Fiscal cliff for dummies

Dec 20, 2012

There are a number of points Americans should keep in mind when they try to decipher the so called “fiscal cliff” hype: first, the “fiscal cliff” is self inflicted, has nothing to do with balancing the budget and has nothing to do with paying down the debt or deficit; and second, the “fiscal cliff” is about playing politics with taxes in an effort to raise revenue that will only run the federal government for eight days.

Americans continue to hear the media chorus that the “fiscal cliff” is rapidly approaching. But what most beltway bandits don’t point out is the “cliff” was self imposed by Congress and willingly signed into law by President Obama to ensure the legislative and executive branches would come together to pass a budget. “It’s” a job that requires all 535 lawmakers to draft, argue and settle on a “spending” budget, but something President Obama and Senate leader Harry Reid have failed to accomplish, therefore the country runs on extensions of the old Bush budgets through continuing resolutions. The Republican House passed a budget the last two years, but the Senate did not move the budget to the floor for a vote, effectively killing any chances for the government to live within its means.

An example of just how bad the “absence of budget” has hurt the American taxpayers comes from this years’ November U.S. government revenues report. The government takes in a little more than $5 billion per day in revenues. Yet, this same government or lawmakers spend approximately $10 billion per day or $5 billion more than they put in the bank.

The largest daily expense is healthcare or Medicare that requires a little more than $3 billion per day, followed closely by Social Security payments of approximately $2.5 billion per day, followed by the Department of Defense that needs $1.8 billion per day and shockingly, the fourth largest expense taxpayers cover is the daily $855 million interest payments on the money “lawmakers” borrow each day. Just think how much that $855 million could help the victims of Hurricane Sandy or the wounded warriors returning from the decade-long Middle East Wars.

These numbers are in stark contrast to what the politicians are promising voters – their falsehoods only ensure the incompetent lawmakers remain in power. Can one possibly balance a budget or control a growth in spending when there has been no baseline budget against which to weigh the prudence of new expenditures?

There are two other programs on the cliff that will affect every worker, the two percent payroll tax holiday that will end on January 1, 2013 and Obamacare taxes, which kick-in to burden taxpayers with footing the bill for another trillion-dollar entitlement program they cannot afford. Last week taxpayers learned the Health and Human Services Department, charged with implementing Obamacare, said it will impose a $63 dollar per person fee per year.

The lapsing “Bush Tax Cuts”

In 2001 and 2003 Congress enacted tax cuts to spur economic growth under George “W” Bush. Congress and President Obama extended the 10-year tax cut program again in 2010 due to the sputtering economy. These tax cuts will expire on December 31, 2012, and will raise all income tax rates as well as rates on estate and capital gains taxes. The alternative minimum tax (AMT) will also automatically apply to millions of unsuspecting taxpayers. These lapsing tax cuts are expected to cost middleclass families approximately $2,000 per year, upper income earners will pay hundreds of thousands and experts say the tax hike will halt economic growth.

Currently, the national debt stands at $16,300,000,000,000. It’s expected to rise to $20 trillion by the end of President Obama’s second term if no significant spending cuts are implemented. However, Republicans are not innocent bystanders in the drunken sailor-spending spree. Under House leader John Boehner, in 20 months (a record) the Republicans have passed roughly $2.3 trillion in deficit spending legislation and sent it to the White House for President Obama’s signature. This translates to roughly $19 thousand per American household owed to Uncle Sam.

It’s important to keep in mind that Congress controls spending, if they don’t pass spending (appropriation) bills the money cannot be spent. The founding fathers intended this check-and-balance concept of government to keep the country from becoming a dictatorship.

Former presidential candidate and Speaker of the House under President Clinton, Newt Gingrich, told Human Events yesterday, “If I was speaker, I’d have had a cheerful conversation with Obama, and said ‘just understand, Oct. 1 other than national defense, FBI and homeland security, you will have no government, because we’re not passing any appropriation bills, none. You want to talk about what an appropriation might look like? Call me.’ If the House doesn’t offer (appropriation bills) and the House doesn’t pass them, there is no money,” Gingrich said.

The former GOP leader knows a bit about this scenario because he engineered two government shutdowns that lasted 28 days and ultimately led to a balanced budget in 1997, but his image was severely tarnished.

