The Right Opinion

Fiscal Cliff Notes

By Thomas Sowell · Dec. 4, 2012

Amid all the political and media hoopla about the “fiscal cliff” crisis, there are a few facts that are worth noting.

First of all, despite all the melodrama about raising taxes on “the rich,” even if that is done it will scarcely make a dent in the government's financial problems. Raising the tax rates on everybody in the top two percent will not get enough additional tax revenue to run the government for ten days.

And what will the government do to pay for the other 355 days in the year?

All the political angst and moral melodrama about getting “the rich” to pay “their fair share” is part of a big charade. This is not about economics, it is about politics. Taxing “the rich” will produce a drop in the bucket when compared to the staggering and unprecedented deficits of the Obama administration.

No previous administration in the entire history of the nation ever finished the year with a trillion dollar deficit. The Obama administration has done so every single year. Yet political and media discussions of the financial crisis have been focussed overwhelmingly on how to get more tax revenue to pay for past and future spending.

The very catchwords and phrases used by the Obama administration betray how phony this all is. For example, “We are just asking the rich to pay a little more.”

This is an insult to our intelligence. The government doesn't “ask” anybody to pay anything. It orders you to pay the taxes they impose and you can go to prison if you don't.

Then there are all the fancy substitute words for plain old spending– words like “stimulus” or “investing in the industries of the future.”

The theory about “stimulus” is that government spending will stimulate private businesses and financial institutions to put more of their money into the economy, speeding up the recovery. But the fact that you call something a “stimulus” does not make it a stimulus.

Stimulus spending began during the Bush administration and has continued full blast during the Obama administration. But the end result is that both businesses and financial institutions have had record amounts of their own money sitting idle. The rate of circulation of money slowed down. All this is the opposite of stimulus.

What about “investing in the industries of the future”? Does the White House come equipped with a crystal ball? Calling government spending “investment” does not make it investment any more than calling spending “stimulus” makes it stimulate anything.

What in the world would lead anyone to think that politicians have some magic way of knowing what the industries of the future are? Thus far the Obama administration has repeatedly “invested” in the bankruptcies of the present, such as Solyndra.

Using lofty words to obscure tawdry realities extends beyond the White House. Referring to the Federal Reserve System's creation of hundreds of billions of new dollars out of thin air as “quantitative easing” makes it seem as if this is some soothing and esoteric process, rather than amounting essentially to nothing more than printing more money.

Debasing the value of money by creating more of it is nothing new or esoteric. Irresponsible governments have done this, not just for centuries, but for thousands of years.

It is a way to take people's wealth from them without having to openly raise taxes. Inflation is the most universal tax of all.

All the pretty talk about how tax rates will be raised only on “the rich” hides the ugly fact that the poorest people in the country will see the value of their money decline, just like everybody else, and at the same rate as everybody else, when the government creates more money and spends it.

If you have $100 and, after inflation follows from “quantitative easing,” that $100 dollars will only buy what $80 bought before, then that is the same economically as if the government had taxed away one-fifth of your money and spent it.

But it is not the same politically, so long as gullible people don't look beyond words to the reality that inflation taxes everybody, the poorest as well as the richest.

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21 Comments

old red in venice florida said:

As ysyal Doctor Sowell-your tell the Truth exactly as it is.
Too bad, the Ovama bunch will not heed one word people such as you publish regulary in thise masgnificent Patriot's News thric weekly.
God Bless you sir for tho one of many voiuces in the wildrness crying out to the American people to wake, wize up and try to understand what this administration is very subtly doing to us.
Thank you again for doing your damndest to be; " The Voice of the People.
"Prior to the recent farce of an election, I tried my very Best, to inform everyone in my life,in my email list and whomever would even listen; The coming election, will be the Most Important one of our lives and, should we lose, the Obama gang of Czars and the like ,return for another four more years-America as we all have come to Love and Admire, will soon be gone with our way of life doomed forever.
The way they are currently handling the so called,"fiscal Cliff:, is a true reflection of what I mean.
As a former WW 2 veteran of almost 4 years service from '42-to '46, just turned 91,I am even more certain of this statement.
Why, even " God Bless America " is under siege.Christmas too,and God forbidden in schools,some even forbid certain well known speakers to visit-like Ann Coulter at Fordham.
OMG.

