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Time for House to call a Time Out — pass Plan C

Time for House to call a Time Out — pass Plan C

We have seen this movie before. A contrived crisis causes a rush to a vote before any legislator or the public has time to read and understand a bill which will have a profound effect on the nation for years if not decades.

That’s what happened in the middle of the night early this morning.

The choice presented was handing Obama what his aides are calling the single biggest policy achievement in decades — breaking Republicans’ tax rate pledge — or raising taxes on the “middle class.”

Rather than raising revenue through economic growth, revenue will be raised through growth of marginal tax rates.  Of course, the “rich” (many of whom are your local business owners and professionals) will change their habits because when you add up higher marginal rates, caps on deductions, Medicare taxes, and state income taxes, that last marginal dollar is becoming hardly worth earning.

The headline a year from now will be that the tax increases on the “rich” did not generate the expected revenue. Obama has positioned the debate so that the answer to the tax revenue shortfall will be more taxes. That is his great achievement.

This fiasco is the product of a false choice between “going off the cliff” or tax increases without spending cuts or entitlement reform.

I saw this coming when I proposed on December 6, and repeatedly since then, the Christmas Plan (aka Plan C):

If a deal which tackles deficits from both revenue and spending can be reached this month, great.

If not, pass a 90 day extension of current tax rates and whatever else is needed to postpone the “cliff,” and go home for Christmas to give time for a Grand Bargain which puts Democratic sacred cows on the table.

Let Harry Reid refuse to bring it to a vote, and Obama refuse to sign it. Their inaction will be the reason for taxes rising for everyone.

I saw that decoupling tax increases from spending cuts and entitlement reform would result in what we now have, where we give up on taxes but get nothing in return. We no longer have bargaining power because we have nothing left to give except even more taxes. We shot our wad on a fiscal three-card monte game.

Plan C did nothing more than maintain the status quo until all issues were addressed as part of a “grand bargain” type agreement in which Democratic sacred cows were on the table.

Plan C did not force either side to concede anything.  Indeed, if passed now, Plan C would not rule out that part of the eventual deal on taxes may be what just passed the Senate … but at least we’d get something in return.

Even people (like me) who are against any tax increases could live with some tax increase if it were part of a deal which actually put the country on a proper fiscal road and substantially addressed our spending problem. Let both sides sacrifice their principles, if either side does.

It’s not to late for the House to reject a piecemeal approach. The House should mark-up the Senate bill to reflect Plan C and send it back to the Senate.

We’re going to have a debt ceiling and spending fight anyway in two months, let everything be on the table when it happens.

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Comments

Isn’t our reality that there are enough RINOs in the house to ensure both that the senate bill passes with no meaningful changes and that Boehner gets reelected speaker?
If so, is another part of reality that the Republican party is beyond saving, which may be a good thing?

    Browndog in reply to Rick. | January 1, 2013 at 12:41 pm

    I think we can dispense with the term RINO.

    Implying that “republican” represents some sort of principled virtue separate and apart from “democrat” is so….yesteryear.

    Daiwa in reply to Rick. | January 1, 2013 at 12:43 pm

    I’ve been a registered Republican since 1970, inspired by Barry Goldwater. I have changed my registration to Independent as of last month. I can’t abide or associate with the current spineless Republican establishment, espousing principles then walking away from them. Done. Especially John McCain.

      jimzinsocal in reply to Daiwa. | January 1, 2013 at 2:36 pm

      I agree. Amazing how Republicans gave away the Tax issue. But hey…just another issue to the long list because our Republican leaders cant articulate even what should be winning positions.
      We used to own the tax issue. Now look. The Whitehouse is claiming a “victory” for middleclass Americans.
      It seems any momentum we saw in 2010 has come to a self inflicted grinding halt.
      If we cant manage a win or break even on taxes?
      You tell me: What’s left?

Making whatever rates come out of the deal permanent counts as a positive for me. We’re not going to get the 2001/2003 rates for everybody, as much as I’d like that. Pushing the threshold as high as possible then becomes the strategy.

