Heartland Institute Reacts to Latest ‘Fiscal Cliff’ Negotiations

November 30, 2012

Negotiations between Congress and the White House to avoid the “fiscal cliff” made little progress Friday. President Barack Obama has proposed a $1.6 trillion tax hike, $50 billion in additional spending next year, and moving the power to raise the federal debt limit out of the hands of Congress and into the hands of the president.

The following statements from economics experts at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at tnash@heartland.org and 312/377-4000. After regular business hours, contact Jim Lakely at jlakely@heartland.org and 312/731-9364.


“The president’s ‘compromise’ proposal indicates he is following the advice of his advisors to let the upcoming tax increases go into effect. This has been their plan all along. The advisors believe the president can convince the public that Republicans are responsible for the tax increases. Once he does, the president will not only be able to dictate who receives breaks from the new higher tax rates, but he will also be able to keep much of the new revenue to fund additional government programs.”

Robert Genetski
Policy Advisor, Budget and Tax Policy
The Heartland Institute
rgenetski@classicalprinciples.com
312/377-4000


“Federal spending is up more than $1 trillion in the last five years. Economist Peter Morici has pointed out that to keep up with inflation it needed to rise only $360 billion. More than $666 billion is new spending. That’s the problem. Raising taxes and spending is no way to solve a problem that’s been caused by too much spending.

“And the attempt by the White House to raise the debt limit instead of Congress indicates President Obama apparently thinks he was elected emperor. The constitution President Obama has sworn to uphold and defend puts spending and borrowing decisions in the hands of Congress. It would be nice if Congress were to fulfill its duties and assert its powers rather than relinquish powers to create an imperial presidency.”

Steve Stanek
Research Fellow, Budget and Tax Policy
The Heartland Institute
Managing Editor, Budget & Tax News
sstanek@heartland.org
312/377-4000


“President Obama’s literally laughable opening offer in the ‘fiscal cliff’ negotiations was utterly predictable from a man who combines narcissism with a deep-seated anti-capitalist ideology. He mistakes the election results for a mandate to do anything he wants to do, and a vote of confidence on what he has done before. Therefore, he leads with another stimulus proposal even though the public is clamoring for less government spending rather than more. But in his bubble he only hears from Keynesian supporters of such policies, whose economic views are thin camouflage for their real goal of expanding government.

“The real question is whether the ‘mainstream’ media, so invested in Obama and so economically clueless themselves, will throw the flag for illegal procedure, if not a personal foul. In the meantime, those of us who have long recognized Obama for what he is can only shake our heads and ask those who voted for him, ‘Well, what did you expect?’

“Obama probably wants to drive off the fiscal cliff, so a game of political chicken with Republicans holds little risk for him. But he is stupidly raising his own risk by coming out with proposals which even independent or moderate voters will see as outside the bounds of a good-faith beginning to the discussion – and outside the bounds of the type of leadership the nation wants and expects from a president at a time like this. Again, the proper thought is, ‘Well, what did you expect?’”

Ross Kaminsky
Senior Fellow, Finance
The Heartland Institute
rossputin@aol.com
312/377-4000


“Congress should resist giving the president permission to raise the federal debt limit. Based on past performance, it’s likely he’ll do it anyway. Then he, not Congress, will be responsible for the results.”

S.T. Karnick
Director of Research
The Heartland Institute
skarnick@heartland.org
312/377-4000


“If we are to infer anything from the simultaneous re-election of President Obama and return of a Republican majority to Congress, it is that the American people would like the federal government's finances to be addressed in a way that reflects the sensibilities of both parties. As it is, President Obama treats the congressional Republicans in a disrespectful, ‘my way of the highway,’ basis, as though his re-election is the only thing that counts.

“Respectful of the decisions made by the American people, the Congressional Republicans offered to increase revenue by curtailing the use of deductions, credits, etc., which differed significantly from the revenue-neutral proposal of candidates Mitt Romney and Paul Ryan. Without a good-faith response to this proposal, going off the cliff is not a bad idea.

“As to going off the cliff, the Keynesian argument is that it would cause a recession by suddenly reducing aggregate demand, both federal spending and private-sector consumption spending. But, the new economics of the fiscal underpinning of the price level suggests that, by slashing the deficit, going off the cliff would restore investor confidence, so that cash that has been sitting on the side-line would be invested. If the new economics is correct, the growth of the economy sparked by investor confidence could soon eliminate the remaining deficit.

“The possibility of going off the cliff should be seriously examined. If the possibility is not so awful that the president does not feel compelled to reach a compromise with the Congressional Republicans, then households, businesses and government agencies should be forewarned as to how they will be impacted, so they can begin, now, to do what they need to do to prepare for it.

Clifford Thies
Professor of Economics and Finance
Shenandoah University
cthies@su.edu


The Heartland Institute is a 28-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.