Sadly.

Old Red has given vent to his beliefes, for better or worse.
Amen.

I

Tuesday, December 4, 2012 at 2:34 AM

William in Florida said:

Thomas
I could not have said it better myself! The reality is we went over the fiscal cliff along time ago and still falling! We need to restore America quickly by killing most bad regulations, quit spending what we do not have, revamp our credit,tax and family road map for a successful outcome. Today we live to work instead of working to live! Our family values are gone with both parents working 6 days a week (some 7) in such a depressed state of mind they convinced themselves this is normal!!!!?????
I am afraid the only solution is to reconize we live in a free nation and to split this nations government into 2 bodies separate from each other with the new government starting over (learning from past lessons) giving the people satisfied with the old government there ability to live there life while giving us the chance to have sanity restored in ours.

Tuesday, December 4, 2012 at 5:58 AM

Pam Breyen in Andover, MN replied:

You are talking about dividing a nation, scary!!

Wednesday, December 5, 2012 at 1:55 PM

Tod the tool guy in brooklyn ny said:

Now playing out, in real life horror:"OBONGO and the trillion-dollar debt!"Neo-Marxist pagan reprobates have ZERO Restraint. They are anti-American, anti-fossil fuels, and anti business growth-what could be better, for a Leftist wet dream?

Tuesday, December 4, 2012 at 6:28 AM

Stephen in NH said:

Off topic, but I thought everyone here at PatriotPost would enjoy this...

http://blip.tv/davidhorowitztv/bill-whittle-6444929

Tuesday, December 4, 2012 at 7:13 AM

READY4ACHANGE in ILLINOIS replied:

A-MAZING!!!!!!

Tuesday, December 4, 2012 at 1:37 PM

John Work in CO said:

I'm reminded of the Steve McQueen line in reference to the man who jumped off a skyscraper and was heard to say as he fell - "So far, so good." Or to paraphrase Nancy Pelosi - "We'll have to jump off the cliff to find out what is at the bottom."

The religion of Leftism and 50 years or more of educational dumbing down leave the multitude of fools incapable of seeing where this is all leading.

Great column as usual.

Tuesday, December 4, 2012 at 8:31 AM

Wayne in Hinesville, GA replied:

John, Those multitudes of fools don't want to see where it leads. That would make them have to actually think for themselves and not listen to the lamestream media and the lying Demorats. It is easier to let the all-knowing government make their decisions for them. Mindless sheep following their Messiah right over the cliff.

Tuesday, December 4, 2012 at 9:45 AM

READY4ACHANGE in ILLINOIS said:

Great article Dr. Sowell.

Tuesday, December 4, 2012 at 10:18 AM

Tapdaddy in Indiana said:

Facts, I love them. Ignore the facts and you are as innocuous as the main stream media.
stimulus: something that rouses or incites to activity
Nothing was stimulated, the government just bought faux movement in trying to excite the economy.
Instead of investing in the industries of the future, Obama has invested in the bankruptcy of now.

Tuesday, December 4, 2012 at 11:23 AM

Stephen in NH replied:

Facts. People don't care about facts. Example. Raise the issue of income taxes and you'll get ridiculed. Yet, these same people cannot provide one statute or regulation that show most workers are liable for the income tax, much less that what they earn is "income" to begin with. I've even gone so far as to put up several thousand dollars to try and spark some interest. Nope. Nothing. It's a foregone conclusion that apathy rules in America.

Tuesday, December 4, 2012 at 12:32 PM

p3orion in Midland, Georgia replied:

Stephen, the courts have consistently ruled that so-called "Section 861 arguments" are completely without legal merit (in such cases as, for example, United States v. Bell, Aiello v. Commissioner, Williams v. Commissioner, Corcoran v. Commissioner, and Loofbourrow v. Commissioner.)

These people lost before juries of their peers, not the IRS. Stamping your feet and shouting "it ain't so!" won't change that fact. In fact, not only will you lose this argument EVERY time, but in addition to back taxes and hefty fines and penalties (which may include jail time, ask Wesley Snipes) you can be slapped with a $5000 "frivolous tax return" penalty. IT JUST DOESN'T HOLD WATER. As much as we might wish it were true, it simply isn't.

