Why The Fiscal Cliff Is Utterly Meaningless
Partisan bickering over roughly a trillion dollars in tax revenue (over the next ten years) is a farce, laughable. It means nothing. Chris Cox and David Archer did a nice job summing up the math in this WSJ piece:
When the accrued expenses of the government’s entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit.
Nothing like that $8 trillion amount is available for the IRS to target. According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate taxable income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws.
The money isn’t there. 100% tax rates would leave a deficit. There’s an $86 trillion hole in America’s balance sheet, and I strongly suspect almost all of it will be monetized by the Fed. This is what some would call the hyper-stagflation scenario. QEfinity on steroids. Inflation north of the 20%/y we saw in the 70’s, for an extended period (10 years?) would not surprise me.