As for decoupling, we shouldn’t need to sweat it (except we’ve got Boehner). Over the next two months and into the Spring Budget season, the answer for Republicans to repeat ad infinitum is “you’ve already raised taxes, now we need to cut spending.” And pass nothing out of the House that doesn’t contain significant cuts (not these $10B in cuts from a $3.8T budget).

    Browndog in reply to Pasturized. | January 1, 2013 at 12:53 pm

    Making whatever rates come out of the deal permanent counts as a positive for me.

    Tax rates are as permanent as the next vote in Congress.

      Pasturized in reply to Browndog. | January 1, 2013 at 2:04 pm

      Yes, but … A situation where your opponents has to pass legislation to achieve their goal is easier to block than one in which they can sit on their hands to acheive it.

If obama’s plan calls for $1.2T and the just passed Senate’s plan will only produce $600B that means there is not enough money to accomplish, or meet, the goal. Why implement a program that’s not going to allow you success? We all know that if this passes the House the revenue from the increased taxes on those making over $400k is just going to fund more spending by the present Administration. It won’t go towards the deficit; it won’t go to stopping cuts in anything. It’ll probably go towards funding some new committee we really don’t need.

    creeper in reply to Icthelite. | January 1, 2013 at 12:07 pm

    Obama doesn’t care about success. He cares about being able to say, “I won!”

      johnnycab23513 in reply to creeper. | January 1, 2013 at 12:54 pm

      Obama does care about success. This is his transformation of the system; the same as the soviets did nearly 100 years ago, but in a more devious fasion.

A one-hundred and fifty seven page document was not created overnight. They’ve been holding this piece of crap until the last minute and now want it passed to find out what is in it.

I agree, turn the tables and give them a last minute choice.

I have no hope for the party at this point.

There have to be deficit cuts. There have to be deficit cuts. Let me say it again! There have to be deficit cuts.
This is not something that can be pushed off until after there’s an agreement to raise anyone’s taxes. Be they mine or the top earners.
This entire sitcom has been approached *bass acwards* , the discussions should have stemmed around spending cuts from day one, lowering the deficit ceiling back down to where it was before the last increase in it, freezing it there, then seeing how much money was going to be needed to start paying the debt down. Then there could have been intelligent negotiations on how much taxes would have to be raised to accomplish the goal.
Probably would have found out ALL of us would have to pay more to get us where we’d like to be again. The freeze would stay in effect until the goal was met.
All that’s going to be done here is to give government more money [a $600b stimulus package] to spend on what they’ve already been spending it on. If there ever are going to be talks on deficit cuts you can bet when they start they’ll be telling us they need more money and we’ll be going all through this again. That’s when they’ll tell us they should have let all tax cuts expire to begin with.

All that’s been done here, with the Senate plan is to put us right back where we were before all this started. Except of course for taxing those making over $400/$450K and the light bulb going on over my head tells me if these earners are smart enough to earn that kind of money, they are smarter than those setting on Capitol Hill when it comes to figure out ways to not pay much more than they’re paying in taxes now.

“We have seen this movie before.”

And we will keep seeing it. Endlessly. Until we get rid of these people.

DDsModernLife | January 1, 2013 at 12:34 pm

I’m consistently infuriated at revenue estimates based on some fantastic static model(!), so it’s refreshing to see Prof. Jacobson point out the obvious: “Of course, the “rich”…will change their habits…”

(Another thing that really gets my goat is some Socialist saying that tax cuts “cost” the gov’t x-amount of money.)

Happy New Year, y’all. #3rdParty

Once again Mitch Mcconnell proves that cutting a deal is more important than the needs of the country.

The people who say, “Don’t worry, the real fight is in 2 months” don'[t seem to realize that that fight is already over. Once you surrender, you’ve surrendered. You don’t magically grow a spine – or some sort of skill at negotiating – AFTER you give up.

