Economy & Budget

Norquist: Showdown at the fiscal cliff

Norquist: Showdown at the fiscal cliff

Barack Obama won the presidency and claims he has a mandate to increase taxes to pay for the larger government he created in his first term.

Republicans were re-elected to remain the majority in the House of Representatives and they point out that voters watched them stop Obama’s drive for higher taxes for the past two years. Clearly their victory in the House is America speaking out against higher taxes.

And the people? On Election Day exit polls, when asked about supporting tax hikes to reduce the deficit, 63 percent of Americans said they were opposed.

So now what? Well, we have been here before.

Two years ago, we faced a “fiscal cliff” because the Bush tax cuts of 2001 and 2003 and various other tax cuts were all scheduled to end on January 1, 2011. At the time, Obama was president, there was a Democrat-controlled Senate and the GOP had just won the House. The compromise was to extend all Bush tax cuts two years. Obama said it would be a mistake to raise taxes during a lousy economy.

Two years later, we have all the same players around a chessboard with the pieces arrayed exactly the same: Democratic White House and Senate, and GOP House. One likely possibility is that the status quo is extended for two years to refight after the 2014 elections—exactly what happened in 2010. An alternative is that Congress and the White House may extend lower tax rates for six months to continue negotiations.

Obama’s present demand is that the top two marginal tax rates be increased to 39.6 percent plus the 3.8 percent Obamacare tax surcharge for a top rate of 43.4 percent. The death tax would also jump back to 55 percent, capital gains tax would jump from 15 percent to 23.8 percent, and the tax on dividends would increase from 15 percent to 39.6 percent.

Speaker John Boehner is calling for extending all of the Bush tax cuts for all income groups.

Boehner notes that there are 11 million businesses that pay taxes at the individual level. Obama, on the other hand, is demanding that more than half of small business income be taxed at 43.4 percent rather than today’s 35 percent. This would be a body blow to job creation.

If Obama follows through on his threat and refuses to extend the Bush tax cuts, then there would be an automatic $500 billion tax increase beginning January 1, 2013, that would total $5 trillion over the decade.

A second factor is that Obama and Boehner agreed last August to create an automatic sequester to reduce Obama’s planned spending by $100 billion each year for 10 years. Obama deliberately weighted the sequester to fall more heavily on defense than social welfare programs hoping Republicans might later undo the automatic budget cuts. These spending reductions were passed as part of the debt ceiling increase last year. It is very important to Congressional Republicans that the total amount of the automatic savings be made and that the savings are not undone or delayed. The House passed the Ryan Budget, which has the same total spending restraint and avoids most if not all of the sequestration hit on defense.

Here’s the thing

Now Obama is trying to conflate these two issues: the automatic tax hike that takes place unless the present rates are not extended as they were two years ago and the automatic spending cuts. They are of course very different. The tax hikes would hurt the economy. The spending cuts would reduce the Obama debt machine and strengthen the economy.

So far, both House Speaker Boehner and Senate Republican Mitch McConnell have both said they would not support any increase in marginal tax rates. They have said they are open to more revenues from economic growth. One fear is that taxes could be raised by limiting tax deductions for home mortgages, health insurance, charitable giving and state and local taxes to raise a great deal of money from taxpayers without technically increasing marginal tax rates.

This would be a bad idea one, because those tax hikes would be instead of spending restraint and second, because reducing deductions now in order to spend more money makes tax reform much more difficult later.

Some had hoped that President Obama would focus on job creation and back off his high tax/stimulus spending agenda that has so damaged the economy. It does appear that four years of failure have taught him nothing.

Obama has not put on the table any specific entitlement reforms and is demanding a total of $1.6 trillion in tax hikes. He is all tax hikes and no spending restraint. Nothing has changed in four years.

Grover Norquist is president of Americans for Tax Reform, founded in 1985, opposes all tax increases as a matter of principle and asks candidates for office to sign a Taxpayer Protection Pledge. The group’s website is www.atr.org.

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  • chillinout.

    Grover Norquist is nothing more than a raggity puppet on a string. 63% SUPPORT raising taxes on the rich, not opposing it. He’s just a greedy rich man who tries to manipulate simple minded voters into supporting his greedy lifestyle for no benefit of their own

  • 1tomritter1

    Raising ANY tax in a bad economy is dangerous.

  • JayC777

    The rich don’t pay taxes, you dolt. They forward them on to the consumers, lay people off, lower employee pay, or some combination thereof. The middle class will bear the brunt of those tax increases. Do you actually think that the REAL greedy people, say … like … Warren Buffet, would be OK with increasing his taxes if he was the one that actually would have to take the hit for that increase?
    Jay
    Welcome … to the machine.

  • JayC777

    The ones really doing all the laughing are conservatives at morons of your ilk. That’s all you got? Only a moron of epic proportions would think this low rate attempt at humor was actually funny or in any way an accurate spoof.
    Jay
    Is laughing at an illiterate retard like you using words like, “neocons”, when you have absolutely no idea what it means.

  • Reno Rivera

    Obama has not put on the table any specific entitlement reforms and is demanding a total of $1.6 trillion in tax hikes. He is all tax hikes and no spending restraint.

    ^^^
    Obama smells weakness. Boehner is leading that smell. He was the first to be wavering about the pledge they signed to never vote for a tax increase.

    And he has made it impossible for Conservatives to have a say in their child-like committee crap that they so much love to play in congress.

