Questions as ‘Fiscal Cliff’ Nears - Cutting taxes and raising spending are activities Washington always finds more satisfying

From The Wall Street Journal:

The most logical way to get something done quickly would be for Sen. Reid to take a bill the House passed a while back, which extended current tax rates for everybody; adjust it to reflect Democrats’ wishes to extend current rates only for families making less than $250,000 a year and allowing rates to rise for others; jam in some other eleventh-hour fixes such as extending exemptions to the Alternative Minimum Tax and continuing expanded unemployment insurance benefits; pass it in the Senate, and then send it back to the House.

One uncertainty in this scenario is whether Mr. McConnell would stand aside and let such a bill hit the Senate floor without objections or tactics to stall it. The benefit of the plan for Republicans is that they wouldn’t have to do anything proactively to let it move forward except stand aside and allow it to proceed. And they wouldn’t actually have to vote to raise anybody’s tax rates. They’d vote only to keep rates at current rates for most people, and rates on wealthier Americans would simply rise automatically.

3. How many Republicans in the Senate would go along with such a half-measure, and could House Speaker John Boehner get a majority of his Republican caucus to vote for it?

The question is relevant because the only way a last-minute fix could pass both chambers is with some combination of Democratic and Republican votes. Democrats likely would have to provide the bulk of the votes in the Senate and a healthy chunk of them in the House.

That would produce an odd case of shotgun-marriage bipartisanship in Washington. On the other hand, it may be that what the two parties really agree on at this point is that they’d rather go over the cliff, prove their points, wait for Mr. Boehner to be re-elected House Speaker Jan. 3 and then try again.

By then, tax rates will have gone up and spending cuts will have kicked in. At that point, the two parties then could negotiate ways to cut taxes and increase spending from their post-cliff levels. And cutting taxes and raising spending are activities Washington always finds more satisfying anyway.

Read all about it! Real all about it! - FreedomWorks tea party group nearly falls apart in fight between old and new guard

From The Washington Post:

The day after Labor Day, just as campaign season was entering its final frenzy, FreedomWorks, the Washington-based tea party organization, went into free fall.

Richard K. Armey, the group’s chairman and a former House majority leader, walked into the group’s Capitol Hill offices with his wife, Susan, and an aide holstering a handgun at his waist. The aim was to seize control of the group and expel Armey’s enemies: The gun-wielding assistant escorted FreedomWorks’ top two employees off the premises, while Armey suspended several others who broke down in sobs at the news.

The coup lasted all of six days. By Sept. 10, Armey was gone — with a promise of $8 million — and the five ousted employees were back. The force behind their return was Richard J. Stephenson, a reclusive Illinois millionaire who has exerted increasing control over one of Washington’s most influential conservative grass-roots organizations.

Stephenson, the founder of the for-profit Cancer Treatment Centers of America and a director on the FreedomWorks board, agreed to commit $400,000 per year over 20 years in exchange for Armey’s agreement to leave the group.

The episode illustrates the growing role of wealthy donors in swaying the direction of FreedomWorks and other political groups, which increasingly rely on unlimited contributions from corporations and financiers for their financial livelihood. Such gifts are often sent through corporate shells or nonprofit groups that do not have to disclose their donors, making it impossible for the public to know who is funding them.

The disarray comes as the conservative movement is struggling to find its way after the November elections, which brought a second term for President Obama and Democratic gains in the House and Senate. Armey said in an interview that the near-meltdown at his former group has damaged the conservative cause.

“FreedomWorks was the spark plug, the energy source, the catalyst for the movement through the 2010 elections,” Armey said, referring to the GOP midterm sweep. “Harm was done to the movement.”

Democrats push for tax cuts they once opposed - Even as they agree that taxes shouldn’t rise on the middle class when the economy is still weak, some liberals are worried by the prevailing Democratic view that the bulk of the Bush tax cuts should be made permanent. - And while, a decade ago, many Democrats favored maintaining higher tax rates to help fund domestic programs. It is much harder to take away a tax cut than make it.

From Tne Washington Post:

Democrats seeking a deal to avert the year-end “fiscal cliff” are trying to etch into stone the signature economic achievement of Republican President George W. Bush by permanently extending tax cuts enacted during his tenure.

President Obama has put the extension of the tax cuts for most Americans at the top of his domestic agenda, a remarkable turnaround for Democrats, who had staunchly opposed the tax breaks when they were written into law about a decade ago.

With Obama leaving his Hawaii vacation for Washington Wednesday evening and lawmakers returning Thursday, the main dividing line between Republicans and Democrats has come down to whether tax rates should increase for top earners at the end of the year, when the Bush-era tax cuts are set to expire. While Republicans want to extend all the cuts, Democrats are pushing to maintain lower rates on household income below $250,000. Those lower rates significantly reduce the taxes of nearly all American households that earn less than $250,000 — and many who earn more, even if tax rates are allowed to increase on income above that figure.

While it is increasingly unlikely that the two parties will reach an agreement to avoid the fiscal cliff before Jan. 1, it is all but certain that their ultimate deal, whenever it comes, will make permanent the lower rates for most Americans.

R. Glenn Hubbard, dean of the Columbia Business School and an architect of the Bush tax cuts, said it is “deeply ironic” for Democrats to favor extending most of them, given what he called their “visceral” opposition a decade ago. Keeping the lower rates even for income under $250,000 “would enshrine the vast bulk of the Bush tax cuts,” he said.

Democrats say they have reconsidered their opposition to the Bush tax cuts for several reasons. The cuts were written into law from 2001 to 2003 after a decade in which most Americans saw robust income growth. Over the past decade, by contrast, median wages have declined, after adjusting for inflation, amid a weak economy. Allowing tax cuts for the middle class to expire would further reduce take-home pay.

“We’ve had these tax cuts in place since 2001. The world changes, and the economy is where it is,” said Steven Elmendorf, who was chief of staff to former House minority leader Richard A. Gephardt (D-Mo.), a primary opponent of the Bush tax cuts. “With people’s economic status, we should not be raising taxes on people earning under $250,000.”

What’s more, income inequality has been growing. Sparing the middle class higher taxes while requiring the wealthy to pay more would tip the scales slightly in the other direction.

“The reason there’s been this movement toward broad consensus on renewing the tax cut for working- and middle-class families is that will give us a sharper progressivity in the tax system that is very much desired by Democrats and progressives who’ve seen an income distribution more and more distorted toward the wealthy,” said Betsey Stevenson, former chief economist in Obama’s Labor Department and a professor at the University of Michigan, who added that taxes may have to rise even more than currently contemplated to meet the country’s needs.

But more than economics is at work. Democrats have found what they consider a winning political argument in calling for lower taxes on the middle class and higher taxes on the wealthy. And while, a decade ago, many Democrats favored maintaining higher tax rates to help fund domestic programs, it is much harder to take away a tax cut than make it.

“Most fundamentally, it was due to a perception by Democrats that the political reality was moving to the right on economic policy,” said Jim Manley, a former top aide to Senate Majority Leader Harry M. Reid (D-Nev.). “The Democratic Party has adjusted to those realities and recognizes you’ve got to be more careful about focusing on the middle class.”

Even as they agree that taxes shouldn’t rise on the middle class when the economy is still weak, some liberals are worried by the prevailing Democratic view that the bulk of the Bush tax cuts should be made permanent. Liberals fear that lower revenue means less money for domestic programs, such as education, as well as for the social safety net.

The Bush tax cuts involve a long list of provisions, including lower federal income-tax rates for all Americans, lower tax rates on investment income such as capital gains and dividends, and tax benefits for married couples with children. The scheduled expiration of the Bush cuts, combined with an end to other temporary tax cuts enacted more recently by Obama and deep spending cuts, constitute the fiscal cliff, which is to take effect in January barring action by Congress. These dramatic fiscal changes could tip the U.S. economy back into recession.

Although primarily targeted toward households earning less than $250,000, the middle-class component of the Bush tax cuts also benefits those earning above that. The first $250,000 earned by even the wealthiest families is subject to lower rates. For this reason, Obama noted last month that under his proposal, “every American, including the wealthiest Americans, gets a tax cut.”

