Three quotes to whet your appetite, followed by the punch line from the president. House Republicans' latest "fiscal cliff" resolution package -- originally proposed by Democrat Erskine Bowles -- includes $800 Billion in new federal revenues, while lowering tax rates across the board. Democrats instantly rejected the idea, making a heavy play about "the math" not adding up. They've repeatedly contended that Republicans' plan to expand the tax base by closing loopholes, eliminating or capping deductions, and limiting credits cannot hit their projected revenue target. (1) White House Spokesman Jay Carney: "Magic beans and fairy dust."
(2) Senate Majority Leader Harry Reid:
“They’ve got to come [up] with some specific revenue,” Reid said of House Republicans. “It’s a simple question, as President [Bill] Clinton said, of arithmetic. Arithmetic. You can’t get from here to there unless you raise the rates. You can’t do it.”
(3) DNC Chairwoman Debbie Wasserman Schultz:
SCHULTZ: I mean there is no way mathematically, if you look at the Republican's proposal, that you can get to the kind of deficit reduction that we need to with preserving the middle class tax cuts by not increasing as the Republicans refuse to do the upper tier rates. And there's room for discussion, but that has to be part of the package.
BLITZER: So the 39.6 percent, that's not a red line?
SCHULTZ: As far as I know and the conversations I've had, the president has said there's room for compromise, but for the red line to be drawn in the sand by Republicans to say that an increase in rates on the wealthiest most fortunate Americans is not on the table is not fair and it's also going to make it so that we mathematically cannot get to the kind of deficit reduction that both parties know we need to --
BLITZER: Because they are coming up with a counterproposal, capping deductions, eliminating loopholes on wealthy people, raising revenue by $600 billion.
SCHULTZ: The math does not work...
(4) Over to you, Mr. President. July 22, 2011:
"What we've said was, give us $1.2 Trillion in additional revenues. Which could be accomplished without hiking taxes--uh--tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and--uh--engaging in a tax reform process that could have lowered rates generally while broadening the base."
So just last year, President Obama told the nation that hitting $1.2 Trillion in revenue enhancements (read: tax increases) was entirely attainable without "hiking tax rates." How? By doing the very things Republicans are now offering in order to raise just two-thirds of the grand total Obama said was feasible via those methods: Targeting loopholes and deductions, cutting rates, broadening the base. But when GOP leaders parrot the president's exact words from 2011 in their 2012 plan, Democrats greet the strategy like it's some terrifying form of mathematically-impossible medieval alchemy. Funny how times can change, even though math doesn't. And if it's details Democrats want, they can look no further than the president's bipartisan fiscal commission, which fleshed out how this sort of thing can be done. Parting thought: Since Democrats now profess to be obsessed with "the math," what's their answer to the basic arithmetic that reveals their preferred tax hike scheme would fund the federal government for about a week? And what about this math?
Nothing like that $8 trillion amount is available for the IRS to target. According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate taxable income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws. In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn't be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities. Some public officials and pundits claim we can dig our way out through tax increases on upper-income earners, or even all taxpayers. In reality, that would amount to bailing out the Pacific Ocean with a teaspoon.
This data is fortified by the president's own budget, which includes every tax-increasing goody and gimmick in his repertoire, yet never balances -- in the near- or long-term future. Indeed, even when offset by all of his tax hikes, Obama's spending proposals would add $9.5 to $11 Trillion to the gross national debt over a ten year budget window. The difficult truth is that nothing either side is seriously proposing in regards to the fiscal cliff even remotely resembles a serious solution to our big-picture debt spiral. I understand the concept of prioritizing and addressing one crisis at a time, but Democrats could at least spare us their sanctimonious drivel on "math."
UPDATE - I discussed the fiscal cliff on CNBC's Kudlow Report last night. During the segment, Democratic strategist Karen Finney claimed that "most economists say you can't get [to $800 Billion] just by closing loopholes..."
Was the president lying last year, Karen?