If no legislation intervenes before January 1 2013, all George W. Bush tax cuts will expire and a pre-determined set of sequestrations will automatically cut federal outlays. That is the law of the land. It is the only reality out there at this time.
For that reality to change new legislation is necessary. This requires a Bill common to both Houses of Congress signed into law by President Obama. Anything short of this will have all the impact of a fart on the wind.
At this time, the United States confronts a national debt problem unprecedented since the end of World War II. To relieve pressure, tax revenues must increase – arguably from 15.5 per cent of gross domestic product to 20 per cent of gross domestic product – and expenditures must fall – arguably from 25 per cent of gross domestic product to 19 per cent of gross domestic product. Only when such a surplus is achieved will the debt itself decline in absolute terms.
The $64,000 question, therefore, is whether President Obama recognizes this reality and is willing to work in good faith to address it. And the answer is a Corleone Godfather-like No!
Barack Obama has never shown any interest in restoring the United States economy to budget balance. All his actions taken while in office have accentuated the size of the debt and have increased federal expenditures. Barack Obama judged by his actions – as any politician must be – is a progressive socialist. His concern is to expand the relative size of the public sector while redistributing wealth from the more to the less productive members of society. All his actions support this hypothesis.
So, if the GOP bargains to avert the fiscal cliff, they will end up with tax increases imposed on the better off and with new ‘stimulus’ outlays designed further to socialize the economy. That is a bad deal for the GOP and a bad deal for the nation.
So, why not do as well as one can while doing as much good as one can in an uphill political environment. The wealthy will take a hit whatever the outcome. But all Americans have created the debt problem. By going over the fiscal cliff, almost all Americans will make a contribution to easing the problem they have collectively caused. Simultaneously, government expenditures will take a hit. And that is good, long-term, for the economy.
And then the GOP will be free to freeze all Presidential legislative initiatives, certainly until 2014 and, with a bit of electoral luck, until 2016. And that is not at all what President Barack Obama has in mind for this second term. He wants to use the veto power to leverage socialism. When the veto power passes to the House of Representatives, he becomes the Emperor with no clothes.