For instance, an individual taxpayer earning between $200,000 and $500,000 a year would pay an average of $515 more in taxes next year if the Bush tax cuts for the wealthy expire, according to the nonpartisan Tax Policy Center. But if all the Bush tax cuts were to vanish and the rich had to pay higher rates on all their income, their tax bills would shoot up by an average of $6,000. The very richest — the top 1 percent of earners — would pay much higher taxes if solely the upper-income tax cuts expire, because the savings from extending the rest of the rates would be relatively negligible.

In 2001, when Bush proposed the tax cuts, Democrats argued they would benefit the wealthy, create long-term deficits and deprive social programs of needed money. Some Democrats at the time were open to a more modest tax cut, especially one less favorable to the rich. Bush could push his tax cuts through Congress only by agreeing they would expire a decade later.

Under GOP pressure, Obama renewed them in 2010. He has vowed not to extend the upper-income tax cuts again. He is also demanding that at least $400 billion worth of tax breaks for the wealthy be eliminated to further reduce the deficit.

As Democrats warned a decade ago, the benefits of the Bush tax cuts have disproportionately flowed to upper-income earners, according to economists. The tax cuts, however, have also benefited less-fortunate Americans, slashing taxes for many low-income households and creating new credits to lighten the financial load of raising children.

The Democrats were also correct in warning about the effect on the government’s debt. The tax cuts did more to fuel ballooning federal deficits over the past decade than any other Bush administration action — including the wars in Afghanistan and Iraq and the creation of a prescription drug benefit for seniors, according to the Pew Fiscal Analysis Initiative. And in coming years, the Bush-era tax cuts are projected to expand the deficit by trillions more.

“The bulk of the [tax cuts] is baked into the cake, and we don’t talk about that. From a fiscal and economic policy standpoint, it makes no sense,” said Bob Greenstein, president of the left-leaning Center on Budget and Policy Priorities and a White House ally. “I don’t see how you can go into future decades with these tax cuts.”

But it’s not clear whether they took a toll on funding for social programs. Bush, for instance, created the new Medicare prescription drug benefit through increased federal borrowing.

GOP thinking about the tax breaks has also shifted over the past decade. While long the party of tax cuts, Republicans justified the Bush cuts largely in terms of refunding projected budget surpluses that emerged about a dozen years ago. “A surplus in tax revenue, after all, means that taxpayers have been overcharged,” Bush said in 2001. “And usually when you’ve been overcharged, you expect to get something back.”

But today, even though the budget is in far worse shape, Republicans defend the Bush tax cuts as helping the economy.

“It’s completely different today,” said Steve Bell, a former senior GOP budget staffer in the Senate. “Back then, we were thinking we had all this extra money.”

Just Do It Mr. President: Give Chuck a Chance

Tom Friedman writes in The New York Times:

In case you haven’t heard, President Obama is considering appointing Chuck Hagel, a former United States senator from Nebraska and a Purple Heart winner, as the next secretary of defense — and this has triggered a minifirefight among Hagel critics and supporters. I am a Hagel supporter. I think he would make a fine secretary of defense — precisely because some of his views are not “mainstream.” I find the opposition to him falling into two baskets: the disgusting and the philosophical. It is vital to look at both to appreciate why Hagel would be a good fit for Defense at this time.

The disgusting is the fact that because Hagel once described the Israel lobby as the “Jewish lobby” (it also contains some Christians). And because he has rather bluntly stated that his job as a U.S. senator was not to take orders from the Israel lobby but to advance U.S. interests, he is smeared as an Israel-hater at best and an anti-Semite at worst. If ever Israel needed a U.S. defense secretary who was committed to Israel’s survival, as Hagel has repeatedly stated — but who was convinced that ensuring that survival didn’t mean having America go along with Israel’s self-destructive drift into settling the West Bank and obviating a two-state solution — it is now.
      

I am certain that the vast majority of U.S. senators and policy makers quietly believe exactly what Hagel believes on Israel — that it is surrounded by more implacable enemies than ever and needs and deserves America’s backing. But, at the same time, this Israeli government is so spoiled and has shifted so far to the right that it makes no effort to take U.S. interests into account by slowing its self-isolating settlement adventure. And it’s going to get worse. Israel’s friends need to understand that the center-left in Israel is dying. The Israeli election in January will bring to power Israeli rightists who never spoke at your local Israel Bonds dinner. These are people who want to annex the West Bank. Bibi Netanyahu is a dove in this crowd. The only thing standing between Israel and national suicide any more is America and its willingness to tell Israel the truth. But most U.S. senators, policy makers and Jews prefer to stick their heads in the sand, because confronting Israel is so unpleasant and politically dangerous. Hagel at least cares enough about Israel to be an exception.

      

No one captured the despair in Israel better than Bradley Burston, a columnist for the Israeli newspaper Haaretz, who wrote the other day: “This year, for Hanukkah, I want one person running this country, this Israel, to show me one scrap of light. One move — any move — for freedom, for all the peoples who live here. One step — no matter how slight — in the direction of a better future. What makes this Hanukkah different from all others? It’s the dark. It’s the sense that this country — beset by enemies, beset by itself — has locked down every single door against the future, and sealed shut every last window against hope. ... This country has begun to feel like a lamp whose body is cracked and whose light seems all but spent. On these long nights, we can make out little but an occupation growing ever more permanent, and a democracy growing ever more temporary.”

      

So, yes, put me in the camp of those who think that a few more bluntly outspoken friends of Israel in the U.S. cabinet would be a good thing.

      

The legitimate philosophical criticism of Hagel concerns his stated preferences for finding a negotiated solution to Iran’s nuclear program, his willingness to engage Hamas to see if it can be moved from its extremism, his belief that the Pentagon budget must be cut, and his aversion to going to war again in places like Iraq and Afghanistan, because he has been to war and knows how much can go wrong. Whether you agree with these views or not, it would be nothing but healthy to have them included in the president’s national security debates.

      

For instance, it’s impossible for me to see how America can secure its interests in Iran, Afghanistan, Iraq, Syria, Bahrain and Lebanon without ending the U.S.-Iran cold war in the Middle East. I’m skeptical that it’s possible. I think the Iranian regime needs hostility with America to justify its hold on power. But with sanctions really biting Iran, I’d like to test and test again whether a diplomatic deal is possible before any military strike. I think Hamas is dedicated to Israel’s destruction and has been a disaster for the Palestinians. But it is a deeply rooted organization. It controls Gaza. It is not going away. I don’t think America or Israel have anything to lose by engaging Hamas to see if a different future is possible. I think the world needs a strong America to maintain global stability. But the “fiscal cliff” tells you that our defense budget is coming down and we need to cut with a smart strategic plan. I think it would be useful to have a defense secretary who starts with that view and does not have to be bludgeoned into it.

      

So, yes, Hagel is out of the mainstream. That is exactly why his voice would be valuable right now. President Obama will still make all the final calls, but let him do so after having heard all the alternatives.

Clout Diminished, Tea Party Turns to Narrower Issues - FreedomWorks, a national group that has played a crucial role in organizing Tea Party activists and backing insurgent candidates, has been riven by turmoil, leading to the departure last month of its chairman, Dick Armey.

From The New York Times:

The Tea Party might not be over, but it is increasingly clear that the election last month significantly weakened the once-surging movement, which nearly captured control of the Republican Party through a potent combination of populism and fury.

Leading Congressional Republicans, though they remain far apart from President Obama, have embraced raising tax revenues in budget negotiations, repudiating a central tenet of the Tea Party. Even more telling, Tea Party activists in the middle of the country are skirting the fiscal showdown in Congress and turning to narrower issues, raising questions about whether the movement still represents a citizen groundswell to which attention must be paid.
      

Grass-roots leaders said this month that after losing any chance of repealing the national health care law, they would press states to “nullify” or ignore it. They also plan to focus on a two-decade-old United Nations resolution that they call a plot against property rights, and on “fraud” by local election boards that, some believe, let the Democrats steal the November vote.

      

But unlike the broader, galvanizing issues of health care and the size of the federal government that ignited the Tea Party, the new topics seem likely to bolster critics who portray the movement as a distraction to the Republican Party.

