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“Why the president will go over the fiscal cliff rather than compromise on tax rates” by Clark S. Judge

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The weekly column from Clark Judge:

Why the president will go over the fiscal cliff rather than compromise on tax rates
By Clark S. Judge, managing director, White House Writers Group, Inc.; chairman, Pacific Research Institute

Why is President Obama so unmovable about tax rates increases on high earners?

Oh, I know what he says. Fairness. The rich – whoever they are – must pay their fair share (I’m not going to get into whether they already do or maybe even pay more than their fair share).

But that’s no longer the question.

House Republicans have already conceded the point. They have offered reduced deductions that will raise as much as the administration claims increased tax rates will raise. They are clear. They want to keep tax rates low so as not stifle new business creation and growth, which for a variety of reasons is highly sensitive to personal tax rates. The products of the entrepreneurial renaissance that started in the last 1970s or early 1980s have created all the net new jobs in the U.S. over the past three decades.

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If today’s were a normal White House, administration officials would have grabbed the GOP plan in a DC minute. Never heard of a DC minute? It is like a New York minute, only a New York minute looks fast and is fast. A DC minute looks slow – as if you are thinking things over – but is almost instant, because whatever has been put on the table solves your problem and saves face all around. It is similar to, but not to be confused with, a Hollywood minute, which looks fast (“love you, Baby”) but never happens at all (“Don’t call us. We’ll call you”). The key is, like everything else in this town, a DC minute isn’t what it seems, but it works for everyone. But the Obama White House is not a normal White House.

Here is another Washington rule. When someone says 1) he wants something, and 2) please, deliver it in a blue package, but 3) you deliver it in a red package and 4) he says, take it back, then 5) he wanted something different all along, or, at least, what he asked for is not all that he wanted.

So what more is behind the president’s demand?

Some believe it is political. They contend the president wants to take the government over the fiscal cliff, which, thanks to media protection, he can get away with. Then he can blame Republicans for the financial chaos and universal tax hikes that follow, force a complete GOP surrender and take back the House at the next election.

How about this as an explanation though? He wants exactly the opposite of what Republicans want – and does so not out of pride or economic ignorance, but for the simplest and most direct of political motives – a key constituency wants it.

The constituency I have in mind is organized labor and the motive would be to put a break on the very entrepreneurial renaissance that Republicans so prize.

During the George W. Bush years, I proposed to a senior administration official – a board member of a major regulatory agency – that labor’s agenda was not all it seemed. I argued that labor was aggressively targeting the entrepreneurial small and medium-sized business sector, working to put it on the endangered species list. To my surprise he responded that he had wondered why the unions had weighed in aggressively on an issue before his commission on which they had no apparent interest. Desire to slowdown new business creation and expansion would explain it, he said.

But why? Why should labor go after the major source of American job creation? It has to do with the simple, classic approach of unions to all competition: stop it.

Here is the business problem, if you will, for the leaders of the U.S. labor movement. They are losing market share. They talk a lot about jobs – meaning union jobs – moving overseas. But at least as big an issue for them is the American entrepreneurial renaissance. By and large, the workers of the rising economy have rejected the movement’s attempts to organize them. And in industry after industry, these new and energetic non-union firms have been expanding at the expense of old unionized ones. In other words, one of the president’s major sources of support sees America’s entrepreneurial renaissance as competition and wants to, if not stop it, slow it drastically down.

Just to be clear, I am NOT saying this is the president’s motivation. I am suggesting it is the motive of key parts of the union movement. Mr. Obama is just, as they say in this town, dancing with the one that brung him.

If I’m right, that’s why he won’t move on tax rates.


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