I wonder what party is going to replace the now completely defunct Republican party?

    +1

    What gets my goat is how much McConnell seems to enjoy the process. He positively lights up when it comes to spending money we don’t have on things we don’t want.

    ThomasD in reply to irv. | January 1, 2013 at 2:36 pm

    This particular ‘surrender’ came from the Senate, which makes it no surprise.

    It is only a real surrender if the House swallows it whole. That is why a House counteroffer is precisely what is needed.

    The Senate is why this is all last minute, and they need to feel the heat.

Not possible to make a deal with Hell’s Demons.

It is possible to let the blame fall rightly at the feet of Hell’s Demons as a result of their unwillingness to negotiate in good faith.

This is a blink moment for the left, not the right.

No more moving the goal post.

    stevewhitemd in reply to VotingFemale. | January 1, 2013 at 1:58 pm

    VotingFemale, above, talks about how it might be possible to ‘blame the Demons’ for the current mess.

    I was going to respond directly to her, but my response has morphed into a more general (and longer) comment. But I start by asking her and those who agree with her this question: how exactly will you have the blame fall at the feet of the Demons?

    Define the Demons.

    If that means Champ and the Democrats, good luck. The Democratic Media Machine, Journolist, and the various parts of the public that support them (and gave them the presidency and a majority in the Senate) won’t buy your attempt to blame them. Seriously, good luck with that one; the conservative bloggers and politicals have been trying to blame the Democrats and DMM the past forty years and you can see where that has gotten them at the end of 2012.

    If that means RINOs, good luck. The RINOs have survived precisely because they’ve been able to avoid blame in their political careers. You’ll have to be better than McCain, Hatch and Graham (for example), and they’re all world-class blame shifters.

    If that means Republicans in general, good luck. The Pubs hold a 20 seat majority in the House and a minority in the Senate. It may not even be filibuster proof if the Democrats decide the change the rules next week, which they just might do. You can certainly blame the Pubs; the Democratic Media Machine will help you in your quest but you’ll be blaming 1/3 of our government. I am not sure that solves anything, but you might feel better as at least there’ll be a target out there for you that you can actually hit.

    So no, I don’t think ‘blaming the Demons’ is going to work very well, whoever you think the Demons are.

    Blaming people generally doesn’t fix the problem.

    I’m not sure there is a fix at the moment. Champ and the Democrats control the White House, Senate, 45% of the House, the various Departments in the Executive branch, and 90% of the organized media. Trying to push spending cuts on that crowd, especially when they just ‘won’ their election and believe that they are the ones with a mandate for what they want to do, simply isn’t going to work.

    The two choices we have, and neither is particularly palatable, are

    a) push to get as much of the Bush tax cuts made permanent as we can
    b) push to cut the deficit.

    The latter option, b, is near impossible right now. If we were to agree to raise taxes with a promise to cut the deficit, Champ and the Dems would use the revenue, whatever it turned out to be, to fund more social welfare programs and corporatist graft. They’d break the promise. They wouldn’t cut the deficit at all, and in fact it likely would go up — the current government always spends more than it takes in.

    There will be no politician fighting to cut the deficit this year. There is no will or stomach for option b. Be as upset about that as you like; it’s political reality. You might get option b back on the table if the Tea Party has a good run in November, 2014 (I define ‘good run’ as not just having Pubs control the Senate but having the Tea Party control the Pubs).

    The former option, a, is one that if handled properly works to ‘starve the beast’. Option a works to a point, that point being the one we have today. It’s political suicide to raise taxes but so much on working and middle class folks; even the Democrats understand that. Having just jacked taxes with ObamaCare, Champ in the end has to agree to extend the Bush tax cuts (the same tax cuts he and the Democrats demonized over the past decade) to keep the middle class sweet on him. That doesn’t mean he won’t try again to raise taxes in a year or so, as he had already indicated, and that’s where the next fight is.

