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e-News 12/14/12

 

The Week Just Past: Frustration At The “Cliff”

“A Truly Balanced Approach to the Deficit”

Small Business Confidence Sags.  Can hiring be far behind?

Surprise Obamacare fee of $63 per person to begin in 2014

New Provocation by North Korea

Protecting the Children

Bringing CALM to a Television Near You

 

The Week Just Past:  Frustration At The “Cliff”

“I am not one who pays very close attention to polls, but some recent public opinion research indicates the American people are frustrated with the pace of negotiations on a legislative approach to avoid the massive tax increases and budget cuts that will take effect in two weeks – the so-called ‘fiscal cliff.’

“I must admit that I share that frustration.  I applaud President Obama and House Speaker Boehner for ‘talking.’  But real negotiation requires a healthy dose of ‘give and take’ and I am not sure that’s happening right now.

“Both sides have acknowledged that additional revenues coming in to the Treasury must be part of the answer.  However, there seems to be the perception that boosting income tax rates on the wealthiest of Americans will address America’s deficit and debt problems. 

“I’ve attached a copy of Senator Rob Portman’s op-ed that appeared Wall Street Journal this week.  I recommend that you read it and share it with your family and friends.  The piece gets a little ‘wonky,’ but after all, Senator Portman used to be the Director of the Office of Management and Budget (OMB).  Among his important points, Sen. Portman reports that ‘raising taxes on the well-off would pay for nine days of spending.’ 

“This fact makes my point (again): the United States does not have a deepening debt crisis because Americans are taxed too little; we have a debt crisis because our federal government spends too much!

“Unfortunately, both sides in the fiscal cliff ‘talks’ have not reached this same conclusion.  That’s why many of us are frustrated."

Rodney Frelinghuysen

Recommended Reading: Senator Rob Portman’s (OH) op-ed in the Tuesday Wall Street Journal, “A Truly Balanced Approach to the Deficit”

“A Truly Balanced Approach to the Deficit”

By ROB PORTMAN in the Wall Street Journal

The dangers of the "fiscal cliff" are by now well known. Most agree that the year-end $500 billion in tax increases and $110 billion in arbitrary, across-the-board discretionary spending cuts, including defense, must be averted to avoid plunging the U.S. economy back into recession. But how the danger is averted is important. To keep from getting right back on another cliff, President Obama and Congress must address the underlying problems of excessive spending and weak economic growth.

Washington needs to pursue structural reforms in the country's important but unsustainable entitlement programs and in an inefficient, outdated tax code. By doing so, lawmakers can responsibly avoid the immediate cliff while addressing the long-term fiscal crisis and spurring job creation.

In January 2010, President Obama described the challenge well: "The major driver of our long-term liabilities . . . is Medicare and Medicaid and our health-care spending. Nothing [else] comes close."

The nonpartisan Congressional Budget Office agrees. According to the CBO, virtually 100% of the projected increase in budget deficits over the next 75 years comes from rising Social Security, Medicare, Medicaid and other mandatory spending.

The CBO projects that, as the economy recovers, revenues will exceed the historical average of 18% of gross domestic product, even if all 2001 and 2003 tax cuts are extended. Federal spending, meanwhile, already exceeds its historical average of 20% of gross domestic product and is projected to rise to 40% within three decades. Much of this dramatic increase in spending will be the result of adding 77 million baby boomers to a Medicare system that, for the typical retiree, provides benefits of $3 for every $1 paid into the system.

Taxes cannot be raised high enough to chase the enormous spending growth projected—the math simply does not work. That is why House and Senate Republicans last year voted for a budget to begin reining in entitlements and closing the deficit.

President Obama's plan to deal with the fiscal cliff includes raising taxes on individuals and small businesses that make over $200,000 or, jointly, $250,000 a year. He has argued that we should repeal the 2001 and 2003 upper-income tax cuts because they are to blame for much of the increase in the deficit since 2001.

There is a continuing debate over whether and how to raise taxes on small businesses that pay their taxes as individuals and on those individuals earning more than $200,000.

However, CBO and Tax Policy Center data together show that only 4% of the $12 trillion swing from projected surpluses to actual deficits from 2002 through 2011 resulted from the upper-income tax cuts. Two recessions and soaring government spending were the main factors.

Ending all the upper-income tax cuts would pay for just nine days of annual spending. Social Security and health entitlements will cost 27 times more than the revenue from ending those tax cuts over the next decade.

Still, negotiations require give and take, so Republicans have put revenues on the table. For instance, during the fall 2011 bipartisan super committee negotiations, Republicans (using the general Bowles-Simpson model of $3 in spending cuts for every $1 in new revenue) offered $250 billion in new revenues with pro-growth tax reform and entitlement savings. That summer, House Speaker John Boehner offered new tax-reform revenues in return for serious entitlement reforms, and he has continued to look for ways to forge bipartisan consensus. Democrats, however, have rejected all offers and demanded $1 trillion or more in tax increases without a commitment to structural entitlement reform and tax reform.