White House and House Republicans impasse rings hollow

With the “fiscal cliff” talks at an impasse the House Republicans have decided to vote on “Plan B.” Apparently Plan B is to raise taxes on those who earn more than $1 million per year, cut no spending and “save” the middleclass from any tax hikes. (Except all taxpayers will see a two percent payroll tax hike on January 1, 2013, plus Obamacare taxes)

“For weeks, Senate Republicans — and a growing number of you — have been pushing for us to pivot to a ‘Plan B.’ I think there’s a better way. But the White House just can’t seem to bring itself to agree to a ‘balanced’ approach, and time is running short,” Boehner said at a press conference this week.

Plus, the tax hike of $80 billion on the top earners in the country will only run the government for eight days and does nothing to pay down the $16 trillion debt or close the yearly $1 trillion spending gap.

A Statement from the White House Press Secretary Jay Carney countered and said:

“The President has put a balanced, reasonable proposal on the table that achieves significant deficit reduction and reflects real compromise by meeting the Republicans halfway on revenue and more than halfway on spending from where each side started. That is the essence of compromise. The parameters of a deal are clear, and the President is willing to continue to work with Republicans to reach a bipartisan solution that averts the fiscal cliff, protects the middle class, helps the economy, and puts our nation on a fiscally sustainable path. But he is not willing to accept a deal that doesn’t ask enough of the very wealthiest in taxes and instead shifts the burden to the middle class and seniors. The Speaker’s “Plan B” approach doesn’t meet this test because it can’t pass the Senate and therefore will not protect middle class families (Plan B doesn’t raise middleclass taxes), and does little to address our fiscal challenges with zero spending cuts. The President is hopeful that both sides can work out remaining differences and reach a solution so we don’t miss the opportunity in front of us today.”

Also, the Constitutional scholar, President Obama has demanded unilateral control over the debt ceiling (a blank check) moving forward, something that is unconstitutional.

In a spirit of compromise, the President reported, “What separates us is probably a few hundred billion dollars… The idea that we would put our economy at risk because you can’t bridge that gap doesn’t make a lot of sense.”

In the same breath, however, the President said he would not compromise on his demand that he be given authority to raise the debt ceiling without Congressional approval. Legal sources say that Article I, Section VIII (To borrow Money on the credit of the United States) enumerated powers of Congress are not subject to transfer to the President absent a Constitutional Amendment. The concentration of the appropriating and spending powers in the President would be contrary to the separation of powers protections established by the drafters of the Constitution and would completely marginalize the Congress.

With no end in sight the fiscal cliff standoff continues to add nothing more than Kabuki Theater to those inside the beltway and more nonsense for the taxpayers.

The “sequestration” blues

Another aspect of the inept politicians in Washington DC is the $109 billion per year for 10 years in “sequestration” or mandatory spending cuts in national security/Department of Defense and non-defense programs like the Customs and Border Protection and Transportation Security Administration.

TSA would experience the largest cuts under the $1.27 trillion sequestration plan. Included in those cuts is the Federal Air Marshal Service’s cut of 8.2 percent or $79 million. The Office of Management and Budget estimates aviation security will cut about $448 million between discretionary and mandatory spending over 10 years.

CBP would lose almost $955 million or almost a quarter of DHS’s sequestered monies. Security along the nation’s borders will lose $823 million, air and marine interdiction will lose $41 million and border security fencing, and infrastructure will be forced to cut an additional $33 million.

The military “sequestration plan”

A few weeks ago Secretary of Defense Leon Panetta said the impact of sequestration on defense programs will hurt warriors coming home from the wars.

“There is no question that if sequestration happens, it will impact those who are coming home (from the Middle East Wars),” he said. “It’s going to impact on what we’re going to be able to provide them.”

Panetta described the automatic military cuts under sequestration to a “meat-axe approach,” and said they would seriously “impact in terms of those (service members) coming home, the programs that serve them, the support system that we have not only for them, but for their families.”

However, Mr. Panetta is hopeful leaders in Washington DC would do the right thing and reverse course on the “draconian” cuts that await the military.

And the glimmer of hope Panetta may be clinging to is a statement President Obama made during of the Presidential debates with Mitt Romney: The President said the military sequester “will not happen.”

Yet, December 31 is rapidly approaching, Congress and the President are no closer to solving the country’s fiscal issues, instead they are trying to pass a $60 billion Hurricane Sandy relief package chocked-full of $13 billion pork earmarks otherwise known as campaign payoffs.

Without the emergence of reason from either party, America may be in real trouble….

Link to television broadcast:

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© Copyright 2012 Kimberly Dvorak All Rights Reserved.

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