Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Bush Tax Cuts

CBO Director: U.S. Accelerating Toward Economic Cliff

Congressional Budget Office Director Doug Elmendorf testified on Wednesday before the House Budget Committee about the federal government’s “Long Term Budget Outlook.” His office just released its latest study which showed two scenarios: one bad, the other worse.

Said Elmendorf:

It is not possible to keep taxes at their [present level] and keep the laws unchanged for Social Security, Medicare and Medicaid…

It is possible to keep taxes at their [present level] but only by making substantial cuts…in [those] large entitlement programs…

Alternatively, it is possible to keep…[those] large entitlement programs unchanged but only by raising taxes substantially on a broad group of Americans…

Even if spending on…other programs [outside the entitlement programs] fell to a smaller share of GDP than we’ve seen at any point since World War II, debt would still be on an unsustainable upward trajectory…

That’s what is facing Congress as 34 Senators and 435 members of the House are deep into their reelection campaigns. And all that Congress is likely to do is use Elmendorf’s comments and his office’s analysis as fodder for their constituents to help them keep their jobs.

A spokesman for likely Republican presidential nominee Mitt Romney said,

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Congressional Budget Office Predicts Recession

WASHINGTON - JANUARY 26:  The Congressional Bu...

The latest report from the non-partisan Congressional Budget Office (CBO) released on Tuesday said that if the country falls off the “fiscal cliff”—variously also called “taxmageddon”—it will likely enter a new recession. With the ending of the Bush-era tax cuts, the termination of extended unemployment benefits, the reimposition of the payroll tax rates back up to 6.2 percent from the current 4.2 percent, and the “sequester” cuts in government spending demanded by the agreement that Congress hammered out last summer in order to raise the debt ceiling, the CBO predicts that the country’s Gross National Product (GNP) will go negative for at least two quarters, which is the classic definition of a recession.

But, adds the CBO, if Congress does nothing, the longer-term benefits could be significant: a lowering of the annual deficit by about $600 billion in the first year, and lower deficits in the out years. This would reduce the danger of spiraling interest costs on the $16.4-trillion national debt along with a lower risk of further credit downgrades of the government debt by various rating services. In other words, according to the CBO: pain now or pain later.

If, as is likely, the Congress just simply sits on its hands and waits until after the November election or January 20 when the next Congress takes over, the problem just gets worse. As the CBO notes: 

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Boehner Fires First Salvo in Taxmageddon Wars

U.S. President is greeted by Speaker of the Ho...

House speaker John Boehner decided on Tuesday to fire the first round in the coming battle to deal with the huge tax increases taking place after the first of the year (“Taxmageddon”) by setting the terms for the debt ceiling debate. In a speech at the Peter G. Peterson Foundation’s 2012 Fiscal Summit in Washington Boehner said that any discussion would revolve around his “Boehner principle”—every dollar of additional debt increase for the federal government must be matched by an equal or greater reduction in government spending.

Said Boehner:

When the time comes, I will again insist on my simple principle of cuts and reforms greater than the debt limit increase. This is the only avenue I see right now to force the elected leadership of this country to solve our structural fiscal imbalance…

Just so we’re clear, I’m talking about real cuts and reforms—not these tricks and gimmicks that have given Washington a pass on grappling with its spending problem…

Previous Congresses have encountered lesser precipices with lower stakes and made a beeline for the closest lame-duck escape hatch. Let me put your mind at ease. This Congress will not follow that path, not if I have anything to do with it.

Democrats immediately fired back. White House spokesman Jay Carney called Boehner’s remarks as inviting brinkmanship similar to that last summer that resulted in an increase of the debt ceiling along with some future spending cuts. Said Carney: 

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$5 Trillion Tax Hike Coming

Barack Obama addressing a joint session of Con...

Back in February when the Congress voted to extend the payroll tax “holiday” to the end of the year, the Washington Post was the first to notice the tsunami of tax increases coming next year. But then Lori Montgomery began to add up all the other taxes that will increase on January 1, 2013, and called it “Taxmageddon.”

