Stop Falling on the Tax Cut Sword

To mix metaphors, Republicans are going to have to fall on some sword with this whole fiscal cliff jazz. All of us Conservatives would like to hold firm to not raising taxes. Reality it is, it ain’t gonna happen.

Deal with it. Give the President what he wants on a tax hike. Just give it too him. Be done with it.

Lest you think I am ok with raising taxes, I’ve stated a time or two that I am not a fan of it. Let me be clear on that point. Still, I will probably be called a blasphemer of sorts.

With our short term memory loss in tact, we continue: Divided.

Throughout the post-election fiscal cliff ordeal, Republicans have agreed on exactly nothing. The range of conversation swings from the ‘we look bad enough already, cave in’ to the ‘I will die on this field of ideological battles for no higher taxes’. For the record, my heart sides with the latter.

Still, we’ve made a demon out of any Republican whose considered negotiating. Stated American Majority Action’s Ned Ryun, “Speaker Boehner has been an abysmal failure as speaker, and his latest purge is the nail in the coffin for conservatives…Boehner has never won a negation battle with the White House or Senate—and he’s been nothing short of an embarrassing spokesman for the Conservative Movement. It’s time for him to go.”

If there is one thing Republicans have become good at, it is self-immolation. We as Conservatives have chosen a Battle of Poljana in a war that we just lost in November to Obama. Like it or not, we cannot play our hand as if we can actually take our toys and go home. We simply cannot get everything we would like.

It would be nice but it’s not happening. It is the result of a lost election. We can no longer live off the fumes of our 2010 landslide.

What this means is that we negotiate. This also means that we lose something in the negotiations. Instead of falling on the sword of raised taxes, perhaps we should look at our priorities and focus on what is the most important in our situation.

“Instead of being concerned about fiscal policy’s effects on the economy, Friedman would have pointed to the damage that large deficits do to the economy at this time as a result of the loose policies of the Federal Reserve Board. These risk inflation and thus higher interest rates.” in synthesizing Milton Freidman’s position, this was noted in a recent article by Lanny Ebenstein.

Further, Freidman himself stated, “I believe the big problem is not taxes, the big problem is spending. The question is, “How do you hold down government spending?” Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half. The real danger we face is that number will creep up and up and up. The only effective way I think to hold it down, is to hold down the amount of income the government has.”

To be clear, Freidman has stated that he is always a fan of lower taxes but mostly as a means to limit government spending. Still, his greater point is less so about the rate of taxes.

While we further lament the whole Fiscal Cliff ordeal, it is possible that our ire is misplaced. The ‘Cliff’ is possibly a good thing. That is, if Republicans can wring out spending cuts.

Going to the well of Milton one more time, “If you had had a Democratic House and Senate, as well as a Democratic president, you would not have a surplus today in my opinion. They would have spent it. Similarly if you had had a Republican president as well as a Republican House and Senate, I doubt that there would have been a surplus today. Because they would either have spent it or had tax reductions.”

As the president has oft said, let’s go back to the Clinton tax rates. In his smoke and mirrors presentation, he is only saying that the causal connection of tax rates and economic activity means that higher taxes can only help.

Well, jinkies.

He can have them. If, and only if, we can return to the same spending. Heck, I’d even be so generous as to allow for some inflation adjustment in that number.

As much as we crab about Obama and the ‘Clinton tax rate’, we get wrapped up in economic anomalies of the era like the dot com boom. We ignore what’s before us today. Breathless affirmations of fracking. Near ubiquitous, high speed wireless services. Computer abilities in the palm of your hand. Cheap energy and leaps in productivity tools is not a time devoid of fundamental economic opportunity.

Just like the 90′s. The relative tax rates did not slow the economy. Nor did the spending. With balanced budgets, there was less negative drag on the economy. I would assert that the dot com boom exploded because it was not weighed down by government spending. It was an economy unencumbered but strong financial negatives.

That’s conjecture on my part.

With Republican hyper-focus on the tax rates, are we missing the real opportunity?

Obama won the election. He won on a platform of the wealthy ‘paying their fair share’. At the moment, everything is against Republicans holding down tax rates on that highest two percent. The upward rate change is a paltry 4%. Let him have it.

In exchange, we get spending cuts.

In the month following the election, Conservatives are thinking that we have something to gain by going to the mat for tax rates. Obama wants tax rates and Republicans want spending cuts. Freidman will take the spending cuts anytime. Yet, Boehner and company have becomes demons of the right.

Republicans are being asked to hold firm on something we can’t have and America has denied the ability to ask for. America has stated many times that it is ok with less government spending.

Detach tax cuts from spending and get what really matters. Less spending. Don’t fight the battle we will lose on tax rates. Fight the battle we can win and according to Freidman, it’s spending that’s the priority anyway.

If only Obama would quit moving the target…

Cross posted at the Rightward Journal