After listening to the President’s press conference it appears to me he wants the massive tax increases scheduled for next year to go into effect. While he claims to want a compromise, I do not believe it’s in his interest.
To understand the President it’s important to understand he places his faith in what I would describe as third world economic policies. These are policies based on class warfare, redistribution of income, and government control over major sectors of the economy. After campaigning on these policies, the President believes the public has endorsed his vision.
In order to fully pursue his objective the President has to be able to overcome any resistance from House Republicans. His advisors have suggested he can do by allowing Taxmageddon to go into effect and blame Republicans for the consequences. Blaming others has worked so far; why not continue to do so?
Another reason for allowing the tax hikes to take effect relates to the economy. Even without the tax hikes, next year’s the economy will be reeling from the impact of more fully implementing Obamacare, Dodd-Frank and EPA regulations. I estimate these measures will shift $800 billion a year in spending from the private to public purposes. This will send living standards down sharply and could produce the next recession.
The President needs to be able to blame someone for the ensuing problems. Blaming Republicans for refusing to compromise on taxes enables the President to shift blame for a bad economy to someone else.
A third reason is the President wants more revenue. Having spent his first term dramatically increasing federal spending, the President would now like to raise revenue to pay for it. He knows Congress would never vote to increase taxes on the middle class. Allowing the tax hikes to occur automatically produces the higher tax rates he would not otherwise be able to get. He can then decide to reduce some of the new higher rates and once again claim to be a tax cutter.
I hope I’m wrong regarding this Machiavellian approach to policy. But remember how the President pulled his compromise off the table this past summer. If he wasn’t really interested in compromising then, with the election still before him, why would he want to do so now?
Republicans face a Catch-22. If they even get to vote on the compromise the President says he wants, they will bear some responsibility for raising tax rates and making next year’s economy worse than it would otherwise be.
However, Republicans stick to their principles and refuse to vote for any tax increase, the President could then chose to allow all tax hikes to go into effect. This would create even more damage to the economy and to their constituents. Elections have consequences.
The Markets Are Voting
In addition to the popular vote and the Electoral College, the markets posted their own views. Since early October, when the Presidential election was getting really close, the markets have shown that they are not happy with our short-term future. Besides the election itself, other mitigating factors include the poor handling of: Hurricane Sandy, the Petraeus and Benghazi scandals, a deadlocked Congress and huge tax increases come January 1st. Then of course current events in the Middle East demonstrate that the U.S. does not really control anyone, and no one fears us or can rely on us with certainty as to what we will or will not do. The markets are saying: “No confidence.”
Source: Bloomberg, Graphs and analysis: The Meyers Report
Creative Compliance and Legal Defiance
Thoughts from David Schwalb, Esq.
Various parts of the business community have been preparing themselves for a deluge of new EPA regulations that would add to their ever-increasing load of compliance burdens before the end of this calendar year. The re-election of Obama simply drives the point across to businesses—both big and small—that there will be plenty of regulatory challenges from the EPA and other agencies which will emerge over the next four years.
Between now and the next election, there will be plenty of time to reinvigorate supporters of Super- PAC’s with a more targeted approach to squaring off against government officials who are adverse to the interests of entrepreneurs. Standing up to government bullying may be the best money spent by those who believe in a free enterprise system.
This should not necessarily be confused with lobbying where constructive engagement with government officials is most typically used in hopes of persuading government to reverse or at least ameliorate an anti-business stance. The kid gloves need to come off at this point. Instead, the SuperPAC resources could be used as a tool to aid businesses in pursuing creative compliance and/or legal defiance in the face of unreasonable government regulations.
The backbone of the approach would be creative compliance and legal defiance spearheaded by the legal community. SuperPAC resources could be allocated to armies of lawyers who may help groups of businesses do the following: (a) come up with novel legal ways to deal with and/or legally circumvent the coming onslaught of unreasonable regulations (the creative compliance); and (b) also resort to vigorous litigation (the legal defiance) as needed.
The fact is that unelected bureaucrats inside of agencies such as the EPA hide behind legal theories to implement their fantasies of how businesses should be run. Lawyers funded by SuperPAC resources could initiate multiple class action lawsuits against government agencies, pursue injunctive relief and possibly target in lawsuits specific bureaucrats who otherwise operate with impunity. While we should be realistic that legal maneuvers will not stop all regulations from being ultimately implemented, any delays of burdensome regulations can buy the business sector time to add some more sorely needed points on the GDP scoreboard.
“During times of universal deceit, telling the truth becomes a revolutionary act.” — George Orwell
“There are two ways to be fooled: One is to believe what isn’t so; the other is to refuse to believe what is so.” — Soren Kierkegaard