Everyone is confused about the Fiscal Cliffhanger. Obama is struggling to make a deal to prolong most of the Bush-era tax cuts. The Republicans are holding back. Yet if a deal is reached, the federal government and the long-term purpose of the Democratic Party are both likely to be ruined for years to come. If the deal fails, the Democratic Party can at long last return to what should be its core purpose: using government to promote the public wellbeing. – Jeffrey Sachs
IF YOU aren’t bored senseless with the non-stop national and new media drum beat to the (inevitable) fiscal scheme deal you’ve obviously been having one hell of a good time over the holidays! I know I have. Today David Gregory, who wasn’t supposed to be hosting this week, but will interrupt his holiday to interview President Obama on Meet the Press, will have the fearmongering austerity drum beat in full view; as if raising taxes is all this is about.
Even so-called progressive sites are trumpeting President Obama’s allegedly “tough” talk on taxes, while continuing to parrot the preposterous sky is falling narrative if the Democratic fiscal scheme isn’t adopted, as the predictable begins to emerge. As I’ve been writing since this fake drama began, some sort of deal will be done and when it happens is immaterial.
The System has failsafes.
This Huffington Post headline is a perfect example of the national media gullibility, as well as the reprehensibly complicit fearmongering by ignorant analysts caterwauling that it matters to the average American what happens come the clock clanging 12:01, January 1, 2013.
But progressive new media sites depend on the establishment to keep paying their people, so sucking up to Obama and the establishment Democratic Party is what they must do to keep their access and ad revenue up. Good business model, bad if you want someone to trust politically. This includes the progressive all stars and just about everyone on MSNBC, all of whom represent the upper echelons of the national media establishment and Wall Street interests through their bosses.
Jeffrey Sachs’s takes another tact, his points are correctly and clearly made, so make sure you read the whole piece. Abrupt cuts aren’t great, but it’s better than the Obama-Democratic-Republican fiscal scheme that our national media says must happen, with establishment progressives parroting the same malarkey.
The main point is this. If no deal is reached, the Bush tax cuts end. We would return roughly to the tax schedule of the end of the 1990s, when the macro-economy performed reasonably well and the budget was near balance. Federal government revenues would rise by around 2.5 percent of GDP per year compared with the current tax schedule. According to the CBO, the federal tax system would collect 20-21 percent of GDP in the second half of this decade. This is a bare minimum of what’s needed for effective government.
Let’s be clear. In an ideal world, there are better and more progressive ways to get to 21 percent of GDP in federal tax revenues than by personal income taxes alone. A partial list would include: a wealth tax on large fortunes (e.g. 1 percent on net worth above $5 million); an end to tolerating tax havens like the Cayman Islands; an end to the tax deferral of overseas corporate income; a crackdown on abusive transfer pricing; and a tax on carbon emissions). The problem is that neither the Administration nor the Congress is proposing these measures, and in the meantime, a deal now that extends the Bush tax cuts will be a severe loss of revenues for years to come without any offsetting gains.
If the deal is reached, therefore, the Republicans have won: they have locked in a federal tax system that collects so little total federal revenue that government can afford almost nothing aside from the military, interest payments, retirement programs and health care. Say goodbye to the rest: science, technology, education, job training, infrastructure, a functioning justice system, community development, renewable energy, environment, and more.
Very few of the people opining about the fiscal scheme can be trusted, because their interests aren’t moored in truth and transparency, with their own vested interest depending on hyping that the world will end if a deal isn’t reached by a deadline that’s set to protect everyone but you and strengthening the fibers that connect the American community.
And when it’s all said and done, President Obama and the Democrats are still going to come for entitlement “reform” instead of cutting Pentagon bloat first, which would require a strong offensive case to be made to the public to do so. Seeing what’s left that must be done after defense cuts would lead to a very different economic picture developing.
Anyone saying that entitlements should be “reformed” to be “strengthened” is not a friend of the middle class or the poor and likely is part of the establishment or a supporter of the fan politics that keeps it alive. Anyone saying that the U.S. financial world will end or some economic calamity will befall America if entitlements aren’t quickly cut is a liar or too ignorant to listen to. Whatever might or might not need to be done with Medicare and especially Medicaid will take long, painful discussions and planning, but may have more to do with streamlining and actual reform over financial cuts, especially with Obamacare due to kick in fully. Health care costs remain the biggest financial challenge of all.
Social Security is not part of any economic U.S. problem now or in the near future, so ignore anyone who tells you otherwise, because he or she is a charlatan or worse, part of the Democratic Party elite, an establishment that is ignoring the one issue that would solve it all: J.O.B.S. and growth. That’s right, jobs.
But come for entitlements Obama and Democrats will. The only thing left from there is how progressive activists react, but there aren’t enough of them to change this tide in the long run, because the Democratic establishment is behind it. As Matt Damon rightly put it, “the game is rigged and no matter how hard you work to change things, it just doesn’t matter.”
So, will progressives get their “Tea Party” on after the entitlement reckoning comes? The answer will determine whether the progressive coalition inside the Democratic Party lives or dies, which is a lot more important to America than the fiscal scheme everyone is squealing about.