The Right Opinion

Why We're Near the Cliff

By George Will · Dec. 13, 2012

WASHINGTON – If you have worked hard for five decades, made pots of money and now want to squander it all in Las Vegas on wine, women and baccarat, go ahead. If, however, you harbor the anti-social desire – stigmatized as such by America's judgmental tax code – to bequeath your wealth to your children, this would be an excellent month to die. Absent a congressional fix before Jan. 1, the death tax, which is 35 percent on estates above $5 million, reverts to 55 percent on those above $1 million.

This is one of many tax changes that could be triggered. The Hoover Institution's Tammy M. Frisby, writing in Policy Review, says that – not counting temporary disaster relief tax breaks – 31, 56 and 37 provisions of the tax code expired in 2010, 2011 and 2012, respectively. “The country,” she says, “is trying to create sustained economic growth using temporary tax laws.” It is not working.

Unless Congress quickly reaffirms its follies, this month the tax credit that subsidizes wind power – a long-standing adventure in industrial policy – expires. This is not quite a sufficient reason to go over the “fiscal cliff” but would be a consolation for doing so.

The cliff, an action-forcing mechanism, could cause a potentially constructive chaos of questioning. Is it wise to increase taxes as student debt passes the $1 trillion mark, dampening graduates' powers as consumers? Two-thirds of them have mini-mortgages (average debt, $27,000). Is it wise to increase the top tax rates, which are paid by small businesses with more than half of small business income, just as the Obamacare tax (called a mandate until Chief Justice John Roberts' clarification) produces many “49ers”? Those are businesses that stay below the 50-employee threshold for providing insurance, or reduce full-time employees to part-timers. A defense sequester might raise questions about who – Denmark? Poland? – our 54,000 troops in Germany are protecting Germans against.

Washington, with its (at most) one-track mind, is fixated on the “Bush tax rates” but cannot even accurately describe its monomania. It actually is the Bush-Obama rates. Two years ago, when the economy was, as now, sputtering along barely above stall speed, Obama – joined by 43 Senate and 139 House Democrats – extended the rates for two years because the economy was too weak to absorb large tax increases.

That was then. This is now:

When Sen. Richard Durbin said “Social Security has not added one penny to the deficit,” Charles P. Blahous III, a member of the Social Security board of trustees, wrote to The Washington Post to say that in 2012 this program will add $165 billion because benefit expenditures exceed Social Security tax revenues by that amount and “this gap is filled entirely by revenue that the federal government borrows.” The fact that the second-ranking Senate Democrat is off by 16,500,000,000,000 pennies reveals the sort of precise thinking that got the country into its current condition and that supposedly will produce a cure. It is enough to make you want to hop in your Fisker and drive off a fiscal cliff.

You should know Fisker because you have helped to finance the Anaheim, Calif., company that makes – well, has made a few – electric cars. Its only model, the Karma – really; Obama administration green investments are beyond satire – costs $110,000. Your subsidy helped Justin Bieber, the fabulously rich Canadian adolescent (he sings), buy one. No one ever said saving the planet one electric car at a time would be easy.

The Wall Street Journal reports that in spite of Fisker's $192 million in Energy Department loans, the Karma “has been hobbled by recalls and quality problems” and Fisker has sacked half its employees. But perhaps Fisker's biggest problem is that its source of batteries, A123 Systems, has gone bankrupt in spite of its $249 million Energy Department grant. The administration that in the fiscal cliff drama is demanding control of much more of the nation's wealth is the author of many Solyndra-style debacles.

American politics has generally been about allocating abundance, not scarcity.

It has, however, occasionally confronted issues not susceptible to compromise – e.g., expansion of slavery into the territories. The fiscal cliff argument is about splittable differences – this or that tax rate or entitlement rule – but also about the proper scope and actual competence of government. This necessary argument should not be truncated until the cliff is even closer.

© 2012, Washington Post Writers Group

4 Comments

Tod the tool guy in brooklyn ny said:

Uncle George: Imagine the jobs that the private arena, could create, with $249,000,000.00! I could easily- double the size of my shop, and be less than 50 employees threshold(chokehold)! Wise business principles, beat out SPENDOKRATIC WASTE, every day & every time! Merry Christmas Patriots!!

Thursday, December 13, 2012 at 6:21 AM

Rod in USA said:

So that is $442 million to Fisker and A123 to produce battery powered vehicles.... and Fisker is plagued with quality issues and fired half its employees (spiralling into oblivion it sounds like) and A123 is bankrupt. Sounds like Obama flushed another half million of stupid ideas instead of letting the markets work.

Who gets hurt? Ask the people who are now or soon to be unemployed.

Is there a website tabulating all of this folly? Between this boondoggle, some of those chronicled by Sen Coburn, Solyndra, Ener1, Harry Reid's insanely stooopid "Cowboy Poetry" festival.... We could be solvent.

Tod: It is not Spendokratic waste, it is SpendoKratic CORRUPTION. Behind every one of these issues is an Obama campaign contributor. I just about guarantee that.

Thursday, December 13, 2012 at 7:33 AM

Ernest Wilson in Maryland said:

George Will begins to approach the argument that the Republicans never made. Giving the government a larger share of the national income is senseless. They lack the expertise and the incentive to use the resources effectively. The fact that this has been recognized fact for almost 50 years seems to have escaped attention. The main reason to limit government to the absolute essentials has to do with it's total incompetence. Who can name an effeciently run, effective government operation? The wealth in this or any country is created by the private sector. We need to explain this to our children since apparently our schools did not.

Thursday, December 13, 2012 at 12:22 PM

Wayne in Hinesville, GA replied:

Ernest, I have been spouting this for a long time. The government is totally incompetent to run anything. The government produces nothing of value but squanders the wealth of the taxpayers on idiot programs. As far as the government is concerned there will never be enough revenue to fund all the stupid programs they come up with. 79 different welfare programs, redundant job training programs run by different departments, and programs to oversee other programs, and probably programs to oversee those programs, etc. Every time they start something new they add another level of government workers. Idiocy on a giant scale!

Thursday, December 13, 2012 at 4:27 PM