Winterset; Plan B fails and the financial cliff approaches; and the world has not ended.

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View 754 Friday, December 21, 2012

WINTERSET

I am pleased to tell you that we have passed both dawn and noon local time in the Mayan palaces, temples, and pyramids in Yucatan, and the world does not seem to have ended. Edgar Cayce predicted the rise of Atlantis with resulting tsunamis creating disasters on the Atlantic coast, and some time later – I’d have some warning – on the Pacific coast. I am pleased to say that so far there is no sign of that happening. Alas, Cayce wasn’t so exact as he might have been, and the rising of Atlantis may not happen until the opening of the New Cycle.

Tomorrow morning begins a new Long Count cycle under the Mayan Long Count calendar. Each cycle lasts 1,366,560 days. The Romans used to have the Secular Games (you see remnants of them in Catholic Jubilee years) which by law were “something no living man has seen, and no man living will see again.” I think a 1,366,560 day cycle qualifies.

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The Republican Plan B which would halt the tax rise (average of $3500 annually per household) in 2013 for everyone making under $1,000,000 a year, but would allow the rate for those making a million a year to revert to the previous level before the Bush Tax Cuts could not get enough Republican votes to pass. It was doomed in the Senate and President Obama had said he would veto it, but the Speaker apparently thought he had enough votes to get it through the House.

The plan was to present the coming tax crisis as the Democrats’ fault for rejecting Plan B.

The Club for Growth, a tax cut advocacy group which preceded the Tea Party and is not a part of the Tea Party movement, had this to say:

“Like many of you, we at the Club have been watching the ongoing debate over the “fiscal cliff” closely. A brief reminder of how we got here: President Obama and Republicans in Congress agreed to a 2-year extension of the Bush tax rates two years ago, and then pushed through a deal to raise the federal debt limit last summer that created “sequestration” or automatic spending cuts if a so-called “super committee” couldn’t reach a deal on deficit reduction. The combination of tax increases and spending cuts set to happen at the beginning of January 2013 is a culmination of these two deals in what is now known as the “fiscal cliff.”

The Club opposed the August 2011 debt limit deal because it raised the debt ceiling without structural reform (like a Balanced Budget Amendment). We firmly believed that Congress would never allow sequestration to happen, and that all we’d be left with is trillions in new debt.

Earlier this week, after publicly putting tax increases and yet another increase in the debt limit on the table during negotiations with President Obama, House Speaker John Boehner announced that he would put forward a proposal to raise marginal income tax rates, as well as rates on capital gains and dividends. He called this anti-growth tax increase “Plan B.”

Thanks to members of the House, elected with Club PAC support, the Plan B tax increase was defeated. Fiscal conservatives revolted, and Speaker Boehner was forced to pull the bill. The Speaker even tried to “buy” votes by including spending increases that broke the sequestration deal (just as we predicted).

Lawmakers now need to focus on the long term pro-growth solutions to grow our economy and reform entitlements instead of their myopic concerns of how polls will blame them tomorrow, next week, next month, or ahead of the next election. The standard by which we should measure legislation is not whether it generates revenue to the government. Instead, the paramount consideration should be whether it promotes growth and reduces the size of government.

The Club will continue to closely monitor the progress of Congress and urge Senators and Representatives to find a pro-growth solution to the fiscal cliff. Stay tuned.”

The Republicans now seem determined to allow the US to go over the financial cliff, since it is unlikely that any Republican Bill that has any chance of passage in the House will be acceptable to the Democrats. It is not clear whether the Democrats can concoct a bill that could attract enough Republican votes to pass, but it is not impossible.

The “financial cliff” that will take effect on January 1 is the reversion to the Clinton era tax rates before the Bush tax cuts, and the sequestration of funds that automatically takes place due to the Republican/Democrat compromise bill that raised the debt limit ceiling. The Act makes many drastic cuts in Federal spending – actual cuts, not merely reductions in planned increases – but does not affect Federal employee pay or pensions. It makes large cuts in military spending, but not in military pay. Medicaid, Social Security, and veteran benefits are not affected. There are those who say that blanket cuts in Federal spending would be a Good Thing.

Note that the Federal Zero Interest Rate policy is not affected; this policy has enormous effects on investment strategies. Do note that everyone who holds cash is subject to a 2.5% tax on total cash holdings (including money in checking accounts) and in general the return on savings accounts doesn’t cover inflation either.

The financial cliff includes taxes on medical devices; it is not clear why pacemakers, crutches, splints, ankle braces, replacement knees and hips, and so forth deserve a special tax and should be made more expensive. Since a great deal of the cost of such devices is borne by Medicare and Medicaid, and thus the tax is paid by the Federal Government, the effect is a rise in costs for those covered by private insurance or by their own bank accounts; which may in fact be the purpose of the tax, which seems to be inserted by those who favor increased government control of medical care.

Once we go over the cliff, the Democrats will propose “tax cuts for the middle class” and will probably gain a great deal of credit for having done so. They repeal the Bush tax cuts and later come up with Obama tax cuts. The Republicans do not seem to have made many political gains from being responsible for the Bush Tax Cuts (which the upcoming Obama Tax Cuts will probably not match – he wants more revenue, and it’s easier to get that from the middle class) but it is likely that Obama will get a lot of credit for his. So it goes.

Of course the Senate has not passed a budget for years. It will be interesting to see if it can do so.

Under the Constitution no money can be drawn from the public treasury except through a law that originates in the House of Representatives and which has been passed by the Senate.

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The NRA position is that “the only thing that stops a bad guy with a gun is a good guy with a gun.”

It hasn’t said much about who the bad guys and who the good guys are. King George and Lord Germain undoubtedly had different ideas from those of Samuel Adams and George Washington.

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And when we disarmed they sold us
And delivered us bound to our foes…

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It is evening and the world has not yet ended. I suspect most of us will still be here tomorrow. The days will begin to be longer, and another year begin. Or another Long Cycle if you are a Mayan astrologer. Happy New Year.

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I continue to point out that if we took $10,000 from each of the 2% of Americans every year, that would amount to $62 Billion a year; about the amount the US borrows every month. Not insignificant, but also not likely we can get that much more from people already paying taxes at the current rate.

 

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