    So my advice is simple: fight for option a, get the tax cuts made permanent for as many people as we can, declare victory and move on to the next fight against raising taxes. That one is most certainly coming.

    Please also note that there is no option c. There are no other realistic choices out there.

    You aren’t going to ‘blame the demons’. The demons you’d like to blame are a protected species. The demons you can blame instead don’t matter much.

    Good luck.

I think I’ll head to the hardware store.

I here they have a clearance sale on 75 watt light bulbs.

Sorry Professor, they will not pass your Plan C. Why not? It makes sense & this is about politics, not logic. This clowder of pissing cats is engaged in a political pissing contest & they’ve developed a taste for urine. The media is using a luffa pad as they enjoy the ongoing golden shower.

    PS. Hats off, at least on this vote to my Senator, Michael Bennett. He even voted no for the right reason. I realize it’s a throwaway vote for 4 years from now but one must give credit where due.

    secondwind, I feel your pain but would describe the situation a little differently.

    The Democrats and Republicans represent special interests in addition to—maybe more so than—their voters. If they somehow, which I doubt, struck a bargain agreeable to the bulk of those special interests, the country would keep declining because such a bargain would ignore (or damage) things essential to the overall national welfare.

    The really nasty twist is that a political player who puts the country first will be treated as a sucker by the other players and probably abandoned by his backers. Because, y’see, everybody in DC is so intelligent.

      gs in reply to gs. | January 1, 2013 at 1:57 pm

      Because, y’see, everybody in DC is so intelligent.

      Thomas Sowell wrote to the effect that There’s only so much damage that stupid people can do. To create a real disaster, you need high IQs. (*cough*)Quantitative easing(*cough*).

      As a practical matter, I support Bill’s Plan C.

      gs : I agree also with your point. The aforementioned urine soaked cats are oblivious to that point as they enjoy the salty taste on their tongue. The resulting hairballs they hack up account for the legislation we get. One must maintain a sense of the absurd when encountering such continued nonsense else one goes mad!

Living in USA today is like living in Wonderland. For 6 years or so Democrats and Obama especially have berated the Republicans for the Bush Tax Cuts for the “rich”. We go head over heels in debt and viola! Obama saves the middle class tax cuts from the nasty Republicans. Our media is traitorous! Hitler and Stalin along with Mao must be in awe of Obama’s prowess in getting them to be lap dogs.

nothing will change because the fed reserve is propping up this entire fiscal disorder thru massive money printing.

got this quote from another blog:
PEOPLE CHANGE WHEN THE PAIN OF STAYING THE SAME IS GREATER THAN THE PAIN OF CHANGE.

As this has not occurred, get ready for things to get worse, pay off debts, spend as little as possible and take care of what you can and under your control, your health, your spending habits etc. The rest, just wait for the fiscal crash, how and when it will occur is a guess, it may even be prolonged over a couple of years. But what is certain is that it is coming.

No amount of taxation will pay for the dim’s spending, the entitlements.

    snopercod in reply to alex. | January 1, 2013 at 2:27 pm

    “PEOPLE CHANGE WHEN THE PAIN OF STAYING THE SAME IS GREATER THAN THE PAIN OF CHANGE.”

    While that’s true, history teaches us that when people are suffering, they usually vote for more of what caused the suffering in the first place. The recent election in the U.S. is a perfect example.

    When government meddling fails (as it always does), people usually vote for a “strong leader” out of desperation.

as much as repub bashing there is here, I don’t just blame repubs, I blame much of the ignorant american public that are too fiscally and economically ignorant and voted for and support this nonsense.

    snopercod in reply to alex. | January 1, 2013 at 2:39 pm

    There’s a reason many of us Independents bash Republicans: When running for office, they claim to stand for less government, more freedom, and fiscal responsibility; Once in office, many of them turn into Democrats-Lite. Ayn Rand noticed this way back in 1960, when she wrote:

    It is generally understood that those who support the “conservatives” expect them to uphold the system which has been camouflaged by the loose term of “the American way of life.” The moral treason of the “conservative” leaders lies in the fact that they are hiding behind that camouflage: they do not have the courage to admit that the American way of life was Capitalism, that that was the politico-economic system born and established in the United States, the system which, in one brief century, achieved a level of freedom, of progress, of prosperity, of human happiness, unmatched in all the other systems and centuries combined–and that that is the system which they are now allowing to perish by silent default.