Here is a partial list of taxes that will increase unless Congress intervenes:

  • The 2001 and 2003 Bush “tax cuts” expire
  • Taxes on investment income
  • Estate and gift taxes
  • Income taxes
  • Marriage penalty returns
  • Child credit drops
  • Taxes on first $8700 of wages increase by 50 percent
  • Payroll taxes go from 4.2 percent back to 6.2 percent

But that is only a start. The Heritage Foundation did an in-depth analysis of all the tax increases scheduled for next year and found that Lori forgot some:

  • The Alternative Minimum Tax (AMT) will increase in size and reach
  • Five new Obamacare taxes will start
  • Some 50 “tax extenders” will go away
  • Small business owners can no longer write off business equipment purchases immediately

Adding them all together, the total is $500 billion. And that’s just in 2013. Over the next decade, the tax increases will exceed $5 trillion.

The effect of this tidal wave is already having a dampening effect on the economy. Curtis Dubay, the author of the Heritage study, wrote:

Families, businesses, and investors need to know how much tax they will pay in the future before making important economic decisions. The uncertainty caused by Taxmageddon means they are stuck in neutral while they wait for President Obama and Congress to act. This is slowing job creation and stopping many of the millions of unemployed Americans from going back to work.

Sucking half a trillion dollars out of the economy is going to have a severe negative impact on growth. Mark Zandi of Moody’s Analytics estimates that the nation’s GDP (Gross Domestic Product) would be reduced by at least

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Obama Economic Recovery Still Underwater

President Barack Obama signs the Tax Relief, U...

For proof that the Obama “recovery” remains unimpressive compared to previous recoveries, Cato Institute scholar Dan Mitchell gathered evidence from a number of sources to make his point.

President Obama promised that at this point in the recovery unemployment would be down to six percent, but it remains stubbornly above eight percent if one believes the government numbers. At least five million people who lost their jobs in the recession are still unemployed or underemployed. The number of Americans living below the poverty level has set a new record. Government spending is virtually out of control with annual deficits now admitted to be above $1 trillion for the foreseeable future. Higher taxes are coming unless the Bush tax cuts are somehow permitted to remain in force. And the housing market is still looking for a bottom.

But according to President Obama everything is coming up roses: More than three million jobs have been created in the past two years and the Dow Jones Industrial Average just exceeded 13,000, nearly doubling from under 7,000 in March 2009.

Thanks to the Minneapolis Federal Reserve’s interactive website, the Obama recovery can easily be compared to (and contrasted with) 10 previous recessions all the way back to 1948. Whether looking at jobs or at economic output, the performance under Obama has lagged behind each of the previous recoveries very significantly. As noted by Mitchell, “Under Obama’s policies…we’ve just barely gotten back to where we were when the recession began…[and] the jobs chart is probably even more discouraging…. [It] is still below where it started.”

On February 2, 2012, Phil Gramm and Mike Solon wrote in the Wall Street Journal:

Never before in postwar America has…employment still been lower four years after a recession began….

If in this recovery our economy had grown and generated jobs at the average rate achieved during the 10 previous postwar recessions…13.7 million more Americans would be working today….

President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today…some 16.9 million more Americans would have jobs.

The negative impact of the Obama administration’s policies is also evident when America’s economic performance is compared to that of

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Obama’s Tax Plan Neither Simplifies Nor Reduces

Tax

President Obama’s tax plan announced yesterday claims to simplify the tax code and make it fairer. This being an election year it is more likely his proposal is designed to attract votes instead of Congressional approval.

His plan proposes to reduce the top corporate income tax rate from 35 to 28 percent in exchange for eliminating some “loopholes” placed in the tax code in the past to reward cronies, promote public policy and misdirect investment. But as Danielle Kurtzleben wrote, “How effective the proposal might be is a matter of perspective.”

If one is a tax attorney the tax plan could reduce his workload as a lower tax rate, if it worked, would reduce somewhat the incentive to find so-called tax shelters. It might cost less to pay the lower taxes than hire accountants to find ways around them. As Thomas Lys, professor of accounting at Northwestern, keeping tax rates where they are means that “We’re not better off, but lawyers and accountants are better off, because they make money on creating these monsters.”

If one owns a company that invests heavily in research and development, he will like Obama’s plan to expand some of his tax credits. And his plan to limit manufacturers from paying more than an effective rate of 25 percent will be music to those most likely to contribute big bucks to keep Obama in office.  Steven Schier, a political science professor at Carleton College, said “I really don’t think that a lot of businesspeople are going to be changing who they support based on Obama’s new proposal. But what it may do is…allow him to raise more money from people in the business community who are already sympathetic to him.”

