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Wednesday, January 2, 2013

It’s just the first bite of the apple

My goodness, you would've thought that the deal that was made to prevent us from going over the fiscal cliff was the last chance at legislating.  This morning Joe Scarborough was ranting and raving because for the first time in over 20 years, Republicans raised taxes.  According to Grover Norquist, Republicans lowered taxes but try convincing those who make over $450,000 next year when they get their  tax bill.  Joe went on and on about Paul Ryan voting for a bill (without tax cuts) that will add $4 trillion over the next decade. He was so mad that he said Ryan voted for the $7 trillion Medicare prescription bill a few years ago, so he stripped him of his deficit hawk title.  Joe Scarborough is one of those libertarians / conservatives who think republicans should just be reforming the entitlements and reducing the size of government; nothing else.

For the average Americans, they get to keep their credits for the next five years, so they can plan accordingly.  Economists have told us that business wants certainty, this bill gives them that, so hopefully we will stabilize the markets and increase consumer confidence. American workers will see a 2% reduction in their paychecks because the Social Security payroll deduction rate went back to 6.2%. Two million unemployed Americans got a one year extension of unemployment benefits.Neither party got all they wanted but that's what compromise is all about.

Ricci Ware, radio host for San Antonio's KTSA radio, said liberals were walking around with their chest out because they stuck it to the rich man. He also said that we were headed for a socialist agenda. The libertarian / conservatives are angry because they lost the argument about tax cuts paying for themselves and the hideous thought of ever raising taxes. That small group cannot win national elections on two goals: reducing government and reforming entitlements. We do have to reform entitlements and reduce government, but we have to take a balance approach, and the goal should be efficiency because it's obvious people do not want to give up Social Security and Medicare.

There are two big battles just around the corner: raising the debt limit and the sequester cuts. The president said that he won't partake in a battle to raise the debt limit to pay the bills' Congress agreed to make.  I guess that he could veto the bill and make the Congress pass it with a 2/3 vote, which is virtually impossible.  The leverage on the debt ceiling belongs to the GOP because they have proven that our credit rating and an unstable world financial condition takes a back seat to lowering our deficit and debt. The GOP will hold up other projects President Obama wants to undertake like illegal immigration comprehensive reform, infrastructure, energy policies, gun control and unemployment.

There's only one way to avoid the unnecessary 11th-hour  decisions our Congress is undertaking.  We need a grand bargain to reform the entitlements' minus Social Security because the latter does not increase the deficit, and it's in pretty good shape for right now.  That could be a standalone bipartisan commission fix.  We mustn't forget defense department waste, and we shouldn't get fixated on today's numbers because that will change once our economy starts to pick up.  We also have to factor in us leaving Afghanistan.  We can also cut out several loopholes but keep our progressive tax system.

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