Jumping off the fiscal cliff and bouncing back towards peace and prosperity with bungee budgets!–Videos
FISCAL CLIFF, OH NOES!!
World’s Tallest Bungee Jump HD (Backwards)
Aussie tourist’s bungee cord snaps
Fiscal Cliff: What Republicans, Democrats Agree on So Far
Dan Mitchell Commenting on Republican Weakness in Fiscal Cliff Negotiations
Grover Norquist: Obama “Thinks Somebody Made Him King”
Peter Schiff: Many Other Cliffs Await the US Economy – CNBC 12/05/2012
“Grover Norquist confident Republicans will abide by no tax pledge” Grover Scares The GOP
Fiscal Cliff solution: Simpson-Bowles?
Fiscal Cliff GOP Plan Offered by John Boehner White House Rejects Plan
Obama – Finally An Aggressive Progressive?!
White House ‘Reluctantly’ Willing to Go Off Fiscal Cliff?
Obama On Rejecting GOP Plan: It’s Just A Matter Of Math’
Sen. Hatch: Obama’s “fiscal cliff” plan a “bait and switch”
Joe Scarborough Hammers Fiscal Cliff Offer: Was It Necessary For Obama ‘To Be So Provocative?’
Charles Krauthammer Fiscal Cliff Analogy: Obama Offer Worse Than Appomattox
Timothy Geithner ‘This Week’ Interview: Fiscal Cliff is in the GOP’s Court
Dr. Coburn on OUTFRONT with Erin Burnett Regarding Speaker Boehner’s Offer and Fiscal Cliff
Fiscal Cliff Hangout – Nov. 30, 2012
The Engineered Fiscal Cliff
Jumping off the fiscal cliff and bouncing back towards peace and prosperity with bungee budgets!
By Raymond Thomas Pronk
The year-end fiscal cliff time bomb of massive tax increases and huge spending cuts is ticking louder and louder.
On Nov. 29, President Barack Obama sent Treasury Secretary Tim Geithner to Congress to present his opening proposal to increase tax revenues by $1.6 trillion over the next 10 years, a possible extension of the temporary Social Security payroll tax cut and increased presidential power to raise the national debt without limit. Obama would support $600 billion in spending cuts including $350 billion from Medicare and other health programs.
However, Obama wants an additional $200 billion in new spending outlays for jobless benefits, aid for struggling homeowners and at least $50 billion for public works infrastructure projects—another stimulus package. In summary, Obama wants four times as much in tax increases as spending cuts. Obama’s so-called balanced approach offer was dead on arrival in the Republican-controlled House..
House Speaker John Boehner, R-Ohio, and other Republican leaders responded by sending Obama the GOP plan in a Dec. 3 letter that includes $800 billion in higher tax revenues over the next decade. The letter pointed out that Erskine Bowles, co-chair of Obama’s debt commission, recommended a balanced middle ground approach that included significant spending cuts as well as $800 billion in new tax revenue.
However, the GOP plan would keep the Bush marginal tax rates for all brackets, including those for higher income earners in place. The Republican letter pointedly said,
“The new revenue in the Bowles plan would not be achieved through higher tax rates, which we continue to oppose and will not agree to in order to protect small businesses and our economy.”
The Republican plan would also cut over ten years $600 billion from costly health care programs including Medicare, $300 billion from national defense and domestic programs and another $300 billion from other proposals including forcing federal workers to contribute toward their pension plans. The Republican plan would produce an estimated $2.2 trillion in savings over 10 years.
Neither the Democratic nor Republican proposals to avoid the year-end fiscal cliff would balance the budget in the next ten years. The Republicans as much as admitted this in their letter by stating, “This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform. Indeed, the Bowles’ plan is exactly the kind of imperfect but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs.”
The president after reading the Republican proposal letter, rejected the GOP plan out of hand because it did not increase the marginal tax rates on those earning more than $250,000, the majority of whom are successful business owners who create wealth, income and jobs.
The table below summarizes the failed 10 year record of both political parties in controlling government spending that have produced massive fiscal-year deficits and an ever increasing national debt.
