Republicans surrender on fiscal cliff

Tiny tax increases, spending cuts revoked, trillion-dollar Obama deficits as far as the eye can see.

The changes in tax rates that were agreed to between Messrs. Biden and McConnell would raise roughly $600 billion in new revenue over 10 years.

$600 billion over ten years, when we are running trillion-plus-dollar deficits each and every year. In other words, less than 6% of the deficit!

Gee, who could have seen that coming?

We will get tax increases that raise a trivial amount of money relative to the deficit, no real spending cuts or entitlement reform, and no path to fiscal sustainability.

To illustrate what a complete farce this whole thing is, the “spending cuts” that had everyone’s panties in a twist were a $24 billion “sequester.” Yes, $24 billion, or 2% of the permanent trillion-dollar deficit.

It gets worse. Some of the “tax increases” actually make the long-run fiscal situation worse. WSJ:

Republicans had insisted the cuts of $24 billion be offset with savings in other areas. The White House wanted some of the offset to be in the form of tax increases, not just other spending cuts.

The deal pays for delaying the sequester with a mix of new taxes and spending cuts, according to several congressional aides.

Of that $24 billion cost, $12 billion would come from a shift in the rules affecting workplace-based 401(k) plans. The change would allow plan holders to roll their 401(k) assets into a Roth IRA plan, which would require them to pay taxes up front on any gains in their plan. The benefit for investors would be that disbursements from Roth plans in retirement are tax free.

Get that? Allowing the option of a Roth conversion is a “tax increase.” It will bring in a trivial amount of additional revenue in the near term, but reduce future revenues much more substantially by zeroing out income tax revenue from those converted IRAs after they have multiplied in value decades in the future.

To summarize, Congress is going to keep running trillion-dollar deficits as far as the eye can see, and Zimbabwe Ben is going to coincidentally monetize almost exactly a trillion dollars of debt per year. Got gold?