Thursday, December 13, 2012

The Republicans Should Just Let Obama Take America Off Of the Cliff!

Forbes ^ | 12/13/2012 | Louis Woodhill

For the good of the country and the survival of the Republican Party, the GOP must allow President Obama to take America off the so-called “fiscal cliff” on January 1.

Given the intransigent position that Obama has taken on raising marginal tax rates, any deal that the Republicans in the House of Representatives could conceivably make with him before the end of the year would be counterproductive. It would impede economic growth, and thereby actually reduce the present value of future federal revenues. Such a deal would also further damage the Republican “brand”, which has been trashed by the “clueless conservatism” of practically every Republican leader since Ronald Reagan.

But wait! Doesn’t Obama have a mandate to raise taxes? No, he does not.
In the recent election, the electorate was perfectly capable of giving the Democrats control of the House of Representatives if this is what they wanted. They did so as recently as 2008. When the voters gave the House back to the Republicans in 2010, and left it with them in November, they did so for a reason.
The electorate, as a whole, understands economics. It therefore understands that what matters is the present value of future federal revenues. It is the present value of tax revenues, not the tax revenues in the current fiscal year or tax rates, that the financial markets care about. If raising tax rates could solve the financial problems of governments, Greece and Spain would be thriving right now.
Anyone with a copy of Microsoft Excel can demonstrate that America’s rate of economic growth has infinitely more impact on the present value of future government revenues that does the share of GDP that the tax system captures.

(Excerpt) Read more at forbes.com ...

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