President Obama has called for a "balanced" solution of tax increases and entitlement reforms. Yet at this point he is essentially re-offering his budget from last February—a proposed $1.6 trillion in tax increases and virtually zero net spending savings. The CBO says the president's budget actually increases spending by $1 trillion over the decade, as its modest entitlement savings would be overwhelmed by new spending. Higher taxes for more spending isn't the kind of balance that Americans expect.

It should surprise no one that this unbalanced approach in the president's budget was rejected 99-0 in the Senate in May and 414-0 in the House in March.

Tweaking Medicare and Medicaid eligibility rules, benefits and payment rates may save some money in the short run, but it won't sufficiently slow the long-term growth of these programs caused by their outdated design. Reforms should not merely squeeze health beneficiaries or providers but should rather reshape key aspects of these programs to make them more efficient, flexible and consumer-oriented.

Especially in this weak recovery, the president's demands for new tax revenues must be met in the most pro-growth way possible. Instead of merely piling higher tax rates on top of our inefficient tax code, the president should agree to join with Congress in pursuing individual and corporate tax reform, including eliminating outdated preferences that often benefit the well-connected. A simpler, fairer tax code for everyone will also increase productivity, thus creating badly needed jobs and economic opportunity.

Avoiding the immediate fiscal cliff is critical to avert a recession and more job loss, but let's also take the opportunity to address the underlying problems causing our steep deficits. President Obama has said he is for tax reform and promises not to "kick the can down the road" on entitlements. Republicans are eager to work with him on both. By working together, both parties can spare America's children from a national debt that now tops $130,000 per household—and do it in a way that helps bring back jobs.

Mr. Portman, a Republican, is a senator from Ohio and a former director of the Office of Management and Budget.

Small Business Confidence Sags.  Can hiring be far behind?

As the President continues to call for over $1 trillion in new taxes, including higher tax rates for small businesses, many job creators have been speaking out about what those new taxes will mean for them and the men and women they work with each day. The news is not good.  Three newly released surveys confirm the threat of higher tax rates is already hurting Main Street.

The monthly Small Business Economic Trends Report from the nation’s largest small business group, the National Federation of Independent Business (NFIB), was released on Wednesday.  It reveals that small business confidence is at a near record low level.  

According to the survey, the net percent of small business owners that expect the economy to improve and business conditions to be better in the next six months fell 37 points from last month.  This is the largest net percent change in at least 14 years and even worse than during the depths of the most recent recession.

Read the report here.

Surprise Obamacare fee of $63 per person to begin in 2014

Buried deep inside your health insurance plan in coming years could be a new, $63-per-head fee under Obamacare.  The new regulation is apparently designed to cushion the cost of covering people with pre-existing conditions under President Obama's health care overhaul.

The charge works out to tens of millions of dollars for the largest companies, most of which is likely to be passed on to workers.

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee.

The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion.

The fee will be assessed on all "major medical" insurance plans, including those provided by employers and those purchased individually by consumers. Large employers will owe the fee directly. That's because major companies usually pay upfront for most of the health care costs of their employees. It may not be apparent to workers, but the insurance company they deal with is basically an agent administering the plan for their employer.

The fee will total $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. That means the per-head assessment would be smaller each year, around $40 in 2015 instead of $63.

It will phase out completely in 2017 — unless Congress, with lawmakers searching everywhere for revenue to reduce federal deficits — decides to extend the fees.

New Provocation by North Korea

North Korea on Wednesday successfully fired into orbit a long-range rocket carrying a satellite.  Many experts believe this feat is a major advance in the nation’s weapons program.

The long-range missile launch threatens the U.S. and its allies, undermines stability in the Pacific and violates multiple international accords. This provocative act is heightened by the regime’s ongoing development of new nuclear weapons.

As the Congress and the Administration consider deep spending cuts in our national security budget, they must be mindful that rogue regimes like Iran and North Korea and accelerating instability in the Middle East require us to maintain and enhance our military capabilities.

Protecting the Children

Legislation designed to better protect children from sexual predators became law this week.  President Obama signed into law the Child Protection Act of 2012 (H.R. 6063), a bipartisan, bicameral bill which provides law enforcement officials with additional resources to combat the growing threat of child pornography and online exploitation of children.

The House passed the bill in August.  The Senate followed suit last month.

“There are indications that internet child pornography may be the fastest growing crime in America,” Rodney said.  “This crime is increasing at an average rate of 150% per year – an unspeakable and intolerable trend.  We must do more to protect the children and this new law gives law enforcement officials new tools to attack this growing crisis.” 

Bringing CALM to a Television Near You

If holiday commercials on your television seem a bit less intrusive this year, you can thank the CALM Act.  Passed by Congress in 2010, theCommercial Advertisement Loudness Mitigation (CALM) Act took effect this week. The act was designed to prevent TV commercials from blaring at louder volumes than the program content they accompany. FCC rules that took effect on Thursday govern broadcasters as well as cable and satellite operators.

The FCC is working on establishing a procedure by which suspected violations can be reported on its website:

http://www.fcc.gov/complaints