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A billion here and a billion there!
Posted By Dan Mangru On 12/17/2010 @ 8:31 pm In Commentary,Money | Comments Disabled
One key premise of negotiation is to frame the deal within the context that everyone wins. Everyone wants to feel that they got what they wanted. Nobody wants to be a loser.
Well, today in Washington, D.C., there are no losers, just politicians.
You see, Republicans wanted to extend the 2001/2003 tax cuts for all Americans. They believe that lower taxes are key to running an economically viable nation.
That’s not altogether a bad idea.
Democrats feel that increased spending and lower/middle class tax rebates are the way to get our struggling economy back on track.
That’s debatable, but there are some good uses for government spending. The sad thing is that those cases are few and far between.
For instance, cyber security and space exploration are examples of good government spending. Having our national databases hacked by the Chinese and relying on the Russians or the Chinese for a ride up to the space station … not such good ideas.
But I digress. I mean why have things like cyber security and a space program (which is being phased out by the Obama administration) when you have so many other important things to spend on in a new stimulus … err, I mean…Tax Cut Bill.
You see, like Rahm Emanuel says, you never should let a good crisis go to waste. Here America was in crisis facing a massive tax hike in the middle of a recession. Congress literally had to act now as the holidays were approaching and the tax hikes ready to rear their ugly head come January 1.
This was an opportunity. Sure, Congress could have just passed an extension of the tax cuts. But that would have been too easy.
Congress also could have followed the law and passed a dollar in spending cuts for every dollar in tax cuts per the Reagan-era PAYGO law. But that would have been too responsible.
So what did our friends in Congress decide to do? They decided to pass a win-win deal for Democrats and Republicans.
The Republicans wanted an extension of the tax cuts no matter what. The Democrats were happy to give that to them at a price.
In the end, an extension of some tax cuts ended up being a $990 billion debacle.
Yep, that’s right, $990 billion (although I presume that it was strategically valued at $990 billion so that it wouldn’t be over the magic $1 trillion mark, but then again has there ever been a government budget figure that wasn’t underestimated?). This bill is even larger than the $787 billion Obama porkulus bill.
So what’s exactly in this $990 billion bill? Necessary items for the growth of our nation, of course.
Some of the goodies in our beloved tax cut bill are the railroad track maintenance credit, a 7-year recovery period for NASCAR raceways, accelerated depreciation for business property on an Indian reservation, tax credits for mine rescue training, tax incentives for investment in the District of Columbia, and special tax breaks and subsidies for the rum industry.
What’s really been ailing our economy is that rum prices are just too high. Why should we pay $20 for a bottle of Capitan Morgan? That’s ridiculous.
Well, good thing that the new tax cut bill addressed that with a $235 million subsidy for rum makers in Puerto Rico and the Virgin Islands.
Whew! Crisis averted.
Yet, our friends in Congress didn’t stop there.
It turns out that the ethanol lobby didn’t feel like they were getting their fair share, so they got $6 billion.
Technology companies such as Microsoft and Boeing wanted in on the action, so they got $6 billion too.
All in all about $55 billion of goodies handed out to friends. Ah, the change that we can believe in. Apparently, the only thing that really changes is which party to blame this time.
It gets even worse. Had Congress just passed the income tax cuts ($359 billion), Alternative Minimum Tax Indexing ($140 billion) and the Estate Tax Changes ($68 billion), the total cost of the bill would have been $568 billion as opposed to $990 billion.
So how does the bill almost double in size?
Well, throw in about $56 billion in unemployment payments for people who have been out of work for up to 99 weeks, add in $120 billion of a payroll tax holiday, $21 billion of refundable tax credits, with a $146 billion dash of business expensing writeoffs, and a sprinkle of $80 billion so-called business tax extenders (i.e. major government subsidies for green technology), and you can start to see how the bill becomes so big.
Now for the $64,000 question: how do we pay for it?
Well some of you might suggest that we cut existing spending to pay for new spending.
While that might seem logical, you must remember this is Washington, D.C., that we’re dealing with.
Why do things like cut spending, and balance the budget, and pay down the national debt, when we can crank up the old printing press?
You guessed it, Obama is just going to put in a call to his buddy at the Federal Reserve Mr. Bernanke, and tell him to oil up the machines because he needs a fresh trillion dollars printed up ASAP.
Don’t you just wish that you could fire up your HP printer at home and just start printing money? When the power bill comes every month, don’t worry about it. Just make sure that there is ink and paper in the printer and you’ll be just fine.
While that seems preposterous to you and me, this is the real power that our president has, and he’s teaming up with Congress to put our country further in debt.
Keep in mind, because Obama “compromised” by extending the Bush tax cuts, he’s going to expect the Republicans to “compromise” by extending the debt ceiling.
Currently, the U.S. is only legally authorized to have $14.3 trillion of debt. However, that can be changed by an act of Congress. And when President Obama reminds the Republicans that their tax cut bill was the trillion dollars that put them over the edge, the Republicans will cave in to his demands to allow the nation to go trillions more in debt.
How high can the ceiling go?
It just depends how high Obama is willing to ask. Maybe he’ll go for just another trillion. If he’s daring maybe he can push the debt ceiling to $17 trillion maybe, even $19 trillion. After all, he is the Compromiser-in-Chief.
So in the end every political party got what they wanted, a win-win deal. Republicans got tax cuts and Democrats got more spending.
Yes America, only in Washington, D.C., can we make a deal that not only increases spending but decreases tax revenue. Simply put, we have to pay for more with less.
Hopefully, when the new class of representatives and senators comes into office next year, we will have a change for the better. Maybe the threat of the Tea Party can keep newly elected politicians honest.
For our sake, I hope so.
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