      

“People in positions of responsibility within the Republican Party tolerated too much of this,” said Fergus Cullen, a former chairman of the New Hampshire Republican Party. He blamed a backlash against “tinfoil hat” issues pushed by the Tea Party-dominated legislature in New Hampshire for the loss of a Republican majority in the State House last month and a near loss in the State Senate. Republican leaders “looked the other way too often,” he said. “They sort of smiled, winked and nodded too often, when they should have been calling ‘crazy, crazy.’ ”

      

The movement is not going away — most Republicans in the House have more to fear from primary challengers on their right than from Democratic challengers. An unpopular budget deal could reignite the Tea Party, as the antitax crusader Grover Norquist predicts.

      

But surveys of voters leaving the polls last month showed that support for the Tea Party had dropped precipitously from 2010, when a wave of recession-fueled anger over bailouts, federal spending and the health care overhaul won the Republicans a majority in the House.

      

The House members elected with Tea Party backing in 2010 forced onto the national agenda their goals of deep cuts to spending and changes to entitlement programs, embodied by the budget blueprints of Representative Paul D. Ryan of Wisconsin, who became Mitt Romney’s running mate. And some of those lawmakers led the revolt last week that prompted Speaker John A. Boehner to cancel a House vote on a plan to avert a year-end fiscal crisis by raising tax rates on household income above $1 million.

      

“The Tea Party put a lot of steel in the spine of the Republican Party,” said Representative Tom Cole of Oklahoma.

      

But the Tea Party activists have not been front and center in the fiscal fight. And Mr. Cole added that Tea Party leaders now excoriating Mr. Boehner for offering higher taxes in a budget deal did not recognize political reality.

      

“These guys want instant success,” said Mr. Cole, a member of the House Republican leadership. “If they want to see a better result, they’ve got to help us win the United States Senate. We’ve thrown away some seats out of political immaturity.”

      

But a number of Republican leaders said the Tea Party seemed headed toward becoming just another political faction, not a broad movement. It may rally purists, but it will continue to alienate realists and centrists, they said.

      

“I think the Tea Party movement is to the Republicans in 2013 what the McGovernites were to the Democrats in 1971 and 1972,” said Don Gaetz, a Republican who is the president of the Florida Senate. “They will cost Republicans seats in Congress and in state legislatures. But they will also help Republicans win seats.”

      

Because the Tea Party comprises thousands of local groups, it is impossible to determine whether its ranks shrank after the many electoral defeats last month, which activists said caused grief and deep frustration.  

 

 Greg Cummings, the leader of the We the People Tea Party in rural Decatur County, Iowa, said his group had picked up 12 members since the election, for a total of about 50. “If you were in a fight and someone gave you a good left hook, it doesn’t mean the fight is over,” he said.

      

But Everett Wilkinson, the chairman of the Florida Tea Party in Palm Beach County, said the number of active Tea Party groups statewide “has diminished significantly in the last year or so, certainly in the last couple of months,” with only a third of what there once was.

      

“A lot of people gave their heart and soul to trying to get Obama out; they’re frustrated,” he added. “They don’t know what to do. They got involved with the electoral process, and that didn’t work out.”

      

FreedomWorks, a national group that has played a crucial role in organizing Tea Party activists and backing insurgent candidates, has been riven by turmoil, leading to the departure last month of its chairman, Dick Armey, a former Republican majority leader in the House.

      

Mr. Armey said in news accounts that he questioned the ethical behavior of senior officials in the group, though others told of a power struggle. He was eased out with an $8 million consulting contract, a copy of which was obtained by The Associated Press.

      

FreedomWorks spent nearly $40 million on the 2012 elections but backed a string of losing Senate candidates, including Richard E. Mourdock of Indiana, Josh Mandel of Ohio and Connie Mack of Florida. Some Tea Party firebrands lost their House seats, including Allen B. West of Florida and Joe Walsh of Illinois.

      

One notable success for the Tea Party was the Senate victory by Ted Cruz of Texas.

      

Mr. Cummings, who is the Midwest coordinator for Tea Party Patriots, a national group, said a major issue he would be focusing on now was Agenda 21, a United Nations resolution that encourages sustainable development. It has no force of law in the United States, but a passionate element of the Tea Party sees it as a plot against American property rights.

       

Billie Tucker, an activist with the First Coast Tea Party in Florida, said she and others suspected that corruption on local election boards had led to Mr. Obama’s victory in the state. Activists want to investigate.

      

“Some people say it’s just a conspiracy theory, but there’s rumbling all around,” she said. “There’s all kinds of data, and no one’s talking about it, including, hello, the mainstream media.”

      

Another issue boiling is the “nullification” of the Affordable Care Act. Angry that Mr. Obama’s re-election means that the health care law will not be repealed, some activists claim that states can deny the authority of the federal government and refuse to carry it out.

      

At a Florida State Senate meeting this month, two dozen Tea Party activists called the law “tyrannical” and said the state had the right to nullify it.

       

Mr. Gaetz, the Senate president, a conservative Republican, said in an interview that he, too, disagreed with the Supreme Court ruling that upheld the law. But he called nullification “kooky.”

“We’re not a banana republic,” he said. It is “dangerous to the foundation of the republic when we pick and choose which laws we will obey.”

Tea party stays on the sidelines as Obama, Republicans in Congress tackle fiscal cliff - The ideas advocated by the tea party — which helped propel concerns about federal spending and borrowing to the forefront of the national debate and fuel 2010’s Republican sweep of the House — still resonate in the GOP.

From The Washington Post:

The tea party movement has been nearly invisible in the intensive lobbying campaign over the “fiscal cliff,” even as Congress and the White House debate the issues of government spending and national debt that are at the core of the movement’s identity.

In many ways, the tea party was made for this moment. The grass-roots opposition to President Obama’s agenda that arose in 2009 has been so focused on fiscal concerns that leaders once prevented speakers at tea party rallies from even discussing abortion and other social issues.

And in fact, it is the tea party that helped bring the country to this moment. The automatic spending cuts at the heart of the year-end fiscal cliff grew out of the tea party’s fierce campaign last year to slash federal budgets and cap government borrowing.

Yet as groups across the political spectrum seek to influence any deal to avert the cuts and tax increases set to kick in Jan. 1, the tea party has been unusually — and deliberately — quiet. Members still call and e-mail Congress but have held no rallies and done little lobbying.

When tea party leader Jenny Beth Martin recently journeyed to the Capitol from her Atlanta area home, for example, she did not bring with her the bus loads of tea party members who once descended on Washington to rally for fiscal restraint.

As she toured the offices of several Republican House members, Martin barely brought up the fiscal cliff negotiations that could chart the nation’s budgetary future, according to Martin and congressional aides.

Her focus instead? Fighting over spending at the state level.

“We’re sitting back’’ on the fiscal cliff, said Martin, co-founder of Tea Party Patriots, the nation’s largest tea party group. Republicans in Congress, she said, “have proven they’re not going to listen to us,’’ adding that House Speaker John A. Boehner (R-Ohio) is a “cave man” for his willingness to consider tax increases.

Tea party activists say they feel despised by Democrats and ignored by Republicans, and they still resent the blame they received for last year’s debt ceiling crisis, in which tea-party backed lawmakers demanded deep spending cuts in return for increasing the federal borrowing limit and helped push the nation to the brink of default.

“We’re thinking, ‘instead of wasting our time with these people, maybe we should go home and actually enjoy our families for the holidays,’’ said Marianne Gasiecki, an Ohio tea party activist. “We’re saying, ‘You can’t blame us for this one.’ But they’ll blame us anyway. Someone has to be the scapegoat.’’

Unless members of Congress “are blind, deaf and dumb,’’ Gasiecki added, “there’s no way they could not have heard what’s been screamed at them for the past four years.’’

Indeed, the ideas advocated by the tea party — which helped propel concerns about federal spending and borrowing to the forefront of the national debate and fuel 2010’s Republican sweep of the House — still resonate in the GOP. An example, said conservative strategist Keith Appell, was the failure last week of Boehner’s “Plan B” legislation to avoid the fiscal cliff, which was doomed when conservative Republicans in the House declined to endorse a tax increase even on millionaires.

“The tea party vision for fiscal sanity is still very powerful in Washington,’’ said Appell, senior vice president at CRC Public Relations in Alexandria.

Michael Steel, a Boehner spokesman, said the speaker, “like virtually every House Republican, was elected with Tea Party support in 2010 and 2012 — and he deeply appreciates that support.”