    Since none of the Conservative in congress have the nuts to leave the party, as DeMint claimed he would do two years ago, and Norquist fears the same, well, we already have a third party and it is showing.

    We have no check and balances in the federal government. Supreme court is useless. It does not protect the Constitution. And liberals of both parties continue to urinate on it.

    They cave, America is lost sooner than it is expected.

    There is a little hope. Already some 12 million Conservatives do not vote for any moderate Republican. Now there is another 3 million, they refused to vote for Romney.

    That 3 million is not correct but it’s what’s on the data. Some think it is more like 7 million.

    See, we do have a third party. Conservatives don’t vote anymore for Republican liberals Party. More have been adamant to never vote again for a moderate. That number is not known until there’s another election.

    It could be another 12 million. See how liberals in the GOP have ruined it once again.

  • phillipjackson

    If you really believe that our legally elected President is intentionally trying to destroy our country, then you need professional help. That is a stupid, moronic and insane notion and you should see a psychologist

  • Dustoff

    Who just called O-dumber GOD… Now talk about getting help.

  • Culture_Warrior

    Mainstream Repugs are finally coming to their senses and are repudiating the Grover Norquest pledge as being out of touch with current realities. Call them RINOs at your own peril. Face it. The American people have spoken and y’all LOST the election! The 10 to 1 proposal that ALL the candidates shunned in the GOP primaries this year is something you won’t ever see again in your lifetimes. Wake up and face the real world if you want to remain relevant.

  • Culture_Warrior

    The Obama proposal has been to keep the Bush rates on the middle class and raise them only on the rich. This is obviously news to the Fox News fed extreme right HE reader.

  • JayC777

    As has been explained, adnauseum, the rich are not going to eat those increases. People will be layed off, have their pay frozen or reduced, consumer prices will increase, or a combination thereof. Thereby making this a tax increase on the poor and middle class.
    Jay
    What is it that you don’t understand about this?

  • eewell

    A tax hike is a tax hike whether direct or de facto.

  • WinstonGalt

    It’s pretty simple. You can tax the “rich” at 100% and it won’t make a dent in the debt or the deficit. This is because the problem is not “revenues”, it’s spending.

    The government is spending other people’s money. This is money that they’ve earned, and are duly entitled to. Social Security and Medicare are paid for (or are supposed to be paid for) by contributions made in the category known as “payroll tax”. This means that the vast majority of spending by the government is discretionary and should be cut dramatically in order of priorities.

    This includes Welfare and it includes any and all “investments” by the government in technologies and eduction (such as Pell grants). You want a Pell grant? OK, then you can give up subsidized lunch programs. You want subsidized lunch programs? OK, you can give up aid to children of illegal immigrants. And so on.

    It doesn’t matter how much that “rich guy” makes or owns – you have no right whatsoever to decide that you can confiscate more to spend on yourselves.

    If everyone wants to ante up and pay taxes then fine. Let’s have that discussion. But if you don’t think that what you want is important enough to have everyone – and I mean everyone, including “lower income” workers – pay taxes for it then it’s simply not important enough to spend money on.

    End of story.

  • JonathanN3

    Yeah I’m sorry Mr. Norquist, but this kind of absolutism is a one way ticket to another catastrophic loss for conservatives. If the point is to win the argument AND the policy, we shouldn’t be listening to you.

    Here’s the problem, as I’m sure you’re aware. We lost. Badly. We’re outnumbered. The United States is a center right country but Obama and his party are winning the present and future demographic wars. Young people, people we need to be future conservatives, who we need to vote for us in some appreciable number, need to be appealed to.

    We’re not going to do that by having our elected officials kowtow to a pledge written twenty five years ago. Twenty five years ago, for pity’s sake, the people we need to vote for our party in order for us to win anymore were in diapers, or not even born.

    Let me put it simply. You and your approach are scaring people off. It’s not your idea that is wrong: it’s your method.

    Our problem is one of credit. Our party is not credible. We do not have credible, young exciting candidates, credible and detailed ideas and credible communicators. We have a lot of posturing, a lot of absolutism, and in a word, a lot of yous.

    If Republicans don’t negotiate with Democrats, the US will fall off the fiscal cliff. Obama will have exactly one year of awful economic news, before the world market and our economy adapts to the new normal. Suddenly we fill find that a federal budget flesh with massive new sources of revenue starts righting our books just in time for the 2014 election.

    In other words: Republicans “shoot the hostage” as a matter of principle, and you hand Obama a massive strategic victory. Probably the biggest one of his entire career. He becomes the President who got the US budget back in the black in record time. History won’t care much how he did it or what got cut and what got raised.

    The only hope of winning at all in this is dealing. Achieve tactical victories. Give up some ground now, gain a lot more later. And build credibility by positioning ourselves as principled conservatives, doing our part to be the yin to the Democrats yang. We do that, we disarm the Democrat’s most convincing and powerful argument against us: that we can’t be reasoned with and we’ll never yield on anything, and start winning back some next-generation and on-the-fence hearts and minds we desperately need.

    But none of that will happen if we do what you say Grover, and don’t budge. Obama wins just by showing up, and we’ll get blamed for it. Just as we have everything else since 2010.

    Put simply, the cause of Conservatism is too important to also be held hostage to a 25 year old piece of paper you wrote. Accepting tactical defeats and achieving tactical wins simultaneously to prevent a wider strategic one and lay the groundwork for future, strategic victories is the smart way of winning the war. So please Grover, don’t screw this up the next two decades of conservatism, to protect an obsolete vow made two decades ago.