This is an example of politics at its worst. Pres. Obama has repeatedly blamed the Republicans. He has given one major speech and is apparently planning on another today. The gist of these speeches is, "We're doing everything we can, but the big, bad Republicans won't let us fix this." He talks about how far they have come to meet the Republicans in the middle, but how the Republicans are squabbling over $100,000. He makes it all sound so petty.
Let me ask you this, Pres. Obama: What is it exactly you have compromised on?
The major sticking point is that Pres. Obama wants to raise taxes on any households making more than $250,000.
Republicans understand that people making over $250,000 are the individuals that create small business and invest in business and keep the economy running. For anyone who is reading this, how much money have you invested in a company and/or the stock market? In other words, if the economy was dependent on you, what would be happening with your money?
I know that whenever I receive a large chunk of money, I do one of two things: 1) I put it into savings, or 2) I pay off debt. Putting money into savings is one of the worst things for the economy, because you have now pulled those dollars out of circulation. They aren't buying anything. They aren't growing any business. If you pay off debt, you are paying off something that has already been purchased, and it also has little impact to help the economy. What keeps the economy going is money circulating. By pulling money from those who actually do invest and start businesses and buy large quantities of stuff, you slow the economy.
Think of it this way. I'm going to see a movie this afternoon. What if everybody decided they couldn't afford to see anymore movies and that they would put that money into savings instead. How long would it take for the movie theaters to go out of business? One month? Two?
Republicans are fighting on principal, that raising taxes on those who keep the economy moving and growing is the worst possible thing you can do in a slow economy. They want instead to keep the same tax rates or even lower them to encourage growth in the economy. What about the problem of the deficit and the national debt? Republicans want to fix it by reducing spending -- By living within the government's means.
Keynesian economists (who are all liberal) argue that, when money is pulled from those making $250,000 or more, that the government spends it. So it's still going into the economy. And, in fact, they argue that it actually goes further, because there is no tax on the money like there would be in a corporation. It's called the Government Spending Multiplier Effect.
This might be true if the government ran anything efficiently, but unfortunately they do not. Let's say the government raises $1 trillion through the new tax increases, and then they buy a $1 trillion candy bar from a factory that employs one person, and you eat it. The individual that sold them the candy bar makes a lot of money, but it goes to that one individuals. The individual will likely invest it and some will get distributed back into the economy. But how much money went to waste in that exchange by overpaying for goods? What happens when you give $535 million to Solyndra to manufacture green products and they go out of business? What happens when you bail out GM and then push them to emphasize green vehicles like the Chevy Volt that there is no demand for, and the product fails?
The biggest flaw in Keynesian economics is that there is no consideration for what happens to productivity when you hand people money rather than make them work for it. No consideration for what happens in the market when you don't let the natural laws of supply and demand dictate what is produced.
If you look at all the money that was wasted in the stimulus and all the money that is going to be wasted in Obamacare, it is a significant amount. That money would simply be better served in the hands of an entrepreneur or an investor (WHOSE MONEY IT IS IN THE FIRST PLACE!!! THEY EARNED IT!!!)
So Republicans made a major compromise from "Absolutely no new taxes" to "Okay, we will meet you halfway and allow a tax increase on those making more than $1 million." But that's not good enough. Pres. Obama pushed for $250,000 still and said he would not negotiate on that. He will "not put more of the burden on middle income families." (Ummmmm... How about a decrease in spending then? That would be a much more effective solution. Reduce the amount that everybody has to pay!)
So Democrats finally said, "Okay... We'll meet you halfway and go from $250,000 to $450,000." (Since when is $450,000 halfway between $250,000 and $1,000,000?) So that is their big sacrifice they are making, and they can't see how Republicans could be against that.
So now they are debating between raising taxes on incomes $450,000 or $550,000, which is the $100,000 they are describing.
Why not compromise to save the economy? Here is the dirty little secret: Pres. Obama wants to go over the cliff.
That way, he can raise taxes on everybody, and he can just blame the Republicans. Middle income families will see a significant tax increase, but he doesn't have to be the bad guy. He can have more money to spend on more government programs, and he can further increase his control over the American people. His major compromise is not to raise taxes to the 70% rate it was under Jimmy Carter, which he would like to do! He feels like he is giving up a lot, which is why he is probably dumbfounded with the Republicans.
Republicans are the sensible, thrifty group in the marriage, and the Democrats are the ones with 15 credit cards that are all maxed out, and they're asking if we wouldn't mind co-signing on another. Then, when we say no, they throw a fit and blame us for their financial woes.
Unfortunately, Republicans are too soft-hearted, and they will likely say "Okay, just this one last time..." and compromise to once again save the people of the United States from the Democratic policies. Raising taxes on those who keep the economy moving is an incredibly stupid thing to do in a bad economy, but it's even worse to raise taxes on everyone.
We've got about 10 hours left at the time I'm writing this. It'll be interesting to see what happens by the time the ball drops in Times Square. Hopefully Republicans can once again save this economy, despite the best efforts of Pres. Obama and the Democrats to destroy it.