“The (fiscal cliff) is obviously a massive debate about what our country’s fiscal future is going to look like, and you’re looking around going, ‘Where is the tea party?’’’ said Ned Ryun, president of American Majority, a political training institute allied with the movement. “Part of this is simply that some of the movement has disappeared.’’

That is a far cry from the tea party’s halcyon days, when members flocked to D.C. rallies against Obama’s health-care overhaul and what they considered excessive spending. During last year’s dispute over the debt ceiling, tea party members called for a government shutdown during a rally at the Capitol. The debate ultimately produced a deal to raise the borrowing limit but also set up automatic cuts, which are part of the fiscal cliff.

But soon after the Nov. 6 election, more than 100 Tea Party Patriots leaders and state coordinators gathered at a Hyatt hotel in Washington and chose a different strategy for the fiscal cliff. “We decided to treat Congress like grown-ups and say, ‘Fix it,’’’ said Gasiecki. “It’s like parents who have raised their kids well and step back and say, ‘Prove to us that you’ve been listening.’"

How Party of Budget Restraint Shifted to ‘No New Taxes,’ Ever - “Republicans used to be interested in not running continual rivers of red ink.”

From The New York Times:

On a Saturday afternoon in October 1990, Senator Pete V. Domenici turned from a conversation on the Senate floor, caught the eye of a clerk by raising his right hand and voted in favor of a huge and contentious bill to reduce federal deficits. Then he put his hand back into his pocket and returned to the conversation.
      

It was the end of an era, although no one knew it then. It was the last time any Congressional Republican has voted for higher income taxes.

      

The conservative revolt against that 1990 legislation — and against President George Bush, who violated his own “Read my lips” vow not to increase taxes — was a seminal moment for Republicans. The party of balanced budgets became the party that opposed tax increases.

      

When conservatives sank Speaker John A. Boehner’s plan last week to acquiesce on tax increases for the most affluent Americans as part of a potential broader deal with the Obama administration to avert tax increases for everyone else, several said that 1990 accord was a reason. They regard Mr. Bush’s broken promise as a major reason he was not re-elected, and they say the budget agreement proved that such compromises do not restrain the growth of government.

      

But the 1990 legislation also highlights a basic challenge now facing the party, which the chaos within the House caucus helped bring into public view on Thursday night.

      

Republicans continue to embrace the no-new-taxes stand as a centerpiece of the party’s identity, even in the face of public opinion that strongly supports tax increases on high incomes. And some Republicans fear that the party’s commitment to prevent tax increases more and more is coming at the expense of those other, older kinds of fiscal responsibility.

      

“Republicans used to be interested in not running continual rivers of red ink,” said former Representative William Frenzel, a Minnesota Republican who as the ranking member of the House Budget Committee in 1990 helped to negotiate the deficit deal. “If that meant raising taxes a little bit, we always raised taxes a little bit. But nowadays taxes are like leprosy and they can’t be used for anything, and so Republicans have denied themselves any bargaining power.”

      

The resulting debate has created perhaps the greatest test of the tax stand in the last two decades. Republicans who are willing to accept tax increases as part of a broader deal are pitted against a conservative wing, restocked by the Tea Party wave of 2010, that insists that opposition to tax increases is particularly important at times like these, when the temptation is greatest to avoid spending cuts by asking Americans for just a little more. Many in the antitax camp come from deeply conservative districts and were re-elected by wide margins.

      

They were not even swayed by Grover Norquist, the activist and arbiter of antitax orthodoxy, who has pushed politicians for the last 25 years to promise that they will not vote to raise taxes, a pledge a vast majority of Congressional Republicans have signed. Mr. Norquist said Mr. Boehner’s proposal was not a tax increase, but he could not convince the generation of politicians he helped create.

“We know that our big problem is too much spending,” Representative Louie Gohmert, Republican of Texas, said on Fox News last week, explaining his opposition to Mr. Boehner’s plan. “We know that President Reagan fell into the trap and President George H.W. Bush fell in the trap of ‘Here, just raise taxes on somebody, and we’ll come along with the cuts later.’”

      

The Republican Party’s embrace of tax cuts is often traced to the 1970s, when conservative thinkers began to argue that cuts were not just politically advantageous but also fiscally responsible. The economist Arthur Laffer advanced the theory that cuts could even be self-financing, because they could generate enough economic activity to increase revenue.

      

Others said that cutting taxes would force the government to cut spending too, an idea colorfully described as “starving the beast.”

      

But the movement did not truly take hold until the early 1990s. Some Congressional scholars argue that opposition to tax increases offered a new kind of ideological glue after the cold war. Others cite changes in the political landscape, including the rise of advocacy groups like Mr. Norquist’s Americans for Tax Reform, and the purification of Congressional districts through gerrymandering, which led House members to fear primaries more than general elections. And the electoral success of the political strategy — many voters are swayed by promises of a lower tax bill — became its own justification.

      

In the early 1980s, majorities of Congressional Republicans voted for a pair of deficit deals orchestrated by President Ronald Reagan, even though tax increases accounted for more than 80 percent of the projected reductions. But by 1987, a majority of Republicans opposed a third deal, even though only 37 percent of the reductions came from tax increases.

       

The 1990 battle echoed the present situation. The economy was struggling. Deficits were growing. Congress had enacted automatic spending cuts that it was racing to avoid. Republicans did not want to raise taxes. Democrats did not want to cut spending. Mr. Bush, convinced that the government needed to balance its books, reluctantly agreed to break his no-new-taxes pledge. Once again, less than 40 percent of the money came from tax increases. Once again, a majority of Republicans voted no.

      

By 1993, not a single Republican would vote for a deficit package drafted by the Clinton administration and Congressional Democrats that laid the groundwork for the first balanced budget since the late 1960s.

      

Instead, in 2001 and 2003, Republicans passed tax cuts that more than reversed the increases during the Clinton administration.

      

“When I entered politics, the frame of reference was a balanced budget as the principal conservative precept,” said former Representative James Leach, an Iowa Republican who served from 1977 to 2007. “Today, it’s the level of taxes.”

      

In order to maintain that commitment, Republicans need to develop a similar consensus about how to reduce federal spending. The federal budget, particularly spending on health care programs, is projected to grow rapidly as the country ages and as medical costs continue to rise, leaving Washington in need of more revenue.

      

The party’s conservative wing wants to circumscribe those benefit programs, despite their popularity among voters. The goal of balancing the federal budget has all but vanished, replaced by the idea that deficits should be reduced to sustainable levels.

       

The 1990 deal still won the support of 47 Republicans in the House and 19 Republicans in the Senate. Only 4 of those 66 are still in Congress, and Senator Richard G. Lugar of Indiana and Representative Jerry Lewis of California both will be gone at the end of the current session, leaving just two: Senator Thad Cochran of Mississippi and Representative Frank R. Wolf of Virginia.

      

Mr. Domenici, the New Mexico Republican who played a significant role in negotiating the 1990 deal, which he regarded as necessary to reduce federal deficits, left the Senate in 2009. But he has continued to advocate a similar approach as a co-chairman of a commission organized by the Bipartisan Policy Center that called for a mix of revenue increases and spending cuts to stabilize the federal debt.

      

He said he was frustrated by the reflexive opposition of conservatives to any kind of tax increase, but he added that Democrats had also shown little willingness to negotiate necessary cuts in spending on federal entitlement programs.

 

Democratic line, too,” he said. “There isn’t any Democrat in here that is going to help with these cuts.”

Michigan Effort Shows G.O.P. Sway in State Contests - Starting next year, Republicans will have one-party control in almost half of the state capitals in the country.

From The New York Times:

As Republican leaders in Washington grappled after the election with their failure to unseat President Obama, Dick DeVos, one of Michigan’s wealthiest men, began dialing up state lawmakers in Lansing.

Although Mr. Obama won Michigan handily, Republicans had kept control of the Legislature. A union-backed ballot measure to enshrine collective bargaining rights in the State Constitution was defeated, thanks to an aggressive campaign against it that was financed in part by $2 million of DeVos family money.

The time had come, Mr. DeVos told Republican lawmakers, for the bold stroke they were considering: a law banning requirements that workers pay union dues or fees, in the state where the modern American labor movement was born. If the lawmakers later found themselves facing recalls or tough re-election fights, Mr. DeVos told them, he would be there to help.

