The so-called fiscal cliff has been avoided, at least for the time being, and all it cost was a tax rate increase on the nation's most productive taxpayers. Of course, conservatives are disappointed, but one also needs to appreciate that with all the Bush tax rate decreases set to expire automatically, Democrats had Republicans over a barrel. That being the case, Republicans didn't do so badly, considering. The higher rates that would have kicked in at incomes above $250,000 (for marrieds, $200,000 for singles) will instead apply only to incomes above $450,000 (for marrieds, $400,000 for singles). And the formerly temporary Bush rates on incomes of $450,000 and below have now been made permanent.
The bad news is that at least some Democrats, such as New York Senator Chuck Schumer, see the recent rate increases as just a first step, a prelude to demanding "additional revenue" as part of any agreement to deal with the debt ceiling.
Well, good luck with that, Chuck, or did you not notice that when your ability to hold taxpayers hostage to automatic tax rate increases disappeared, any leverage you might have had disappeared with it? But that doesn't mean that Republicans can sit idly, as the Democrats did with the fiscal cliff, and wait passively for events to produce a favorable result. Because as sure as night follows day, and Chuck Schumer follows a TV camera, Democrats will continue to argue for the "additional revenue" they believe to be absolutely necessary to reduce the budget.
And Democrats will continue to believe that their tax rate increases will actually produce the revenue they predict it will.
They will not, and this is how I know. The Federal Reserve Bank of St. Louis recently published a report, "The U.S. Deficit/Debt Problem: A Longer-Run Perspective," providing both a diagnosis and prognosis of the nation's deficit/debt problem. First, the diagnosis -- and, along with it, a thorough debunking of a myth Republicans have allowed Democrats to get away with for far too long: that our current deficits and soaring debt began in 2008 and were caused by the subprime and banking crises in the latter years of the century's first decade (emphases mine).