Isn’t it Ironic – the Underlying Fiscal Cliff Issue

I don’t often get the chance to quote an Alanis Morissette song lyric, but from her song “Ironic,” the often repeated lead lyric is “isn’t it ironic?” Since we are in the final countdown toward the fiscal cliff, I would like to add a verse to her song to discuss openly an underlying theme, one which the news agencies seem to ignore. I would also like to give a shout out to Vincent Mudd, Barneysday, and Hugh Curtler who on their respective blogs have provide useful and data driven perspective on the pending fiscal cliff (check them out at respectively at,, and

The irony is we are talking about extending in some form the Bush Tax cuts which are the primary reason we have the deficit today. As an independent voter, both political parties are misleading the American people and not talking about the shared sacrifice we need to resolve our deficit. Very clearly we need spending cuts. Yet, equally as clear is we need to raise tax revenue otherwise the math won’t work to solve our problem. Who says this? For starters, this is the basis of the Simpson-Bowles Deficit Reduction Plan.  However, I want to set that aside and go to a data point external to the US. I like to look at data which compares the US to the rest of the world as it gives an unbiased, comparative view of our problems and gets away from the politics of my data is better than your data.

I have cited before the well-respected global organization based in Paris called the Organisation of Economic Cooperation and Development (OECD). Please refer to their website at for validation of this information. One of the studies of data the OECD does is look at tax revenue relative to gross domestic product (GDP) of each country. Tax revenue includes federal, state and local taxes relative to GDP. At least going back to 1965, the OECD shows the comparative ratios of Taxes/ GDP for 34 countries. I have referenced this before, but let me reiterate data at two key time points.

– In 2009, the US ranked 32nd out of 34 countries in Taxes/ GDP, third from the bottom. Further, the US was just shy of 10% beneath the average ratio of the 34 countries.

– In 2000, the US still ranked low in standing for the 34 countries, yet was around 5% beneath the average of the 34 countries. This is the final year of Bill Clinton’s presidency and we actually had a budget surplus due to the efforts of Clinton, his Chief of Staff Erskine Bowles (why is that name so familiar?), and Congress.

The Bush Tax Cuts came in two waves after his inauguration in 2001. The first irony is we did not need the tax cuts then. One of Bush’s tax advisors was forced to resign after he publicly disagreed with Bush over these cuts. Even Warren Buffett was critical of the lowering of the dividend tax rate to 15% from the ordinary income tax rate. Paraphrasing his quote he said at the time you are giving millionaires a tax cut they do not need. And, there are far more knowledgeable people than me on this subject, but I offended some folks back in 2001 when I said we did not need these cuts and at some point we have to step up and pay for something. One of my pet peeves is politicians who cut taxes for political gain, as in my mind, any dumb ass can get elected saying they will cut taxes.

So, here we are over ten years later discussing whether we continue these tax cuts or just continue them on those making less than $250,000. Going back to my two data points from the OECD survey, that 5% differential from 2001 to 2009 in the US Taxes/ GDP ratio versus the 34 country average stands in the way of getting back to fiscal responsibility. This is why I am so strident in my views against the Tea Party (Taxed Enough Already Party) and Lobbyist Grover Norquist. Of course, we need to be smart about what we spend and we should cut spending in numerous areas including Defense. Yet, we have to step up and pay for something. To do this, we need to raise tax revenue. Messrs. Simpson and Bowles (there is that name again) know this which is why they include tax revenue increase (add Boehner and Obama’s proposal together to get close to theirs) along with spending cuts.

Of course, the GOP will tout growing the economy with lower taxes will do the same. First, economists have shown this is a fallacious argument. If you don’t believe me then why did Senator Mitch McConnell bury a report from a non-partisan governmental agency that came to this conclusion in October? Second, why does David Stockman, one of Ronald Reagan’s economic advisors say Trickle Down economics did not work? Third, why does Warren Buffett say the tax rates don’t get in the way of an idea that will make money. Tax rates have been historically higher in the US and we had a lot of investment going on then.

So, part of me agrees with my friend Barney who says let them go over the cliff and pull the scab off. The tax increases will get us closer to where we need to be. Economists have said the abruptness of the change may stall the economy. Coupled with this change is the cessation of extended unemployment benefits and the elimination of the temporary FICA tax roll back of 2% of pay. Even our friend Mr. Bowles says we should phase in the changes. Yet, if we did go over the cliff, we would all share the sacrifice.