Summary of Tax Receipts and Spending Outlays of the
United States Government for Fiscal Years 2002-2012
[in million of dollars]
|Fiscal Year||Tax Receipts||Spending Outlays||Deficits (+) or Surplus (-)|
|Source: Department of the Treasury, Final Monthly Treasury Statements of Receipts and Outlays of the United States Government for Fiscal Years 2002-2012, table 1.|
Neither the Democratic Party led by President Obama, Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi nor the Republican Party led by House Speaker Boehner, House Majority Leader Eric Cantor and Senate Minority Leader Mitch McConnell, are capable of balancing the budget of the U.S. government.
U.S. government budget deficits are financed or paid for by the issuing of debt in the form of Treasury bills, notes or bonds by the Department of the Treasury. The sale of Treasury securities results in an increase in the national debt and an increase in the interest that must be paid by the American people to those who purchase the Treasury securities.
The Federal Reserve, the central bank of the United States, has been artificially suppressing interest rates for more than four years, to near zero rates (.25 percent) for federal funds, money loaned overnight by commercial banks to each other. Once inflation or a rise in the general price level hits the economy, interest rates will quickly rise to market levels. The interest paid by the federal government on its Treasury securities will quickly double and triple to more than $750 billion per year.
Until the U.S. government lives within the means of the American people by balancing its budget, the economy:
(1) will grow at relatively low rates between 1 and 2 percent per year,
(2) have persistently high unemployment rates in the 8 to 10 percent range,
(3) and inflation or price increases will exceed 3 to 6 percent or more per year.
Economists describe such a situation as stagflation, a portmanteau of stagnation and inflation
Forget about the fiscal cliff. Focus on economic growth and job creation. Balance the budget.
A balanced budget is one in which total spending outlays equal total tax receipts. A budget deficit is one in which total spending outlays exceed total tax receipts. A budget surplus is one in which total tax receipts exceed total spending outlays.
Balance the U.S. government’s budget by Sept. 30, 2016, the end of fiscal year 2016, by cutting total government spending $250 billion or about 7 percent per year for four years until the budget is balanced or in surplus.
Federal government spending outlays would be capped at the following fiscal-year levels:
The Bungee Budgets
Balancing The United States Government Budget
By Sept. 30, 2016
Estimated Tax Receipts, Spending Outlays, Deficits, and Surpluses
[in million of dollars]
|Fiscal Year||Estimated Tax Receipts*||Estimated Spending Outlays**||EstimatedDeficits (+) or Surplus(-)|
|*Estimated tax receipts are based on the current Internal Revenue Code being extended for four years and increasing tax receipts of $25 billion per fiscal year.**Spending outlays are reduced $250 billion from the previous fiscal year.|
Extend the so-called Bush marginal tax rates for four years or until the current complex Internal Revenue Code and regulations are replaced by either a single flat income tax or a broad-based national consumption retail sales tax—the FairTax. The proposed bungee budgets for fiscal years 2013-2016 require leaders with courage, vision and wisdom to pass and implement them. The possibility of the above proposal being passed by Congress and signed into law by the president are slim and none.
Today the U.S. has a national debt exceeding $16 trillion and unfunded liabilities for Social Security and Medicare exceeding $63 trillion according to the latest report of the trustees of both programs. The unfunded liability is the amount the government has promised in benefits looking indefinitely into the future less the payroll taxes and premiums the government expects to collect.
The U.S. government’s national debt and unfunded liabilities now exceed $80 trillion or more than five times the total estimated U.S. real gross domestic product for 2012. The U.S. warfare and welfare state has already fallen off the fiscal cliff and is accelerating toward a default on its Treasury debt.
Yet the political theater in Washington, D.C., over the phony fiscal cliff crisis will continue into 2013. The American people deserve the leadership they voted for in November. Now the American people will pay the price as the economy heads toward another recession. The party is over. Happy New Year!
Raymond Thomas Pronk is host of the Pronk Pops Show on KDUX web radio from 3-5 p.m. Fridays and author of the companion blog http://www.pronkpops.wordpress.com.