Why we're headed over the fiscal cliff
The GOP's effort to avoid raising taxes won't work without concrete spending cuts both parties can agree on.
What a chump I am. With the help of my colleague Matt Horween on Monday night, I went rooting around for ways to actually cut spending, something that many people talk about but few actually want to do. I did this because I am spending the morning in Washington, D.C., and I know that the tax hikes, while important, are being used by both sides to avoid concrete ideas for spending cuts.
Defense? Medicare? Social Security? What would these people do, concretely, to make the deficit smaller now? How about in the next two years? How would they do it better than the fiscal cliff would?
For example, look at Medicare. There are a whole host of ways to have people pay more into the system or to cut back certain procedures or to get the government to negotiate hard with the drug companies. There are real specifics that could be discussed. We could create some true competition by outsourcing the darned thing to a company such as Accenture (ACN) or IBM (IBM) to consistently check how hospitals and doctors are doing. We could exempt Medicare from legislation that requires quick payment in order to smoke out fraud.
But I think these all come under the "so-and-so slashed Medicare" concept that makes it so easy to vote people out -- even people with very solid seats.
Nevertheless, while I'm in Washington, I'll ask about what people are willing to cut and what kind of trade-offs that, say, a person like tax activist Grover Norquist is willing to make. If you give Norquist spending cuts, I imagine he will simply say they aren't big enough. If you ask him whether he would allow his congressmen and Senators out of the no-tax-hike pledge at a particular level of spending cuts, I imagine he would say something like this: "No, there is no level, because if you cut like you are supposed to do, then you don't need to raise taxes anyway. In fact, you can cut them, too."
Left out of the equation is that, eventually, someone has to buy the debt being issued by the U.S., because we can't seem to cut spending, and we won't raise taxes. The Federal Reserve isn't always going to be there to keep buying it.
What's so beautiful about Norquist's position and logic is that nobody wants to pay more tax and you can simply say no by voting for Republicans to take the pledge. It means nothing that there is actually some cost for government, because most people I talk to believe that government doesn't give people anything they need, and that it takes more than they want it to take. That's standard. It's an ineluctable, circular, beautiful position.
You occasionally hear about these people who say, "Look, I am not going to pay my taxes because it's illegal for the government to tax me."
We throw those people in jail.
But I believe that the beauty of the pledge is the illegitimacy with which it frames taxes. "Hey, we only need to tax because the government spends more than it should -- so if it spends less than that, we don't have to pay those taxes."
Of course, this circular bit of logic ignores the fact that the nation ran up $4 trillion in deficits fighting the Global War on Terror. Was that illegitimate? Was that something we didn't need, and therefore something we shouldn't have had to pay for? It wasn't all social programs that got us into this fix.
To me it seems the Republicans want to keep spending on defense no matter what, and the Democrats want to keep spending on Medicare, Social Security and other social programs no matter what. When it comes to the arguments here, the only real advantage the Democrats have is that they know it must hurt the Republicans to cut any defense at all -- and defense will get cut.
Nevertheless, in some ways Norquist's logic is more powerful than President Barack Obama's. The president campaigned on raising taxes for the wealthy, and he's sticking by that. Norquist doesn't want anybody to pay more tax. Moreover, so far it hasn't bothered him that the media is typecasting him as someone who just wants to protect the rich -- a caricature that has not resonated. I keep hearing in the media that he is finished, but when you watch him on my Mad Money show Tuesday, I am confident you will see a man who is just getting started.
While the president was recently elected and will be finished after his second term, in the next election the Tea Party people will target any Republicans who broke their no-tax-hike pledge by compromising. So they have more to lose than the president does -- which is why, alas, I think the U.S. is going over that darned cliff. We won't come back, either, until Norquist says it is OK to vote for a tax cut, even if it is only for the 98% -- provided that they immediately dig in on the debt-ceiling fight and again try to shut down the government.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long IBM.
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I guess filing Farm paperwork, and filing early; May get bigger bucks..??
But the Big Corporate Farms/Ranches, that do over a Million gross...Shouldn't get a dime.
They are the ones owned by investors, food companies and rich families..
And they have Accountants and Lawyers to apply for the subsidies.
If everytime Americans went shopping and had their bills double; Such as in the example earlier...
$107 in taxes on items totalling $100..I just can't picture many people buying much, and the possibility of a "black market" springing up...Or used items, bringing a premium..Avoiding the tax man..
Hello.....Garage sales and Victory Gardens.
Why dont we stop sending money over seas why don't we cut the pay of the senate and the congress why are we not cutting ther benefits and social security why due people get money out that have never pai in like SSI so many lazy people claim they are bipolar what a bunch of bull what about all the people living off of welfare its saposed to be for people on hard times so many welfare people have child after child to get more money all welfare has done is create crime look at all the big cities and ther all trashed
I sent an email to Boehner yesterday suggesting he
1. Detail out the loophole and special treatment tax changes the Republicans are willing to make.
2. Present cost cutting proposals.
3. Balance the above ideas with a tax cut for the middle class.
Time to get out of the crosshairs.
Final consumption sales tax only - no item or person exempt – When a family goes into a grocery store and buys $100 in groceries and the clerk adds $5 for local tax, $7 for county, $15 for state tax, $35 for federal tax and $45 to pay off the federal debt, the crap will come out of the American peoples head about the cost of government.
Then give the American people the right to directly decide what they are willing to buy through government, (by pass congress). Socialism, liberalism, high government spending will end. In 4 years the American people will reduce government spending by 35% and increase the productivity of our tax dollars by 400%.,
Final consumption tax would make America made products and services more competitive. Taking taxes off business will bring business, their money and jobs back to America. Also, if the fed were to make the (real) inflation rate between a deflationary .5% and 0% inflation foreign money would move to America and keep interest rates low in a free market.
In my opinion Norquist and President both do not understand the change taking place in the world and economy. Both are fools and ignorant.
Technology if not properly handled is going to create lots of dislocation. Technology does not allow us to think in terms of traditional economic theory. Value of specific goods or service can drop or rise without much notice. A sudden change in solar collection efficiency let us say 25 % collection efficiency can turn energy market upside down. A change in man's potency and bragging point in physiology that can be if easily increased it can change very dynamics of sex creating upheaval in a way we live. Ability to grow fruits in sand deserts can create havoc in fruit market.
There are three factors they are key:
(1) Dramatic reduction in birth rate among those who cannot afford or know how to raise babies
(2) Social acceptance of death at earlier age due to serious sicknesses that creates unproductive longevity can improve economic situation for everybody in any country
(3) Ability to keep people productively employed can create better society with less anxiety and more positive happier society.
To assume technology will solve all problem or will unlimited access to better health at affordable cost is not viable. The ratio of no productive years/productive years cannot be sustained at current level. We have to understand promise, viability and affordability of technology. One can go to Mars does not mean any one or even few will be able to go.
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