Tag Archives: Fiscal Cliff

A Dime’s Worth of Balanced Thoughts on SOTU

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President Obama seems increasingly divorced from reality on the deficit. First there was his jaw-dropping statement to Speaker Boehner, during the fiscal cliff crisis, that “we don’t have a spending problem.” Now tonight he trots out the usual SOTU laundry list of new initiatives — some of them sensible enough. But he introduces them by saying “nothing I’m proposing tonight should increase our deficit by a single dime.”

Excuse me? Props to the Republican National Committee for being out already with a video that includes tonight’s speech in a litany of video clips of Obama’s dime-saving promises, closing by pointing out that the national debt has increased by 58 trillion dimes since Obama took office.

The Obama-voting Web Goddess, who has to get up early tomorrow, bailed about 10 minutes into the speech, saying it wasn’t very interesting “now that he never has to run for office again.” I said “he’s acting like he never has to compromise with a Republican again, either.” She said “yes, that’s coming through.” Celebrate small victories…

I’m getting tired of Obama’s repeated references to “a balanced approach” to cutting the deficit. Here’s my idea of balance: the fiscal cliff deal imposed tax increases with no spending cuts. Now let’s balance that with a sequester deal of spending cuts with no tax increases.

There will be no sequester deal, of course. The Republicans cannot possibly surrender the only mechanism they have for forcing spending cuts, however clumsy those cuts may be, unless they and the Democrats can agree on alternate cuts of equal size. And there’s no chance of that in the next two weeks. Obama’s White House invented the sequester idea in the summer of 2011, and he and the Democrats have had a year and a half to propose alternate cuts. This president has no intention of cutting anything except defense.

One statement jumped out at me in his discussion of the need for changes to Medicare: “I am open to additional reforms from both parties, so long as they don’t violate the guarantee of a secure retirement.” Arrrgh! There is no guarantee of a secure retirement! There are entitlement programs in place that provide subsistence-level support, and even that isn’t guaranteed, because the programs are unsustainable. Anyone wanting “a secure retirement” is going to have to either inherit it or save for it.

After my negative feelings about much of the speech, I was surprised to find myself moved by Obama’s closing, when he offered up the examples of the brave police officer, the noble nurse and the 102-year-old woman who endured six hours in line on election night so she could cast her vote.

That’s just the way we’re made.

We may do different jobs, and wear different uniforms, and hold different views than the person beside us. But as Americans, we all share the same proud title:

We are citizens. It’s a word that doesn’t just describe our nationality or legal status. It describes the way we’re made. It describes what we believe. It captures the enduring idea that this country only works when we accept certain obligations to one another and to future generations; that our rights are wrapped up in the rights of others; and that well into our third century as a nation, it remains the task of us all, as citizens of these United States, to be the authors of the next great chapter in our American story.

Well put, Mr. President. (Yes, I know that by “certain obligations to one another” he means bigger government, but I don’t have to accept that premise.)

Man oh man, I loves me some Marco Rubio! An excerpt from the official Republican response:

Presidents in both parties – from John F. Kennedy to Ronald Reagan – have known that our free enterprise economy is the source of our middle class prosperity.

But President Obama? He believes it’s the cause of our problems. That the economic downturn happened because our government didn’t tax enough, spend enough and control enough. And, therefore, as you heard tonight, his solution to virtually every problem we face is for Washington to tax more, borrow more and spend more.

Preach it, brother.

To end on a bipartisan note, I’ll paraphrase something David Gergen said on CNN: Who would have thought, as recently as a dozen years ago, that we would one day see a state of the union speech by a black president, followed by a response from a Hispanic senator?

Lesson from the Mislabeled “Fiscal Cliff”: Please Spare Us Any Future Countdowns

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A breathless Market Watch

Gimme a break.

Remember Y2K?

I rang in the year 2000 in a windowless Wall Street bunker, part of a multidisciplinary rapid-response team standing by to spring into action and muster resources from across the company in the event of a disaster anywhere in the world.

I performed this solemn duty while playing video games on my laptop.  I also practiced with a putter and golf ball someone else had brought. Every three hours the team assembled for a scheduled conference call with the company’s smaller command centers around the world, giving everyone a chance to tell jokes.

All this comes to mind, of course, during the breathless countdown to the so-called “fiscal cliff.”  Wolf Blitzer shows off the ticking clock every afternoon on CNN, and there are competing websites where you can get your own ticking clock widget for your blog or website. Please don’t.

Here’s Rex Nutting of the Wall Street Journal‘s MarketWatch.com to put it into perspective:

In truth, nothing much will happen to the economy on Jan. 1 or Jan. 2 or Jan. 3, despite the expiration of tax cuts and the automatic reductions in federal spending. … The fiscal cliff is a misleading metaphor. The laws will change on that day, it’s true, but the impact will be spread out over many, many months. In fact, the effects are already being felt, particularly in financial markets. Businesses, investors, workers and consumers have begun to prepare for the changes, and that’s caused the economy to slow a bit already.

