The Grand Capitulation
According to reports, Speaker John Boehner (R-OH) has offered $1 trillion in higher tax revenue over ten years and an increase in the top tax rate on people earning more than $1 million a year. $450 billion in revenue would come from raising the top rate of million-dollar-plus income from 35 percent to the Clinton-era 39.6 percent. The rest of the $1 trillion on revenue would come from a “rewrite in the tax code next year and by slowing the inflation adjustments made to tax brackets.”
Liberals and conservatives know very well that raising taxes is not enough to fix our nation’s fiscal problems, problems like a deficit of $1.1 trillion and publicly held debt of $11.3 trillion or 73% of GDP.
While conservatives are calling for spending cuts (which would actually fit the definition of the word “solution”), liberals want to extend the government’s borrowing cap to fund the government for one year before the issue must be revisited. In his latest proposal, Speaker Boehner has obliged. But that is no real solution at all.
In fact, even when President Obama was demanding the mind-blowing $1.6 trillion in revenue, “the national debt [would] still go up by about $7 trillion over the next ten years.”
To be clear, we’re not advocating that $1.6 trillion would be better than the $1 trillion Speaker Boehner has offered. However, it does highlight how wrong the liberals are to demand tax hikes as the sole solution to our nation’s fiscal woes. Soak the “rich” for everything they’ve got, and we’ll still be up to our eyeballs in debt.
Republicans are also considering a “tactical retreat that would hand Obama a victory in his longstanding campaign promise to raise taxes on households making more than $250,000 a year.” The supposed return for that would be a renewed fight against increasing the government’s borrowing cap and perhaps more spending cuts. President Obama’s proposed spending cuts include “$600 billion in spending cuts over a decade including $350 billion from federal health care programs and $250 billion from other cuts to domestic programs like farm subsidies and the pension program for federal workers.”
$600 billion in spending cuts for federal health care programs? At one point, “[t]here was a marker for potential entitlements savings of up to $400 billion. But [that] proposal was vague, and the savings aren’t guaranteed, as they would happen sometime later only after the tax increases and new stimulus package,” according to Heritage’s Allison Acosta Fraser. What’s to make us believe that this new proposal is any different?
Whether we get $400 billion or $600 billion, it doesn’t matter. The savings may prove to be as imaginary as the spending cuts liberals have promised in years passed, AND these savings would be a drop in the bucket considering that entitlement spending is currently 62 percent of the federal budget and is projected to consume ALL tax revenues in 2045. Speaker Boehner has asked for $1 trillion in spending cuts and an increase in the Medicare eligibility age, but as we’ve noted, Democrats strongly oppose changing the Medicare eligibility age from 65 to 67.
And $250 billion in spending cuts for farm bill and other domestic programs? Any savings to be found in the farm bill – at least as currently being discussed – are totally bogus, as they only exist before the new spending is added. The Senate and House-passed versions of the new farm bill would cost $969 billion and $957 billion over ten years respectively. Again, only in Washington could a nearly $1 trillion bill be included in a deficit reduction package.
The bottom line is that lawmakers are giving in on taxes, they’re giving in on the debt limit, and there has been no real discussion about cutting back spending. This doesn’t bode well for the economy, and when the economy suffers, so do the American people as a whole.