    If the “conservatives” do not stand for capitalism, they stand for and are nothing; they have no goal, no direction, no political principles, no social ideals, no intellectual values, no leadership to offer anyone.

    Yet capitalism is what the “conservatives” dare not advocate or defend. They are paralyzed by the profound conflict between capitalism and the moral code which dominates our culture: the morality of altruism… Capitalism and altruism are incompatible; they are philosophical opposites; they cannot co-exist in the same man or in the same society.

    –Ayn Rand, Conservatism: an Obituary, a lecture given at Princeton University on December 7, 1960.

It surprises me in the tone of comments that people here feel helpless in choosing who leads the GOP. That is anything but true.

Replacing the GOP leadership (Speaker, Majority Whip, Chairman) is something that can be done tomorrow. This requires effort and focus and relentlessness. But is is something that needs to be done more than anything else.

standard_chimp | January 1, 2013 at 1:30 pm

I say drive this thing right off the cliff. Everyone knows this is Obama’s plan. Let’s get the percent of taxpayers up from 50 to about 70% and let’s see how those new taxpayers like it. Face it, the deficeit is going to $20 trillion. If the Tea Party can’t win with those numbers then all is lost.

And one more thing, a lot of those non-taxpayers are getting the child tax credits and earned income tax credits. So that middle 20% if facing a double whammy. This hurts them more than anyone, but if they are too stupid (i.e., get all their news from CNN), then all is lost!

A_Nonny_Mouse | January 1, 2013 at 1:47 pm

Kabuki.

All “pure theater” – designed to make us think we still have some say, some influence, over own own lives and future (and some hope of reversing course).

But no: the “cold civil war” has already been won (by the wrong side).

Now, what should a free man (who intends to stay free) do?

Well Fox reporting Cantor is opposing this. I frankly have no faith anymore.

My guess is any so called fiscal conservatives will cave. and to be honest, I’m not opposed to tax increases as long as it immediately substantively tied to REAL spending cuts.

I just don’t see that. The dems will just keep taxing and taxing, until there is nothing left to tax and the fed will keep printing the money to make up the difference until the US dollar becomes so reviled that a new currency will emerge, forcing real cuts at that point!

Conservatives and the GOP House refusing to support the Senate bill is totally crazy. There will never be a better resolutiin of the tax side of the equation. Holding the Bush rates for 99 percent of earners AND moderating otherwise automatic increases on the highest earners is the best deal anyone will get short of GOP control of the White House and both Houses of Congress. Meanwhile, everyone’s taxes go up, the GOP quite properly gets the blame, the party loses its historic lock on the issue of lower taxes, and the new Congress, which has more Democrats gets to decide everything. Democrats are licking their chops over all that new “revenue” from across the board tax hikes. They will contrive to keep a lot more if it, with Obama in the lead. That plus the automatic sequester will give them the ability to pass out new tax cuts and MORE spending in ways most beneficial to them.

It’s a good deal wrought by maximizing the limited leverage the GOP has due precisely to the “crisis” atmosphere around the “cliff.” Spurning it is absolutely insane.

Forgot to mention earlier.
What gauls me about the Obama cheerleading yesterday on ther tube and his spiking the ball attitude is a tax increase from any administration should never be celebrated.
In this case it wasnt a pragmatic decision. It was pure ideology.
Can you imagine the President of say an automaker celebrating increasing the price of high end Cadillacs because he was unable to keep costs for the rest of the product line under control? Tax increases should be seen as an evil time to time necessity not cause for celebration. Its not a conventional “win” in the real world…its evidense of failure.

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