It’s not a Niagara Falls, with billions of gallons going over a cliff. It’s more like a bathtub slowly filling up. And, on Jan. 1, it’s going to spill over the edge. Eventually, it will flood the house, but that’ll take time.

Hey Rex, tell it to whoever put a countdown clock on your own website’s homepage! Mercifully, the countdown craze for this manufactured crisis has not yet spread as widely as the craze for the last manufactured crisis — the debt ceiling struggle in 2011.  Here’s my take on that countdown:

Much of the news media is guilty of malpractice for pretending that August 2 was a consequential deadline.  The cable news networks and even the Washington Post had clocks ticking down the number of hours and minutes until midnight August 2, sometimes labeling those clocks as a countdown to default.  But if the clock had struck midnight without a deal in place, the awful consequences would have been… absolutely nothing.

The country would continue to pay most of its bills, including all of its debt-servicing bills, through the time-honored business practice of “maturing their payables” — making some creditors wait.  The next major step would be a partial shut-down of government, which certainly would have ratcheted up the drama.  But we were weeks away from any danger of default.

This countdown is perhaps slightly more real than the debt ceiling because at least it ends on a date where something actually will happen, whereas the deadline for the debt ceiling was an estimate pulled out of Tim Geithner’s ear three months in advance.

The U.S. Chamber of Commerce jumped on the countdown bandwagon early, but to their credit they’re not displaying it now.

As a commenter pointed out in my previous post, the January 1 deadline was created by an act of legislature, and the same legislature can vote at any time to stop the clock or overturn the law altogether. If the President and the House Republicans don’t reach a deal before January 1, both sides will begin discussing plans to undo much of the damage triggered by the law.  Then the Republicans will have to fold their tent on the tax issue, unless they want to vote against a tax cut for the middle class.

One more Y2K memory: Later that holiday weekend, when I was off duty, someone found an actual problem to report! I got an urgent call at home from the communications person who was staffing the increasingly irrelevant command center.  I was the intranet guy at the time, managing the corporate homepage for our far-flung internal website. On a locally managed site overseas (I forget where), the Y2K preparations had missed a problematic bit of code.  A script had updated by adding 1 to the two-digit field for the year, resulting in an internal page dated January 1, 19100.

OK, I said.  I’ll call them Monday.

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Fiscal Cliff Notes: It’s Hard to See Any Winning Scenario for the GOP

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Who'll take the plunge?There’s a school of thought among conservatives that letting the country go over the “fiscal cliff” may be the least-bad option.  The “sequester” — the automatic across-the-board spending cuts that will accompany the tax increases set for January 1 if no deal is reached — may be the only way to accomplish any spending cuts.  Here’s Daniel Henninger in the Wall Street Journal:

Conventional wisdom holds that the sequester is a mindless anti-spending Godzilla. But the sequester, because it is set in legislative stone, possesses what Washington today lacks with the public: credibility.

The only issue on the cliff negotiation table held true by every serious person is that the entitlement crisis is going to crush the country. But nothing is dearer to this president than higher taxes on people defined by him as the wealthiest. If the president’s DNA prevents him from a compromise that also includes a sequester-strength commitment to disarming the entitlement bombs, much less discretionary spending, take the sequester. Better the fiscal cliff than pitching the American people over the bottomless entitlement cliff.

But polls make it clear that the public would blame the Republicans more than the Democrats if we go over the fiscal cliff.  And that’s not the only problem the GOP would have.

Play the game out: let’s say there is no deal by January 1, so taxes increase automatically for all working Americans.  Democrats quickly will propose legislation to reduce taxes on all but the top two percent of earners. Obama will vow to veto any tax cut for the highest earners, secure in the knowledge that such a veto would be easily upheld.  Then the Tea Party caucus  — the segment of the Republican Party which has tax cutting as part of its brand identity — would either have to support the Democratic proposal or explain that they are opposing tax cuts for the middle class as a matter of principle because the cuts don’t also extend to the highest earners. Ugh.

House Speaker John Boehner, at some risk to his speakership, took a giant step toward the president by proposing a tax increase of $800 billion on the highest-earning Americans.  The new revenue would come from eliminating or limiting loopholes and tax deductions — which would have less of a negative effect on the economy than a straight increase in the top marginal rates.  As Kathleen Parker wrote,

Boehner’s good-faith attempts at a deal, offering new revenue through reforms as well as leaning toward some limited tax-rate increases, have been met with mockery. Obama’s laughable idea of a balanced deal includes taking control of the debt ceiling and doubling revenue demands, while offering little in the way of spending cuts.

To go along with the tax increase, the President actually is proposing a spending increase in the short run. The plan includes some new spending, and all of the proposed spending cuts would be delayed by a year, on the pretext of reducing the immediate impact on the economy.  A year is a long time, and Republicans today are likely to find themselves in the same boat as Ronald Reagan — agreeing to tax increases in return for later spending cuts that never happen.

A deal in the next 22 days looks highly unlikely. Obama holds the trump cards, and he’s shown no inclination to make any concessions.

(Public domain photo from Wikipedia.)