Thursday, November 29, 2012

Did President Obama Present the Republicans An Offer He Knew They Could Not Accept?

Remember the classic line from the Godfather “I’ll make him an offer he can’t refuse?”

What if President Obama is making the Republicans an offer they can’t accept?

The assumption is that President Obama wants to avert the fiscal cliff.

He won reelection, gained two Senate seats, and several House seats. The President controls the Bully Pulpit. The mainstream media supports him. Having just been reelected, he’s at the height of his political power. He has the leverage.

The Republicans lost; they’re weakened.

They have more leverage than they think, but they lack the voice to convey their message right now.  The budget is about to approach the borrowing limit. The Treasury may run out of money in a few weeks.

The President and Senate Democrats want the lending cap lifted as part of the deal. The House GOP has leverage.

The President has said he wants to increase revenues. The way to do that is to grow the economy. A rising tide raises many a ship.

The President has shown no sign in four years of wanting to grow the economy.

He wants to raise tax rates on the rich, defined as incomes of $250,000 or more.

That will not raise revenues but contract the economy.

The tried and proven means to increase revenues is to lower tax rates. It sounds counterintuitive, but the lowering of rates increases economic activity

That has been proven by the Kennedy-Johnson tax cuts, the Reagan tax cuts needed to stimulate the economy after the Carter debacle, and the Bush tax cuts, which were a response the bust. Similarly, cuts in capital gains taxes unleashed a flood of revenue.

President Obama again demanded earlier this week that the Republicans approve the extension of the Bush Tax Cuts for all but those earning $250,000 or more.

The Democrats and media are mounting a full court press against the Republicans to prevent the fiscal cliff on January 1, 2013.

He has the Republicans on the horn of a dilemma. If they agree to raise taxes on his terms, then they will once again become known as the tax collectors for the welfare state. They will lose credibility with voters and court revenge from the Tea Party. The base will rebel, but take it out on the Republicans in two years rather than the Democrats, who might otherwise prevent a repeat of 2010 since the Republicans will be the tarnished politicians..

President George H. W. Bush lost reelection because he raised taxes in spite of his “No new taxes” pledge.

If they don’t go along, and the economy slips into recession, then the President and the media will cast blame on the Republicans.

If taxes are raised, the economy will go over the cliff.

Wait a moment; taxes are being raised. All the ObamaCare tax increases will go into effect January 1, coupled with small business cutting back employment.

President Obama has clearly demonstrated an ignorance of basic economic principles.

He is genetically opposed to the wealthy, as indicated by his famous response when told that the lowered capital gains tax generated revenue. He said the rates had to rise for “fairness.”

He bad mouthed “fat cat bankers,” insurance companies, doctors, and Big Oil. Unlike many demagogic politicians, he believes his rhetoric. “You didn’t make it” was a Freudian slip that says it all.

What if the President doesn’t really want an agreement?

Taxes will rise automatically on January 1. Defense spending will be sequestered; i.e. cut. The liberal Democrats love defense cuts.

Medicare cuts will ensue, but those will be blamed on Republicans.

The President views himself in a win-win scenario, but the Republican House controls the debt limit.


I realize as I post this blog that the Politico reports that the contours of an agreement have been reached between President Obama and Speaker Boehner. The details will represent a sellout of Republican principles.

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