Why don't you stop wasting time with these "excluded income" arguments, and put your efforts toward electing people who will tax you less, and be better stewards of the taxes they do collect?

Friday, December 7, 2012 at 9:59 AM

Old Desert Rat in Las Vegas, NV said:

Your assesment is correct Dr. Sowell. A sad day for America that the majority of the populace has lost common sense. John Work in CO had a good summation....we are going over the cliff. Unlike Pelosi, I know what is at the bottom of the cliff: more unemployment, more ripping of the constitution, and more chaos for the USA.

Tuesday, December 4, 2012 at 1:43 PM

JTG in Indiana said:

Give the Bamster what he wants and tax the rich. But call it a "Warren Buffett inspired tax." Put a name to it. Tax the portion of Buffett's income that is not considered ordinary income and listen to the old fart squeal. It's all in the name of paying his fair share since he won't do so voluntarily. This and he can pay his "fair share" some more by withdrawing from the IRS actions against Berkshire.

Tuesday, December 4, 2012 at 3:09 PM

Capitalist Dad in Madison WI said:

By now anyone with a brain (by definition this excludes Marxists, Socialists, Progressives, and every other form of Statist) knows that lower tax rates create more revenue. But for Obama, class warfare (not fixing America's fiscal problems) is the be all and end all! In short, all the bluster concerning taxes and the "Fiscal Cliff" is a farce! The US does NOT have a revenue problem, it has a SPENDING problem. If government apparatchiks faced jail for cooking the books (like real accountants) we would know that Uncle Sam's unfunded liabilities amount to soething like $130 trillion dollars. If you add in unfunded state and municipal liabilites, the situation is even worse! The private sector doesn't have enough to confiscate to cover this level of insane spending. Between borrowing from China to fund the schemes of vote-buying politicians and QE-4-Ever representing an inflationary "tax" on everyone in the US, the reality is: we're already doomed. And, reality always wins, even if it gets zero electoral votes. Luckily for the nomenklatura, a slight majority of Americans are corrupt and innumerate. Otherwise, this level of corruption, tantamount on teason, wouldn't just raise hackles, it would raise leveled pistols as well.

Tuesday, December 4, 2012 at 5:17 PM

Howard Last in Wyoming said:

When thinking about the current situation with Barry, the phrase that comes to mind is "Weimar Republic". The best comparison for Barry is Adolph.

Tuesday, December 4, 2012 at 7:23 PM

Wayne in Hinesville, GA replied:

Howard, If we're carrying dollars in a wheelbarrow just to buy a loaf of bread do you think the idiots will see the light then? I don't hold out much hope myself that they will ever see the light.

Tuesday, December 4, 2012 at 8:58 PM

Howard Last in Wyoming replied:

They have their heads stuck so far up it is always dark. I first found out about the Weimar Republic when one of my brothers was going through my fathers souvenirs for when he was touring Europe with some guy named Patton as the tour leader. Mike found several million dollars in Deutsche Marks. When my father got home from work he told us about the Weimar Republic. If my father was around today he would be looking for a M-1 and a 1911.

Tuesday, December 4, 2012 at 9:07 PM

Pam Breyen in Andover, MN said:

Tom, I like the clear way you put it all together.!

Wednesday, December 5, 2012 at 1:53 PM

David Thompson in Bellville, TX said:

"No previous administration in the entire history of the nation ever finished the year with a trillion dollar deficit."
G W Bush's last budget ran a greater than $1 trillion deficit, but it was recorded during Obama's first year in office.

Wednesday, December 5, 2012 at 8:15 PM

exlogger in Alaska said:

Mr. Sowell is always correct and to the point. Great article!
But to take our country back we all know what needs to happen. Talk is cheap as my dad (vet) always said but if you believe in something you must be willing to take up arms to fight for it. You can not change another persons (Marxist) mind to believe what you do with talking. Just like you could never change my mind about my beliefs with talking. The time for talking and writing about all our troubles is about to come to the end game.
What will you stand for Freedom or ???????

Monday, December 10, 2012 at 2:04 PM