff has been over exaggerated and I think more revenue is better. Furthermore, I would like to see a Buffet alternative minimum tax put in place. I know there will be lots of screaming about how this creates dis-incentives but the ultra – rich (top .5%)really do pay too little in taxes.
Jon |