“That was when I started to say, you know what, this thing could happen,” Mr. DeVos said on Friday. “These people really are serious and committed.”

The lawmakers and Gov. Rick Snyder, who is also a Republican, rapidly approved the legislation and delivered a body blow to the labor movement.

Yet much of the groundwork for the quick victory was laid months and years before by a loose network of donors, strategists and conservative political groups that has sought to win Republican control of legislatures around the country and limit unions’ political power. Their bet: that money invested in local elections would yield concrete policy victories that could not be had in Washington.

Where the big-spending conservative groups active in this year’s presidential race had little to show for their millions of dollars, the state efforts were strikingly successful. While Mr. Obama was winning onetime red states like Virginia and swing states like Michigan and Ohio, Republicans made large gains in state offices in many of the same battlegrounds. Starting next year, Republicans will have one-party control in almost half of the state capitals in the country.

Former Secretary of Defense and former CIA director Robert Gates and topic of: Cliff Talks Avoid Military Health Plan - Tricare's Costs Have Grown Sharply, but Potential Savings Aren't on Table; Veterans Resist Calls to Carry Heavier Burden

Reading the below article this morning that mentions Secretary Robert Gates made me wonder if I might hear this topic on the evening of February 2.

Last night a friend gave Sally and me tickets to hear Secretary Gates at the Florida Theater in Jacksonville, Florida, as part of something called the Florida Forum Series. This series seeks to bring some of the world's most widely known public figures to Jacksonville, with the series benefiting Wolfson Children's Hospital.

On February 2 former Secretary of Defense and former CIA director Dr. Robert M. Gates will be the featured lectuerer and guest. Considered “The Soldier’s Secretary” for his commitment to placing the men and women in uniform as his top priority, I couldn't help but wonder if I might hear his observation noted in the below article conveyed on February 2.

From The Wall Street Journal:

Washington's budget negotiators are considering cost-saving changes in the nation's entitlement programs, with one notable exception: military health care.

Like the rest of the U.S. health system, the military's program, known as Tricare, has a cost problem. For years, the Pentagon has sought to raise fees and revamp the system, with successive Defense secretaries warning that the program, if left unchecked, would eat into the rest of the military budget.

Pentagon overhaul efforts, however, have been rejected repeatedly by Congress, where there is broad, bipartisan opposition to raising health-care costs for America's military. And in the current round of budget talks, which are aimed at averting January's tax increases and spending cuts, no one has yet suggested helping to cut the deficit with the billions that could potentially be saved by making changes to Tricare.

"It's a third rail for both parties," said Todd Harrison, a defense specialist at the Center for Strategic and Budgetary Assessments, a nonpartisan think tank with close ties to the Pentagon.

Under the military health plans, 10 million people—active military, veterans and their families—pay a fraction of the fees most Americans pay for care. In 2011, retirees and families enrolled in the basic military health-care program paid an average of $880 in annual copayments and fees, according to the Congressional Budget Office. Most American families in employer-provider health plans paid an average of nearly $5,000.

For 15 years until this year, the enrollment fee for Tricare's health-maintenance-organization plan was fixed at $230 for individuals and $460 for families. That has helped drive up the program's budget from $19 billion in 2001 to $51 billion this year. Without changes, the Congressional Budget Office said, that number will hit $65 billion in five years and $77 billion by 2022.

Two years ago, then-Defense Secretary Robert Gates warned that "heath-care costs are eating the Defense Department alive."

This year, the administration pushed for changes including higher enrollment fees that could save $1.8 billion next fiscal year and nearly $13 billion by 2018. Congressional committees have moved to block the changes, though the administration succeeded in raising the annual family enrollment fee to $520.

Veterans groups have sent more than 110,000 messages to the nation's leaders, urging them to shield military retirees from shouldering more costs in talks for any "grand bargain" on the deficit, said Steve Strobridge, director of government relations for the Military Officers Association of America.

He also said Mr. Gates's fears are overstated, noting the Pentagon's health-care budget ended the past two years with a small surplus. The system accounts for about 11% of the defense budget, Mr. Strobridge said. "There is a value to [veterans'] service and sacrifice…that we won't allow to be discounted by people who only want to account for what they pay in cash," he said.

This year, the association has supported small increases in copayments for drugs, but it opposed the larger fee increases sought by the administration.

Mr. Harrison, the defense budget analyst, said the Pentagon, like the nation as a whole, has to get a handle on rising health-care costs or risk seeing the military shrink instead.

"There aren't easy options here, but when you think about it in the larger context of the defense budget, you're going to have to make some tough decisions," he said.

Some veterans say military health-care benefits should be scrutinized, but they resist shouldering more costs to reduce the nation's budget woes.

Brandon Friedman, a U.S. Army officer who was awarded two Bronze Stars for his service in Afghanistan and Iraq, said many veterans could be persuaded they needed to pay a few pennies more to help their government out of its fiscal crisis. But he chafed at the notion that the government would ask veterans to sacrifice if it doesn't find other ways to deal with the nation's deficit.

"After a decade of war, you asked people to serve their country and repeatedly deploy and risk their lives, and then you say: Sorry, we're out of money?" he said. "I just don't think that's fair."

Most Governors Refuse to Set Up Health Exchanges

From The New York Times:

The Obama administration said Friday that more than half the states had rejected its pleas to set up their own health insurance exchanges, dealing a setback to President Obama’s hopes that Republicans would join a White House campaign to provide health insurance to all Americans.

Friday was the deadline for states to notify the federal government of their plans, and administration officials had been hoping that Mr. Obama’s re-election would overcome resistance to the new health care law.

Federal officials said they knew of 17 states that intended to run their own exchanges, as Congress intended.

 

The exchanges are online supermarkets where people can shop for private health insurance and obtain federal subsidies to help defray the cost. The Congressional Budget Office has estimated that 25 million people will eventually receive coverage through the exchanges.

Federal officials and federal contractors will set up and run the exchange in any state that is unable or unwilling to do so.

 

The concept of an exchange is simple: Competition will drive down prices. But operating an exchange is an immense technical challenge requiring sophisticated information technology to digest and display huge amounts of data on the costs and benefits of various insurance plans.

 

Administration officials said they were delighted this week when a Republican governor, C. L. Otter of Idaho, announced plans to establish a state-run exchange.
 

However, Mr. Otter’s rationale provided little comfort to the administration. He said he did not want to surrender power to “federal bureaucrats.” He denounced “the mandates and overreaching federal authority of the Affordable Care Act.” He said the law “will do little or nothing to reduce costs while force-feeding us coverage and increasing the size and scope of government.” And he said his decision could be rescinded if the State Legislature disagreed with him.
 

Pennsylvania seriously considered running its own exchange, but Gov. Tom Corbett said on Wednesday that he would not pursue the idea.
 

“State authority to run a health insurance exchange is illusory,” Mr. Corbett said. “In reality, Pennsylvania would end up shouldering all of the costs by 2015, but have no authority to govern the program.”

Susan Rice has so often been criticized as being an unusually undiplomatic diplomat, direct to the point of rudeness. But friends and former White House aides say that Ms. Rice’s style is a reflection of Mr. Obama’s own: impatient with niceties, uninterested in small talk or long dinners, focused solely on results.

From The New York Times:

For President Obama, the decision to forgo the fight to make Susan E. Rice his secretary of state was a deeply painful one. It required publicly abandoning one of his most loyal aides, who had broken with the Democratic foreign policy establishment early to side with his improbable candidacy, and whose blunt-speaking style — which helped cost her the job — had always been, for Mr. Obama, a part of her appeal.

Typically, just hours before she called Mr. Obama to tell him she had decided to withdraw from contention as Hillary Rodham Clinton’s successor, she rebuked her Chinese counterpart in an informal meeting of the United Nations Security Council, telling him his views excusing a North Korean missile launching this week were “ridiculous.”

He shot back, according to witnesses, that she “better watch your language.”

It was the latest example of why Ms. Rice, the American ambassador to the United Nations, has so often been criticized as being an unusually undiplomatic diplomat, direct to the point of rudeness. But friends and former White House aides say that Ms. Rice’s style is a reflection of Mr. Obama’s own: impatient with niceties, uninterested in small talk or long dinners, focused solely on results.