That is where both parties are misleading the American people. All of us will have to play a role in reducing the budget. And, guess what – none of us will like it, but that is where our politicians need to shoot straight with the American people. At least the President gets part of this answer, but he does not go far enough. Thanks to Mr. Norquist, except for a few brave souls in the GOP, most have not gotten at least to where the President is.

So, Alanis “isn’t it ironic?” that we are debating over the extension of the key reason we have our deficit. Isn’t it ironic that the author the Bush Tax Cuts is considered by historians as one of the worst presidents in history, some pointing to this reason as he took a surplus budget and made it a deficit budget. I would ask the GOP if he was so great, how come he has not been invited to your last two conventions?

So, President Obama, Speaker Boehner and Senators Reid and McConnell, please shoot straight with the American people and start telling us what we need to hear. I do have a compromise for you, if you want one. Let the Bush Tax cuts expire – all of them – yet continue the FICA tax rollback of 2% of pay for one (or two) more year(s). It was temporary to begin with. Extend the unemployment benefits, but look for strategic cuts in Defense, Medicare and Social Security. Americans won’t like it, but they will understand if you start shooting straight with them and stop listening to lobbyists like Mr. Norquist and all of the defense contractors who don’t want you to cut their budgets.

Isn’t it ironic, don’t you think?

12 thoughts on “Isn’t it Ironic – the Underlying Fiscal Cliff Issue

  1. I still have the original press release from the President in 2000 justifying the largest tax-cut in history. 1. We have a balanced budget. 2. We have a surplus. 3. Washington is taking more of your money than it needs. 4. Lower taxes will grow the economy to a sataoned GDP rate of 6-7%. 5. Lowering taxes will create 20 million net new jobs during my term. 6. Lowering taxes will put more money in the hands of the middle-class.

    Please tell me why another 4 years of these rates would produce different results than the last 10 years. Einstein was right: some out there are insane and willing to do exactly the same thing , the same way and expect a different result.

    • The results have been nothing less than fantastic for those who promote them and profit from them. The only insanity here is in those who think capitalism has something to do with helping everyone. Capitalism is about helping yourself.

      Even when republicans lose elections they end up winning because the peasants can be counted upon, thanks to propaganda and a remarkably “dumbed down” education, to fight for crumbs among themselves. How many young people do you think there are out there who have ANY knowledge of what organized labor did for and to create the so called “American Way of Life”?

      As silly as this may sound, High School students today have zero mastery of cursive writing. They “write” their names like “making a mark” because they have memorized that particular combination of letters, but, no more. The claim is… “They don’t need it” along with the ability to do math in their head with the use of memorized times tables. We have calculators and keyboards for these things you see. No mention is made of the loss of the neurological advantages of fine motor skills and memorization. Forever gone is the phrase.. “That answer doesn’t look right.” It may be metaphorical, but, forever gone too is any claim to being an educated public when your population no longer has the ability to read their founding documents. They weren’t written with word processors. Thomas Jefferson didn’t “text” them in.

      To young Americans the Constitution and Bill of Rights may as well be written in Egyptian Hieroglyphics and god help us all if the power goes out.

      • Good comments. You are speaking to a much broader set of concerns. I still do the math to balance my checkbook, so I don’t lose the skill. Thanks, BTG

  2. Yay Alanis! I am torn on whether we should go over the cliff or not…it scares me on a number of levels, but I am glad that Obama is standing strong. I wish Congress would get its act together and stop having us toe the line on all of these dangeous cliffs….

  3. Isn’t it ironic that Medicare and Social Security are on the table while are “elected” reps disappear back under the private rock they crawled out under? The Bush tax cuts should expire and no concessions made to entitlement programs that a vast majority of Americans depend on to live a life of hard earned dignity. Obama works for the same masters that Romney does and it ain’t the American people. Kinda ironic isn’t it?

    • Thanks for writing Jeff. The biggest savings can be found under defense, but the very real miliary industrial complex is a powerful body. The Medicare changes they are talking about may push more in total cost to the exchanges and employers than it saves in Medicare. So, the government saves, but we pay more. Thanks for sharing your thoughts. The irony abounds here. BTG

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