Comments on 1st Presidential Debate
A debate on domestic policy issues that turned into a free-for-all between the candidates over the economy left out the single biggest obstacle to economic recovery facing us in just 3 short months – Taxmaggedon 2013 and sequestration. Together, they are called the “fiscal cliff”.
They were never mentioned once during the first debate. They should have been.
The New York Times Speaks
In the realm of the mundane, according to the New York Times, there is a glimmer of hope for the Romney Campaign.
The NYT did not out-and-out claim an Obama win as most expected. Instead, the NYT actually gave Romney pretty good marks and even accurately pointed out some flaws in Obama’s arguments:
Obama and Romney, in First Debate, Spar Over Fixing the Economy”
-Jeff Zeleny and Jim Rutenberg, NYT, 10/3/2012
A new term, “economic patriotism”, came out of the debate. It may becomes a battle cry for Democrats in the last 5 weeks of the campaign. It is a gussied up way of saying “pay their fair share”, which is a euphemism for taxing the rich. That phrase has become cliché.
No matter what, put lipstick on a pig and it is still a pig.
Tax the Rich!
There is nothing wrong with taxing the ultra-rich some more. They are doing pretty good. President Obama’s fatal flaw is making it an implied panacea for fixing all spending problems and paying for his spending proposals. It doesn’t come remotely close. Its a pittance compared to what is needed.
Obama’s ‘tax the rich’ proposal would raise only about $80 billion/year max. That is a drop in the proverbial debt bucket. It is just 6.3% of what is needed to close the budget gap. And that doesn’t account for the President’s new spending proposals, like hiring 100,000 new teachers!
The President never tells us how much his new spending proposals will cost but you can be sure they are more than taxing the rich will bring in.
Did you know that we could tax the rich at 100% of their earnings and not come close to closing the federal budget gap?
The Fiscal Cliff
Did you also know that if we fall off the fiscal cliff entirely we cannot fix this country’s spending problem, either?
The fiscal cliff is a horror story awaiting us at the start of next year. It has two main parts:
- It increases taxes about $500 billion dollars a year a bunch of different ways
- Through sequestration, it cuts spending by $1.2 trillion over 10 years
When it comes to balancing the budget and ultimately reducing today’s ginormous $16.3 trillion dollar national debt the fiscal cliff is a good thing.
When it comes to creating jobs and recovering the economy it is a nightmare.
It is a nightmare because it kills an already weak recovery. Things left unchanged, the CBO forecasts we will fall into recession again the first half of 2013.
Sequestration is the bitter pill left over from the last debt ceiling debate debacle that got this nation’s credit rating reduced for the first time ever. It is what kicks in automatically next year because the “Supercommittee” ignominiously failed.
Sequestration will reduce federal government spending about $120 billion/year or so starting in January. Half will be cuts in military spending, half across the board spending cuts.
Fiscal Cliff Effects
The fiscal cliff is worse than the CBO’s estimates would leave us to believe. CBO estimates are for fiscal year 2013 which will already be 1/4th over before the fiscal cliff kicks in. It is better to think of it in terms of next calendar year rather than next fiscal year.
Interpolating the CBO, its $607 billion reduction in federal spending in fiscal year 2013 turns into a $759 billion one in calendar year 2013.
However, as the CBO says, those numbers must be reduced because of the negative impacts of the massive cut. Jobs will be lost, which reduces federal revenues coming in and government spending increases to pay for unemployment benefits and other unemployment related services.
The CBO estimates that reduces $47 billion savings in fiscal year 2013. That translates into $59 billion for calendar year 2013. That leaves a $700 billion reduction next year.
Unfortunately, for the fiscal year just ended, that amount is about half the yearly $1.3 trillion amount needed to reduce debt borrowing to zero. At this time, reducing the national debt is only a fiscal-minded conservative’s wet dream.
If we fall off the fiscal cliff it reduces debt growth less than half, yet would cost this country about 1.4 million jobs next year. That is assuming an expected fiscal cliff increase in unemployment by 1%. The CBO also forecasts a recession plunge to the tune of -1.3% of GDP the first half of 2013 and only 0.5% GDP growth for the year.
That ain’t good all the way around, folks.
We could strangle every penny out of the ultra-rich and fall off the fiscal cliff without a single penny of new spending and it can’t close the budget gap.
Lehrer didn’t ask and the candidates didn’t talk about the fiscal cliff. That was a huge oversight. Instead we heard pie-in-the-sky proposals lacking substance from both candidates.
But you can bet the farm the fiscal cliff is all that is talked about after the election.
The talk won’t be pleasant, either, and campaign promises will quickly fade into oblivion.