Charlie Harper's words of advice: Obstructionism and political isolationism are much easier. But the only majority that that will result from Tea Party activists abandoning their party already in a minority negotiating position will be that of Democrats.

Charlie Harper writes in the Dublin Courier Herald:

The Tea Party is at an interesting moment in time. Nonexistent just 4 years ago, the movement crashed onto the scene in time to change the 2010 elections and stop the Obama administration in its tracks. The various groups operating under the same moniker allied with Republicans to take control of the House, but also took on incumbent Senators with mixed results.

2012 was a more frustrating election year for those who identify with the movement. Despite having a large slate of GOP presidential candidates acceptable to the brand, the party eventually nominated Mitt Romney. Early successes in GOP Senate primaries ultimately resulted in the GOP losing Senate seats. Tea Party backed candidates for House leadership posts to serve in the next Congress were beaten back by more “establishment” candidates favored by leadership.

Meanwhile, the “grand bargains” to solve budget, tax, and deficit issues
 have been delayed into a situation that is largely the same after the election of 2010. Republicans control the House, the Democrats control the Senate, and President Obama has 4 more years at 1600 Pennsylvania Avenue.

It’s quite natural – and quite acceptable – that Tea party activists had an overall strategy to stall and obstruct from 2010 until the 2012 elections. After all, the “mandate” of the 2010 election was a rebuke of the previous two years. All House Republicans and the larger minority in the Senate could do was contain the situation in a status quo mode so that big picture policy issues – and the direction of the country – could be decided by voters in the November elections. The results of November – that of continued status quo – leave the parties in place, as is.

Republicans in leadership who have decried the “lack of certainty” because of Washington’s changing tax and regulatory environment have decided, more or less, that it is time to govern. It is time for some certainty. They have also acknowledged, quite directly, that holding only the House means that at least for the next two years Washington will not be governed exclusively on Republicans’ terms. Activists within the Tea Party movement, not surprisingly, are not taking this exercise in reality very well.

One of the great difficulties of being in the party that doesn’t hold the White House is that there is no titular spokesperson for the party. The closest Republicans have for that role is Speaker John Boehner, who has the unenviable role of trying to negotiate with the White House for an acceptable fiscal cliff solution while attempting to keep independent minded Tea party activists within the fold. It’s not going well.

While the President seems to be more interested the economics of forcing Republicans to vote for higher tax rates rather than the economics of trying to maximize revenue or minimize deficits, Tea Party activists are bristling at the mere suggestion that federal revenues may be increased, much less than the fact that tax rates may be going up. And, as is custom, there are calls to remove Boehner. This is where Tea Party activists must decide what is their future, and whether it is with the Republican Party.

While various threats to challenge the Speaker are likely to surface, Eric Cantor who generally represents the Tea Party wing of House Republicans within leadership appears fully on board with Boehner. Georgia’s Tom Price who challenged one of Boehner’s leadership preferences in caucus elections spent Monday putting down rumors that he is running for Speaker. There does not appear an appetite from within the caucus to undercut the Speaker while he attempts to negotiate, and in effect, govern.

In response, Tea Party activists are now circulating an article from RedState.com suggesting that 16 conservatives need to withhold their vote for Speaker when the House re-convenes in January. Their reasoning? “If no nominee for speaker receives 218, the House remains speakerless—as it did during parts of the Civil War.”

This approach is not constructive and would spell doom for the Republican Party and ultimately the Tea Party. The House is the one part of government which Republicans control. Should this tactic be advanced, it would demonstrate that Republicans can’t even manage to govern within the confines of what they can control.

The message it would send to an electorate that re-elected Barack Obama would be more striking than any caricature of the Tea Party currently promoted by the most partisan MSNBC commentator. It would prove that Republicans aren’t interested in governing, but only obstructing. This is not a risk worth taking.

It’s time the Tea Party takes a long look at itself and the state of their movement. They have proven that they can be effective agents for change. They have also proven that they can force decisions that cost Republicans seats – which makes the Democrats that they fight grow stronger.

The Tea Party needs to spend more time on developing a message of why smaller government is better, and how that would work for Americans who currently depend would be better off with less – and what that transition would look like.

That’s no small nor easy task. Obstructionism and political isolationism are much easier. But the only majority that that will result from Tea Party activists abandoning their party already in a minority negotiating position will be that of Democrats.

Tom Friedman: Can God Save Egypt? - The fear is that autocracy is returning to Egypt under the guise of Islam. The real fight here is about freedom, not religion.

Tom Friedman writes in The New York Times:

When you fly along the Mediterranean today, what do you see below? To the north, you look down at a European supranational state system — the European Union — that is cracking up. And to the south, you look down at an Arab nation state system that is cracking up. It’s an unnerving combination, and it’s all the more reason for the U.S. to get its economic house in order and be a rock of global stability, because, I fear, the situation on the Arab side of the Mediterranean is about to get worse. Egypt, the anchor of the whole Arab world, is embarked on a dangerous descent toward prolonged civil strife, unless a modus vivendi can be found between President Mohamed Morsi of the Muslim Brotherhood and his growing opposition. If Syria and Egypt both unravel at once, this whole region will be destabilized. That’s why a billboard on the road to the Pyramids said it all: “God save Egypt.”

Having watched a young, veiled, Egyptian female reporter tear into a Muslim Brotherhood official the other day over the group’s recent autocratic and abusive behavior, I can assure you that the fight here is not between more religious and less religious Egyptians. What has brought hundreds of thousands of Egyptians back into the streets, many of them first-time protesters, is the fear that autocracy is returning to Egypt under the guise of Islam. The real fight here is about freedom, not religion.

The decisions by President Morsi to unilaterally issue a constitutional decree that shielded him from judicial oversight (he has since rescinded most of it after huge protests) and then to rush the completion of a new, highly imperfect, Constitution and demand that it be voted on in a national referendum on Saturday, without sufficient public debate, have rekindled fears that Egyptians have replaced one autocracy, led by Hosni Mubarak, with another, led by the Muslim Brotherhood.

Morsi and the other Muslim Brotherhood leaders were late comers to the 2011 Tahrir Square revolution that ended six decades of military rule here. And because they were focused only on exploiting it for their own ends, they have grossly underestimated the deep, mostly youth-led yearning for the freedom to realize their full potential that erupted in Tahrir — and it has not gone away.

Whenever anyone asked me what I saw in Tahrir Square during that original revolution, I told them I saw a tiger that had been living in a 5-by-8 cage for 60 years get released. And there are three things I can tell you about the tiger: 1) Tiger is never going back in that cage; 2) Do not try to ride tiger for your own narrow purposes or party because this tiger only serves Egypt as a whole; 3) Tiger only eats beef. He has been fed every dog food lie in the Arabic language for 60 years, so don’t try doing it again.

First, the Egyptian Army underestimated the tiger, and tried to get it back in the cage. Now the Muslim Brothers are. Ahmed Hassan, 26, is one of the original Tahrir rebels. He comes from the poor Shubra el-Kheima neighborhood, where his mother sold vegetables. I think he spoke for many of his generation when he told me the other day: “We all had faith that Morsi would be the one who would fulfill our dreams and take Egypt where we wanted it to go. The problem [now] is that not only has he abandoned our dream, he has gone against it. ... They took our dream and implanted their own. I am a Muslim, but I think with my own mind. But [the Muslim Brothers] follow orders from their Supreme Guide. ... Half of me is heartbroken, and half of me is happy today. The part that is heartbroken is because I am aware that we are entering a stage that could be a real blood bath. And the part that is happy is because people who were completely apathetic before have now woken up and joined us.”

What’s wrong with Morsi’s new draft constitution? On the surface, it is not some Taliban document. While the writing was dominated by Islamists, professional jurists had their input. Unfortunately, argues Mona Zulficar, a lawyer and an expert on the constitution, while it enshrines most basic rights, it also says they must be balanced by vague religious, social and moral values, some of which will be defined by clerical authorities. This language opens loopholes, she said, that could enable conservative judges to restrict “women’s rights, freedom of religion, freedom of opinion and the press and the rights of the child,” particularly young girls. Or, as Dan Brumberg, a Middle East expert at the U.S. Institute of Peace, put it, the draft constitution could end up guaranteeing “freedom of speech, but not freedom after speech.”

