Despite the plans of Representative John Boehner (R-OH), the U.S. is going to go over the fiscal cliff in January 2013. Boehner's plan "A" was stillborn. It was an offer that President Barack Hussein Obama would not sign. Boehner's plan "B" could not garner enough support from fellow Republicans for Boehner to even call it up for a vote. So now the House of Representatives has adjourned for its Christmas recess until after the New Year. I guess that Boehner (and Obama) thought the Christmas adjournment was more important than the country.

But that's old news, something that we knew would happen. This article briefly examines the "fiscal cliff" and its attendant tax hikes, why taxing the "wealthy" will never work, why tax increases in general never work, and the psychological damage to the U.S. caused by the fiscal cliff.

The Fiscal Cliff: The Tax Policy Center says: "The looming fiscal cliff threatens to boost taxes by more than $500 billion in 2013 when many temporary tax provisions are scheduled to expire. Nearly 90 percent of Americans would pay more tax." The table below, provided by the Urban-Brookings Tax Policy Center, provides a visual representation of what the results of the fiscal cliff will be. This graph illustrates what Obama calls "fair" with regard to tax rates. It also illustrates Obama's hypocrisy. On December 10, 2012, in Redford, MI, Obama said, "...what you need is a package that keeps taxes where they are for middle-class families;...[.]" [Emphasis Mine] 

Reasons taxes will increase include:

• the temporary cut in Social Security taxes will expire

• many of the 2001/2003 tax cuts (the so-called Bush tax cuts) will expire

• low-income households will pay more due to expiration of tax credits in the 2009 stimulus

• high-income households will pay higher tax rates on ordinary income, capital gains, and dividends, and by the new health reform taxes (ObamaCare)

The Rhode Island Statewide Coalition (RISC) provides a list of what exactly is going to happen on January 1, 2013. RISC heads its list with "FISCAL CLIFF -- WHAT HAPPENS IF THE GOVERNMENT DOES NOTHING" Well, we taxpayers can expect the country to go over the fiscal cliff since the policymakers (Obama and Boehner) have already left Washington D.C. for their Christmas vacations without doing anything.

But wait, all may not be lost. It seems that Obama cut his vacation short to return to Washington D.C., leaving his family in Hawaii. That move is expected to cost us taxpayers about $100,000 per day. But the Congress did not do likewise, so with whom will he "negotiate?" And this is the person who is so much smarter than we are. Democrats/liberals/progressives will try to defend him by saying that his only motive is to be physically available for discussion. But, as Obama demonstrated before going on vacation, there is a vast difference between physical and mental availability.

Tax the Wealthy Won't Work: According to Obama, if taxes are increased on the wealthy then all the problems in the U.S. would be solved. But there a few problems for Obama with that "solution."

First and foremost, "increasing taxes on the wealthy is about politics, not economics," and is "intended to pacify those who resent the rich". It is not Obama's aim to entirely pacify this resentment. If Obama were to tax 100 percent of the income of the wealthiest people in this country, then the "not rich" people would see that soaking the rich doesn't work. A 100 percent tax levy on the wealthiest Americans would pay for eight days of government spending. Then Obama would be faced with other economic problems, such as who can be soaked next year? Besides, the wealthy will not continue to generate income if it all goes to the government. The U.S. will still have economic problems, so upon whom will Obama blame the problems next year?

Second, Obama is famous for asking the "rich" to "pay their fair share." But there are two problems with that rhetoric.

1. What, specifically, is a "fair share?" The definition seems to change with every speech Obama makes, with every audience to whom he speaks.

2. Let's assume that the rich are coerced into paying their fair share. But when economic problems persist, guess what Obama will do then. His definition of "fair share" will increase. He will establish what is known as a positive feedback loop. The only way the loop can be brought under control is through external intervention. The external intervention, in this case, will be the 100 percent tax rate on the wealthy. But that tax rate, as was demonstrated above, opens up another can of worms.

Tax Increases Never Work: John F. Kennedy (a Democrat icon) got it, so why can't Obama? Among other points about taxes, Kennedy, on January 17, 1963, said:

"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased -- not a reduced -- flow of revenues to the federal government."

So, with Kennedy's quote in mind, let's examine what Obama is actually doing. My personal opinion is that Obama does get it, but he lets his socialist ideology override economic reality. He has surrounded himself with enough economic "yes men" to provide him with plenty of cover. And the fact that the MSM also provides plenty of cover was addressed well by Miguel A. Guanipa.

Psychological Effect: America faces what is even more dangerous than a fiscal cliff": a psychological "cliff." What made America and its people great was not a belief in redistribution, but a belief in potential. It was the belief that, instead of relying on the government to redistribute wealth, there is no limit to what an individual can produce for him/her self. "Forget the fiscal crisis, Obama's plans threaten our American spirit," an article by RISC, provides a very good read. This quote from the article pretty well says it all: "Obama is trying to transform America from a society of aspiration to a society of envy."

But that's just my opinion.

Dr. Beatty earned a Ph.D. in quantitative management and statistics from Florida State University. He was a (very conservative) professor of quantitative management specializing in using statistics to assist/support decision-making. He has been a consultant to many small businesses and is now retired. Dr. Beatty is a veteran who served in the U.S. Army for 22 years. He blogs at rwno.limewebs.com.