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Tuesday, December 04, 2012 1:55 PM

Republican Infighting Over Fiscal Cliff; Senator DeMint Says House Speaker Boehner's Proposal Will "Destroy American Jobs"; Reflections on "Hard Choices"; Game Theory

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Republican House Speaker John Boehner’s has offered president Obama a proposal to generate $800 billion in new revenue. Obama rejected Boehner’s proposal in one hour flat because it does not go far enough in raising taxes on the wealthy.

Indeed, all Boehner proposed was closing loopholes. Yet, closing loopholes to raise $800 billion over ten years is too much for Tea-Party activists such as Senator Jim DeMint, co-founder of the Senate Tea Party caucus.

Bloomberg reports Republican DeMint Criticizes Boehner’s Deficit Plan.

House Speaker John Boehner’s proposal to generate $800 billion in new revenue “will destroy American jobs” and Republicans should oppose it, Senator Jim DeMint of South Carolina said today.

The comments from DeMint, co-founder of the Senate’s anti- tax Tea Party caucus, represent a strong indictment of Boehner’s plan from a fellow Republican lawmaker. Boehner yesterday proposed a $2.2 trillion deficit-cutting plan that seeks $800 billion in revenue in the next decade from an overhaul of the tax code that would curb some breaks.

“Speaker Boehner’s $800 billion tax hike will destroy American jobs and allow politicians in Washington to spend even more, while not reducing our $16 trillion debt by a single penny,” DeMint said in a statement. “Republicans must oppose tax increases and insist on real spending reductions that shrink the size of government and allow Americans to keep more of their hard-earned money.”

Other Republicans back Boehner’s offer including House Majority Leader Eric Cantor of Virginia, Budget Committee Chairman Paul Ryan of Wisconsin, and Senate Majority Leader Mitch McConnell of Kentucky.
Boehner's Plan Dead-on-Arrival

Boehner's plan is dead-on-arrival regardless of how many Republicans are in favor of it.

The president will not accept any plan that does not hike taxes on the wealthy, and unlike a few months ago, Obama is prepared to offer little or nothing to get his way.

Reflections on "Hard Choices"

Last summer, Obama said he was prepared to make "hard choices".

In return for higher taxes, I had this three-point proposal

  1. Ending collective bargaining of public unions
  2. Passing national right-to-work laws
  3. Scrapping the Davis-Bacon prevailing wage law

Negotiation tactics would have been easy.

Start by offering higher taxes on those making over $1 million, then work down to $250,000, putting pressure on the Democrats every step of the way. If Obama rejected the offer, the Republicans would have had the upper hand in who was to blame. If Obama accepted, we would have negotiated real reforms.

But No!

Republicans flushed a golden opportunity for "hard choices" right down the toilet.


Republicans were foolishly cocky as to their odds of winning the election.

As a result, we now witness massive infighting of Republicans, instead of massive Democrat infighting over "hard choices" a few short months ago.

The bottom line is we are going to suffer from higher taxes and get little in return for it, "not reducing our $16 trillion debt by a single penny” as Senator DeMint says.

Game Theory

At this point, game theory suggests both sides may have more to gain by doing nothing than compromising. If so, welcome to the fiscal cliff.

I am actually OK with that vs. the alternative of unwinding everything. We do need to address the deficit.

Unfortunately, game theory also suggest a deal in 2013, undoing the fiscal cliff, further kicking the deficit-can down the road.

Bright Opportunity Ahead

Looking ahead, I do see a shining light.
Rand Paul 2016! 

Mike "Mish" Shedlock

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