The wild street demonstrations here — for and against the constitution — tell me one thing: If it is just jammed through by Morsi, Egypt will be building its new democracy on a deep fault line. It will never be stable. Egypt is thousands of years old. It can take six more months to get its new constitution right.

God is not going to save Egypt. It will be saved only if the opposition here respects that the Muslim Brotherhood won the election fairly — and resists its excesses not with boycotts (or dreams of a coup) but with better ideas that win the public to the opposition’s side. And it will be saved only if Morsi respects that elections are not winner-take-all, especially in a society that is still defining its new identity, and stops grabbing authority and starts earning it. Otherwise, it will be all fall down.

Small State Gets Big Pension Push

From The Wall Street Journal:

Rhode Island's rollback of public-employee retirement benefits has turned the small state into a national battleground over pensions.

A Rhode Island court heard arguments Friday in a closely watched lawsuit over the pension changes, which took full effect earlier this year.

Nearly every state in the U.S. has enacted some form of pension changes in the past four years, ranging from increasing contributions from workers to more-severe moves, such as Rhode Island's decisions to suspend cost of living raises until the pension plan is financially healthy and shifting workers into a system that combines a traditional pension with a 401(k)-style account.

Officials seeking to overhaul pension systems across the country are tangling with a powerful, well-heeled opponent: public-sector unions. In Wisconsin, officials who sought to curb the unions' collective bargaining abilities drew support from backers aligned with Republicans.

The Rhode Island affiliate of the American Federation of State, County and Municipal Employees has sued the state in Rhode Island Superior Court, saying the pension changes violated public workers' contract rights. The national arm of the large public employees union has assured the local affiliate that it will have adequate resources to pursue its lawsuit, a union official said.

Rhode Island officials hired well-known attorney David Boies to defend against the unions' legal challenges to the cuts. Mr. Boies, who is charging Rhode Island a cut-rate $50 an hour for his legal services, said he agreed to take the case because he believes that pension changes are needed across the U.S.

Michigan Approves Union Curbs - Passing a right-to-work law in the state that the UAW union calls home is an especially deep blow to unions. They see right-to-work as political payback for unions' traditional support for Democrats.

From The Wall Street Journal:

The Republican governor of Michigan signed a pair of right-to-work bills Tuesday night, dealing labor unions one of their biggest setbacks in years in this historically union-friendly state.

The law won't go into effect until 90 days after the end of the state legislature's lame-duck session. Existing union contracts will only be affected as they come up for renewal, according to the governor.

While unions have been dealt setbacks in Wisconsin and Indiana, among other states in the industrial midwest, passing a right-to-work law in the state that the UAW union calls home is an especially deep blow to unions. They see right-to-work as political payback for unions' traditional support for Democrats.

The Real-World Cost of 'Tax Free' Online Shopping - Bricks-and-mortar shops suffer, and states are deprived of revenue.

Washington Gov. Christine Gregoire and Sally Jewell, president and CEO of the retailer REI, write in The Wall Street Journal:

In this postelection period, Congress is being asked to demonstrate renewed bipartisanship and fiscal responsibility. Managing our federal finances isn't the only opportunity to do that. Washington can also choose to stand up for Main Street and help state and local governments strengthen their balance sheets by closing the Internet tax loophole.

Local retailers—who create jobs for our families, friends and neighbors—have long been required to collect and remit state sales taxes. By contrast, online vendors that operate from out of state are under no such requirement, even though the taxes are still owed by the consumer in the 45 states that collect sales taxes. This disparity undermines the competitiveness of the retail marketplace and diverts $23 billion from state and local treasuries every year.

The problem doesn't arise solely when people search for supposedly tax-free deals online. "Showrooming" is also increasing. Imagine a customer who walks into a sporting-goods store and asks for help in buying the coolest new running shoes. An attentive salesperson spends half an hour with the customer to find the most comfortable fit, the best performance and the right price. Just as the salesperson thinks she has found the ideal pair, the customer decides to make the $100 purchase via smartphone from an online competitor who doesn't charge sales tax.

Such a scenario causes multiple harms. The retail staff has lost the time invested in the would-be customer. The store has lost profits. Over the long term, the rental market for retail property becomes weaker as tenants' profitability shrinks. And competition is eroded because the bricks-and-mortar retailer must meet its sales-tax obligation, whereas the online-only vendor might even tout the notion—misleadingly—that its sales are tax-free. The customer is responsible for remembering to pay the tax later (through an income-tax return or a use-tax report), but few do.

Then there is the lost public revenue. For every supposedly tax-free sale, fewer dollars are available for schools, infrastructure, public-safety providers or (in flush times) tax reductions.

In the state of Washington, the Department of Revenue estimates that leveling the sales-tax playing field would generate $240 million in state and local revenue in the coming fiscal year and $491 million by fiscal year 2017. The revenue would help the state make progress against its projected budget shortfalls. The next governor could fill gaps in education funding, and local governments would face less pressure to find other revenue sources.

As leaders in government and business, we aren't alone in calling on Congress to act. Traditional retailers, "clicks-and-mortar" firms and even Amazon AMZN -0.04%support federal legislation that would empower states to require out-of-state businesses to collect and remit sales taxes. In this day and age, retailers leverage information technology to speed products from inventory into customers' hands, and IT systems can readily handle tax collection and remittance chores.

Governors from both sides of the aisle have rallied behind two similar bills before the House and Senate. The congressional leaders driving the legislation hail from a diversity of states—Arkansas, Tennessee, Michigan, Illinois, Wyoming, California and more.

It is time for Congress to seize the momentum and fix this gaping pothole on America's Main Street.

Clinton’s Countless Choices Hinge on One: 2016

From The New York Times:

You’re one of the most famous women on earth, and you’re jobless for the first time in decades. You’d like to make money, but you don’t want to rule out running for president. So what do you do all day?

Right now, aides and friends say, Hillary Rodham Clinton’s plan looks like this: exit the State Department shortly after Inauguration Day and then seclude herself to rest and reflect on what she wants to do for the next few years. Those who have invited her for 2013 engagements have been told not to even ask again until April or May.

Mrs. Clinton may find that her freedom comes with one huge constraint. The more serious she is about 2016, the less she can do — no frank, seen-it-all memoir; no clients, commissions or controversial positions that could prove problematic. She will be under heavy scrutiny even by Clinton standards, discovering what it means to be a supposedly private citizen in the age of Twitter. With the election four years away — a political eon — she will have to tend and protect her popularity, and she may find herself in a cushy kind of limbo, unable to make many decisions about her life until she makes the big one about another White House try.

Bill Clinton ... sometimes cannot keep himself from verbally gaming out another campaign for her, said a friend who recently spent time with him. “Every indication is that he would really want her to run,” the friend said.

The speculation is not without its advantages. If Mrs. Clinton is not running, she is a widely respected figure whose chief accomplishments are mostly behind her; if she may be running, she glows with White House and historic potential.

New Taxes to Take Effect to Fund Health Care Law

From The New York Times:

For more than a year, politicians have been fighting over whether to raise taxes on high-income people. They rarely mention that affluent Americans will soon be hit with new taxes adopted as part of the 2010 health care law.

The new levies, which take effect in January, include an increase in the payroll tax on wages and a tax on investment income, including interest, dividends and capital gains. The Obama administration proposed rules to enforce both last week.

Affluent people are much more likely than low-income people to have health insurance, and now they will, in effect, help pay for coverage for many lower-income families. Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate.

To help finance Medicare, employees and employers each now pay a hospital insurance tax equal to 1.45 percent on all wages. Starting in January, the health care law will require workers to pay an additional tax equal to 0.9 percent of any wages over $200,000 for single taxpayers and $250,000 for married couples filing jointly.

The new taxes on wages and investment income are expected to raise $318 billion over 10 years, or about half of all the new revenue collected under the health care law.

 

Since the creation of Social Security in the 1930s, payroll taxes have been levied on the wages of each worker as an individual. The new Medicare payroll is different. It will be imposed on the combined earnings of a married couple.

The new 3.8 percent tax applies to the net investment income of certain high-income taxpayers, those with modified adjusted gross incomes above $200,000 for single taxpayers and $250,000 for couples filing jointly.

