Orszag on the impending "Taxmageddon"

Former OMB director Peter Orszag, who's now with Citigroup:

The nation is hurtling toward what has been called “taxmageddon,” the enormous tax increases and spending cuts scheduled for the beginning of 2013. At around the same time, we will also be spending some more quality time with our old friend: the debt limit.

At the end of this year, all the Bush tax cuts expire -- amounting to about $250 billion a year. The payroll-tax holiday, at more than $100 billion a year, ends too, as do expanded unemployment-insurance benefits. And we face other spending cuts of about $100 billion, from the sequester set up by the 2011 debt-limit deal. All told, this fiscal tightening adds up to about $500 billion -- or more than 3 percent of gross domestic product. The economy will be in no shape to handle that much of a squeeze. If we do nothing to reduce or stop it, the economy could be thrown back into a recession. As if that were not challenging enough, we are expected to bump back up against the debt limit, which currently stands at $16.4 trillion. Projections suggest we will approach the limit in the fourth quarter of 2012. Then, the Treasury secretary will take temporary measures to allow continued issuance of debt. The Bipartisan Policy Center estimates those actions will get us to February 2013 -- at which point we will hit the debt-limit wall. If the economy is weaker than expected, it will widen the deficit faster, and we’ll hit the wall sooner.

CNN's Zakaria: Europe suffers from too much austerity

I'm not saying that CNN's Fareed Zakaria is wrong. But after all of these years of the West, via the IMF, forcing developing countries to decimate their budgets and thus their economies, at the expense of their people, now that the tough love medicine is hitting too close to home, suddenly it's time to revisit the notion that there's no such thing as too much, or ill-timed, austerity.

Fareed Zakaria at CNN:

Consider that data we started with. The U.S. economy, which received monetary and fiscal stimulus, will grow at well over 2% this year. European economies that have followed the path of cutting spending and raising taxes to reduce deficits are finding themselves in a downward spiral: cutting spending means laying off people, which means less demand for good and services, which means the economy shrinks, which - ironically - means lower tax revenues and thus larger budget deficits.
Take a look at Britain. Britain has followed a brave austerity plan, cutting government spending across the board and raising taxes. The result, British growth has stalled; the economy will grow barely 0.8% this year. And while its budget deficit was predicted to be under 13 billion dollars in February, it was in fact 24 billion dollars for that month alone.
After its austerity programs, Spain has hit 20% unemployment - 50% youth unemployment - and now has a much larger budget deficit than projected.

How the Buffett rule could expose the GOP's tax cut lie

With the economy beginning to improve and the electorate showing no interest in the GOP war on contraception, tax cuts and the deficit are the only issues left for the GOP to fight on. Kos has a great run down of Washington punditry on the looming tax fight.

Unsurprisingly absent from the establishment account is the rather obvious fact that reducing taxes will reduce revenues, the same way tax cuts reduced revenues under Reagan and Bushes I and II, and that further tax cuts will only make the budget problem worse. This is only to be expected from people who seem believe that policies are like neckties: The candidate can change them as often as he likes as they serve no purpose other than decoration.

For an example of the establishment discourse on the budget, this piece by Candy Crowley at CNN is typical. We are told that the $50 billion raised by the Buffett rule will do little to balance the budget, but the fact that the GOP House proposal to lower the corporate tax by 20% would be a budget buster goes without mention.

The current fight over the Buffett rule is being seen as a preliminary skirmish to the real fight over extending the Bush tax cuts. There we can expect the GOP to stage a repeat of their earlier ultimatum: No extension of the tax cuts for the 99% unless the 1% get theirs. The GOP is the party of the 1% and for the 1%. The whole point of the Bush tax cuts was that they were a shell game in which the 1% would take enormous tax cuts, then return the budget to a massive deficit that could only be funded by stealing your pension and your Medicare.

And so we come to the hidden genius of the Buffett rule.  With the Buffett rule in place, the Koch Brothers and Mitt Romneys of the world will be paying a tax rate of 30% on their income above $1 million no matter what is done to change the tax code for the not-so wealthy. The only way to deliver tax cuts for the Romney class would be to carve exceptions in the Buffett rule, and that would call the lie to the usual claim that tax cuts for Romney were really intended to help 'small businesses'.

The Buffett rule does not look like it will pass this year, but there is a very real chance that the Democrats might be able to pass something similar in the next Congress. They would first have to take back control of the US House, of course, but that is pretty much a precondition for anything constructive or worthwhile being achieved. Once passed, the Buffett rule would be very difficult to repeal.

Trump calls Paul Ryan budget "catastrophic"

I know, it's Donald Trump.  But as annoying as he is, he does matter - kind of.  He has a megaphone.  He abuses it.  A lot.  But that doesn't mean he doesn't have it.  It's embarrassing for the Republicans to have one of their prominent figures dissing them publicly.  And it only reinforces the message that the Paul Ryan budget (he's the Republican chairman of the US House Budget Committee, and the GOP's top "thinker" on budget issues) is too extreme.

Just to clarify. Trump doesn't disagree with the substance of the draconian Ryan budget. He just thinks it's a mistake to tell voters what's in it. And he's right. Since the Republicans usually only win by lying to the voters about legislation, and elections.

Everyone knows that honesty has a Democratic bias.

From Sam Stein at the Huffington Post:

"It is catastrophic what he's done," Trump told CNBC. "If they lose, it will be the single biggest reason why the Republicans lost: the Ryan plan."

Trump said he took issue not with the content of the Ryan budget -- though he declined to weigh in on that -- but rather, the timing of its introduction.

"I think the worst thing [Romney] can do is strongly embrace that budget if he wants to get elected," he said. "This will be the single worst move in the Republican Party for many years. This is going to be catastrophic."