His proposal to reduce corporate rates will likely be perceived as “pro-business,” offsetting his increasingly strident anti-capitalist behaviors over the last three years. As Schier put it, “This will position him better to make that spiel that he is not a wild

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CBO Report: U.S. Deficits “Unsupportable”

OBAMACARE WATCH:.....CONGRESSIONAL BUDGET OFFI...

In the summary of its “Budget and Economic Outlook” published on Tuesday, the Congressional Budget Office (CBO) noted the supportability of deficit spending even under its “alternative” analysis. Noted the CBO: “Even if the fiscal policies specified by current law come to pass, budgetary challenges over the longer term remain—and the challenges will be much more acute if those policies do not remain in place.” It added:

Under both CBO’s baseline and its alternative fiscal scenario, the aging of the population and rising costs for health care will push spending for Social Security, Medicare, Medicaid, and other federal health care programs considerably higher as a percentage of GDP. If that rising level of spending is coupled with revenues that are held close to the average share of GDP that they have represented for the past 40 years (rather than being allowed to increase, as under current law), the resulting deficits will increase federal debt to unsupportable levels.

In non-economic terms, then, the CBO is saying that no matter how one looks at the numbers, the United States is headed for disaster.

Using assumptions that current law remains in place—with the Bush tax cuts disappearing—revenues in 2013 and beyond will increase by an astonishing $800 billion, and yet even that enormous tax hike isn’t enough to close the gap between expenditures and taxes. The CBO even took into account that inflation will drive peoples’ incomes into higher tax brackets, subjecting more of their taxable income to higher rates of taxation, and still that wasn’t enough. In that “steady-state” scenario the national debt, currently pushing $16 trillion, would

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Latest Economic Surveys Show Little Optimism

South façade of the White House, the executive...

The Republican Small Business Committee reported on November 8 that small-business optimism “remains extremely low,” and that business owners “simply are not hiring because they are pessimistic about consumer sales, the nation’s economic climate, and the amount of regulations to comply with.” Committee Chairman Sam Graves (R-Mo.) added, “The overall mood of the nation’s job creators is still at historic lows. The [Optimism Index of the National Federation of Independent Business] shows that over the next three months, only 9 percent of small business owners plan to increase employment [while] 12 percent plan to lay off workers. These numbers are…worse than the previous two months.”

NFIB’s Optimism Index has shown precious little change going back to January of 2009 and is matched by the University of Michigan’s Consumer Sentiment Index, which noted that “more households reported that their finances had worsened rather than improved for the 48th consecutive month [and that] just

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Obama’s Never-Ending Flow of Red Ink and Economic Fallacies

Warren Buffet

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Last week the President introduced his deficit reduction plan by saying that it would start to pay down “the big pile of IOUs” the government has issued in order to pay its bills, through a combination of spending cuts and tax increases. He asserted, “We have to cut out what we can’t afford [in order] to pay for what really matters. We can’t just cut our way out of this hole. It is going to take a balanced approach.” And to make his point clear, he declared,

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Debt-Limit Deal’s Trojan Horse: The “Special” Committee of 12

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The debt ceiling is to rise initially by $900 billion under the Revised Budget Control Act of 2011. And then, the debt limit is to rise again by either $1.2 trillion or $1.5 trillion depending upon how successful the 12-member Joint Committee of Congress is in finding sufficient cuts in government spending to avoid a “trigger” that would do the cutting automatically. The committee will be made up of

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Debt Ceiling Crisis: Putting Things Into Perspective

WASHINGTON - JUNE 22:  U.S. Sen. Rand Paul (R-...

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The compromise bill that emerged Sunday night from behind closed doors is being loudly trumpeted in an attempt to persuade recalcitrant conservatives in both houses to vote for something—anything—in time to avoid the August 2 deadline.

A careful analysis of the ultimate compromise bill yields some important conclusions. First of all, there is nothing in the law or statutes that

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Obama Budget Sleight of Hand

Of all the explanations, statistics, projections, and conjecture about the Obama administration’s new budget, nothing has had the impact of this simple graph in showing the assumptions, misstatements, and downright falsehoods that are required to “make the numbers work.”