The new tax on unearned income would come on top of other tax increases that might occur automatically next year if President Obama and Congress cannot reach an agreement in talks on the federal deficit and debt. If Congress does nothing, the tax rate on long-term capital gains, now 15 percent, will rise to 20 percent in January. Dividends will be treated as ordinary income and taxed at a maximum rate of 39.6 percent, up from the current 15 percent rate for most dividends.

Under another provision of the health care law, consumers may find it more difficult to obtain a tax break for medical expenses.

Taxpayers now can take an itemized deduction for unreimbursed medical expenses, to the extent that they exceed 7.5 percent of adjusted gross income. The health care law will increase the threshold for most taxpayers to 10 percent next year. The increase is delayed to 2017 for people 65 and older.

In addition, workers face a new $2,500 limit on the amount they can contribute to flexible spending accounts used to pay medical expenses. Such accounts can benefit workers by allowing them to pay out-of-pocket expenses with pretax money.

Taken together, this provision and the change in the medical expense deduction are expected to raise more than $40 billion of revenue over 10 years.

AARP lobbies against Medicare changes that could hurt its bottom line

From The Washington Post:

As Washington debates whether to cut federal retirement programs as part of a deal to tackle the nation’s debt, one of the most powerful advocates for preserving them could have millions of dollars riding on the outcome.

AARP, the highly influential lobby for older Americans, is fiercely opposing any Medicare or Social Security cuts and emphasizes that it is fighting for the good of its members. But the proposals for changing Medicare also could affect AARP’s bottom line.

AARP has long played a dual role. It advocates for the interests of seniors, and it makes money allowing its name to be used in selling them private insurance, including coverage known as ­Medigap, which supplements government-provided Medicare. The group gets a 4.95 percent royalty each time someone buys Medigap insurance with the AARP brand. The Medigap insurance policies bring in hundreds of millions of dollars a year and are among an array of AARP-endorsed products that generate slightly more than half of the group’s $1.4 billion in revenue, according to tax records and people familiar with the group’s operations.

But in last year’s negotiations over the federal debt ceiling, President Obama and top Republicans discussed proposals to change Medicare that could have reduced AARP’s revenue from Medigap. At the time, AARP lobbied against the proposals, congressional aides say. Now, political observers predict that those measures will be back on the table in the coming weeks as Democrats and Republicans wrangle over a deal aimed at avoiding the “fiscal cliff” of dramatic tax increases and spending cuts set to kick in at the end of the year.

“There is a potential conflict of interest,” said Marilyn Moon, a former senior AARP official who runs the health-care program at the nonprofit American Institutes for Research. “Any way you look at changes in Medigap that people are talking about, I think it’s good for beneficiaries, and anybody who is opposing that who claims they are looking out for beneficiaries, you have to wonder why.”

AARP executives dispute any financial motive, saying the group’s all-volunteer board considers only what is best for its membership.

David Brooks: The year 2013 could be spent on natural Republican turf (tax and entitlement reform) instead of natural Democratic turf (expanding government programs).

David Brooks writes in The New York Times:

Sometimes you have to walk through the desert to get to the Promised Land. That’s the way it is for Republicans right now. The Republicans are stuck in a miserable position at the end of 2012, but, if they handle things right, they can make 2013 an excellent year — both for their revival prospects and for the country.
      

First, they have to acknowledge how badly things are stacked against them. Polls show that large majorities of Americans are inclined to blame Republicans if the country goes off the “fiscal cliff.” The business community, which needs a deal to boost confidence, will turn against them. The national security types and the defense contractors, who hate the prospect of sequestration, will turn against them.

      

Moreover a budget stalemate on these terms will confirm every bad Republican stereotype. Republicans will be raising middle-class taxes in order to serve the rich — shafting Sam’s Club to benefit the country club. If Republicans do this, they might as well get Mitt Romney’s “47 percent” comments printed on T-shirts and wear them for the rest of their lives.

      

So Republicans have to realize that they are going to cave on tax rates. The only question is what they get in return. What they should demand is this: That the year 2013 will be spent putting together a pro-growth tax and entitlement reform package that will put this country on a sound financial footing through 2040.

      

Republicans should go to the White House and say they are willing to see top tax rates go up to 36 percent or 37 percent and they are willing to forgo a debt-ceiling fight for this year.

      

This is a big political concession, but it’s not much of an economic one. President Obama needs rate increases to show the liberals he has won a “victory,” but the fact is that raising revenue by raising rates is not that much worse for the economy than raising revenue by closing loopholes, which Republicans have already conceded.

      

In return, Republicans should also ask for some medium-size entitlement cuts as part of the fiscal cliff down payment. These could fit within the framework Speaker John Boehner sketched out Monday afternoon: chaining Social Security cost-of-living increases to price inflation and increasing the Medicare Part B premium to 35 percent of costs.

      

But the big demand would be this: That on March 15, 2013, both parties would introduce leader-endorsed tax and entitlement reform bills in Congress that would bring the debt down to 60 percent of G.D.P. by 2024 and 40 percent by 2037, as scored by the Congressional Budget Office. Those bills would work their way through the normal legislative process, as the Constitution intended. If a Grand Bargain is not reached by Dec. 15, 2013, then there would be automatic defense and entitlement cuts and automatic tax increases.

      

Both parties say they are earnest about fundamental tax and entitlement reform. This deal would force them to think beyond the 10-year budget window and put credible plans on the table to address the long-term budget problems while there is still time. No more waiting for the other guy to go public with something serious. The ensuing debate would force voters to face the elemental truth — that they can only have a government as big as they are willing to pay for. It would force elected officials to find a long-term pro-growth solution as big as Simpson-Bowles.

      

Republicans could say to the country: Hey, we don’t like raising tax rates. But we understand that when a nation is running a $16 trillion debt that is exploding year by year, everybody has to be willing to make compromises and sacrifices. We understand that the big thing holding the country back is that the political system doesn’t function. We want to tackle big things right now.

      

The year 2013 would then be spent on natural Republican turf (tax and entitlement reform) instead of natural Democratic turf (expanding government programs). Democrats would have to submit a long-term vision for the country that either reduced entitlement benefits or raised middle-class taxes, violating Obama’s campaign pledge. Republicans would have to face their own myths and evasions, and become a true reform and modernization party.

      

The 2012 concession on tax rates would be overshadowed by the 2013 debate on the fiscal future. The world would see that America is tackling its problem in a way that Europe isn’t. Political power in each party would shift from the doctrinaire extremists to the practical dealmakers.

       

Besides, the inevitable package would please Republicans. The House would pass a conservative bill. The Senate would pass a center-left bill. The compromise between the two would be center-right.
       

It’s pointless to cut a short-term deal if entitlement programs are still structured to bankrupt our children. Republicans and Democrats could make 2013 the year of the truly Grand Bargain.

The law of unintended consequences; my, my ... - Flow of Arms to Syria Through Iraq Persists, to U.S. Dismay

From The New York Times:

The American effort to stem the flow of Iranian arms to Syria has faltered because of Iraq’s reluctance to inspect aircraft carrying the weapons through its airspace, American officials say.

The shipments have persisted at a critical time for President Bashar al-Assad of Syria, who has come under increasing military pressure from rebel fighters. The air corridor over Iraq has emerged as a main supply route for weapons, including rockets, antitank missiles, rocket-propelled grenade and mortars.

Iran has an enormous stake in Syria, which is its staunchest Arab ally and has also provided a channel for Iran’s support to the Lebanese Islamist movement Hezbollah.

 

The Iranian flights present challenges for the Obama administration, which has been reluctant to provide arms to the Syrian rebels or to establish a no-fly zone over Syria for fear of becoming entangled in the conflict. They also illustrate the limits of the administration’s influence with the Maliki government and point to divergent foreign-policy calculations in Washington and in Baghdad.

 

While Iraq’s actions clearly benefit Iran, a Shiite country with close ties to many Iraqi officials, Mr. Maliki may have his own reasons to tolerate the flights.
 

Mr. Maliki, American officials say, is worried that if Mr. Assad falls from power it may embolden Sunni and Kurdish forces in the region, including in Iraq, which could present challenges to his Shiite-dominated government.

 

“If so many people have entreated the government to stop and that doesn’t seem to be having an impact,” Mr. Kerry said in September, “that sort of alarms me a little bit and seems to send a signal to me maybe we should make some of our assistance or some of our support contingent on some kind of appropriate response.”