Triangulating The Fiscal Cliff

By Dick Morris on December 12, 2012

Published on on December 11, 2012

Obama’s popularity and his party’s political fortunes might not survive the fruits of his recent victory. If he cows the Republicans into giving him a tax increase on the upper brackets, he will lose the fig leaf he uses to disguise his true intentions. Until now, taxing the rich has been his answer to everything.

Is spending too high? Tax the rich.

Is the debt out of control? Tax the rich.

Is the economy not rebounding? Tax the rich.

Is the deficit out of sight? Tax the rich.

But once he does tax the rich more, he is out of answers. Then his big spending, deficits and borrowing are exposed for all to see.

Triangulation involves stripping away the fig leaf your political opponents use to disguise their true intentions. In 1995-6, the Gingrich Republicans wanted to cut Medicare but couldn’t say so. Instead they said they wanted to balance the budget. But once Clinton proposed a way to achieve balance without cutting Medicare, they had no place to hide and their agenda was exposed.

Obama wants to increase spending, increase borrowing and raise taxes on the middle class and the rich. But he hides behind the rhetoric of taxing the rich. Once he gets his way, he can hide no more.

The full scope of Obama’s financial goals is gradually becoming apparent, and it is truly terrifying. His request for $1.6 trillion of new taxes goes far beyond the simple increase of tax rates on upper-income taxpayers. It presages a far broader tax increase hitting far more deeply into the middle class than he has thus far admitted.

And now he proposes eliminating the need for congressional authorization to raise the debt limit. Consider what that means. Normally, one’s ability to borrow is constrained by another’s willingness to lend and the interest rate the lender would want to charge. But this check and balance does not operate on the federal government because it is the global currency and can just print as much money as it wants. The Treasury is “buying” worthless mortgage-backed securities with newly minted money — backed by nothing but our government’s say-so — and then borrows it back at 3.5 percent interest. There are no lenders. The government/borrower is the lender. And because the money is newly and artificially created, there is no way the market can set interest rates.

Add to the proposals for vastly more taxation and no debt limit the president’s refusal to rein in spending and, indeed, his desire to increase spending to, yet again, attempt an economic stimulus.

And here’s what you have: a government that can spend money without limit, financing the spending by taxing job creators more and printing money it then borrows. The government, of course, uses the extra spending to spread the reach of entitlements to create a larger dependent population on whose votes it can count. Job creation falls. More people leave the labor force (500,000 last month alone) and enter the entitlement society.

All this leads to a Greek-like deficit and a debased currency with a strong risk of inflation once the recession lifts.

But there is a political fallacy in his program: Taxing job creators has a direct economic impact. His success in raising taxes will bring about his failure in promoting economic recovery. As economic numbers worsen — driven by the global recession and the Obama tax increases — the fallacies in his economics will become apparent for all to see.

Victory could prove the undoing of the Democratic Party. If Obama has his way and runs America into the ground through spending, borrowing and taxing, the resulting economic disaster will convert all those demographic Democrats into new Republicans. They will see, firsthand and vividly, the results of Obama’s economic policies and they will recoil in horror.

It didn’t happen in 2012 because things had not gotten bad enough. Now they will, and the political consequences will be severe for this president and his party.

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