The source for this very telling graph is the Obama administration’s Office of Management in budget. Below is the graph, as it appears in the Wall Street Journal.

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Federal Deficit Outrage

A lot of digits

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Back in August of 2010, the Congressional Budget Office estimated the federal deficit for 2011 to be $1 trillion. On Thursday, after revising its assumptions, the CBO announced they missed the mark by $500 billion.  The deficit number has been revised upward to $1.5 trillion, and could bring the national debt to $20 trillion by 2021.

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The 112th Congress: Real Substance, or Just Smoke?

Minority Leader John Boehner

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When the House of Representatives announced new rules for the Congress that convenes on Wednesday, the mainstream media immediately called them “strict” and even “unprecedented.” The first new rule to take effect will be the reading of the Constitution of the United States and its 27 amendments on the floor of the chamber.

Incoming Speaker of the House John Boehner told ABC News: “The American people want a smaller, more accountable government—and that starts with respecting the Constitution. That’s why we will read it on the floor next week. It sends the clear message that starting on January 5th, the House of Representatives will be the American people’s outpost in Washington, D.C.

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Obama/CEO Summit: Sweetness and Light

President Barack Obama listens to Safeway Pres...

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Despite being verbally abused and legislatively hamstrung ever since the start of the Obama administration, those CEOs arriving at the Blair House Wednesday for another Summit meeting with the President seemed in good spirits. In a pre-announcement, White House spokeswoman Jen Psaki, was all smiles:  “[This] working session is an opportunity for the president to continue building strong partnerships in the business community.”

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Counting the Costs of Unemployment Insurance

Bismarck ca. 1875.

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As part of the backroom deal to extend the Bush tax cuts for another two years, the GOP gave the progressives an extension of one of their favorite welfare-state building blocks: unemployment insurance—which will undoubtedly add to the long lines of suffering Americans in our country.

Otto von Bismarck, the “Iron Chancellor” of Germany in the 1880s, first introduced the concept of state-mandated unemployment insurance. It was then forcibly introduced in the United States during the Great Depression under the Roosevelt administration and has been expanded regularly ever since. In fact, the proposed extension would be the sixth such expansion since June of 2008.

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States’ Budget Shortfalls: Pressure from Above and Below

Recovery.gov

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With all the attention being focused on extending the “Bush tax cuts,” granting additional unemployment benefits, and the arrival in Washginton of newly minted congressional Representatives and Senators, a major piece of the fiscal puzzle has been ignored altogether: states’ increasingly pressured budgets for next year. As noted by the Center on Budget and Policy Priorities (CBPP), the Great Recession “has caused the steepest decline in state tax receipts on record.”

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Who is Mike Pence?

Mike Pence, member of the United States House ...

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In an early straw poll, Rep. Mike Pence (R-Ind.) was the choice for presidential nominee in 2012 over such conservative luminaries as Sarah Palin, Mike Huckabee, and Mitt Romney. Capturing 24 percent of those voting at the Family Research Council’s Values Voter Summit this past weekend in Washington, DC, Pence relegated even Senator Jim DeMint to a barely visible 5 percent.

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Reid’s Lame Duck Session: Just Mopping Up?

Photograph of a toddler holding a mop with a b...

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Last Tuesday, September 7, when Senate Majority Leader Harry Reid (D-Nev.) said he intended to focus the current lame duck session on “mopping up” leftovers from the previous session, these included a national renewable energy policy, a small business jobs bill, and another stimulus bill. Reid said, “We are still going to be in Congress, working, after the election…There are things that we have to do. There is a lot of mopping up to do.” Reid failed to mention one small item that his lame duck session is determined to ignore altogether: the Bush “tax cuts” which are set to expire without Congressional action by the end of the year.

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Stossel, Greenspan, and Ayn Rand

Cover of "Capitalism: The Unknown Ideal"

Cover of Capitalism: The Unknown Ideal

When John Stossel of Fox Business Network wrote his recent “Memo to Alan Greenspan” column, he recounted many of Greenspan’s failings while Chairman of the Federal Reserve, including especially Greenspan’s relentless expansion of the money supply and lowering of interest rates that set in motion the housing bubble that burst in 2007.

But Stossel got one part of his memo wrong.

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2018 Bob Adelmann