The Economy, A New GOP Economic Agenda, Obamacare Cometh, Darwinian and Newtonian Constitutions, Property Rights, Maple Syrup Heist, Founders and Finance, Chesterton
The Transom: News and Notes From Around the Web
Welcome to 2013, Transom subscribers! I hope the New Year brings you happiness, prosperity, redemption, new friendships, and unexpected grace.
Well, this looks like an insult to fig leaves everywhere.  For all the talk of solving deficit problems, grand entitlement bargains, and steps toward dealing with out of control spending, Republicans and Democrats came together in the past 48 hours to endorse a solution which was about as small as it could possibly be. On the spending side, it trades the endorsement of higher taxes for every working American by Republicans for essentially nothing, with the promise of more nothing in the future.   
Despite the fact that the president’s position on taxes will not aid the economy nor address the challenge of deficits and debt, President Obama prevailed thanks to Republican division and an ability to agree on a strategy in response, and his own insistence on his smaller goals as opposed to any larger deal.  “Eight weeks ago, hopes ran high inside and outside Washington [ed. note: really?] that Mr Obama and Mr Boehner could in fact strike a grand bargain: higher revenue in return for entitlement reform. Mr Boehner hoped to revive the deal he briefly entertained with Mr Obama in the summer of 2011 along just those lines. But Mr Obama, his hand strengthened both by re-election and the economy’s stronger footing, was less inclined to compromise, and focused instead on forcing Republicans to accept much higher taxes on the rich or pay a grievous political price for refusing. “It’s not acceptable to me, and I don’t think it’s acceptable to you, for just a handful of Republicans in Congress to hold middle-class tax cuts hostage simply because they don’t want tax rates on upper-income folks to go up,” he declared at a campaign-style event in late November, while his and Mr Boehner’s staff were trying to narrow their differences.” The primary approach Republicans had to this obvious and expected crisis was to deploy negotiators so out of touch with the nature of their opponents that they are still insulted by the grandstanding which takes place on a daily basis.   
It’s possible this could backfire.  “But Obama's victory fell short of what he had campaigned for, and came at a high cost... Whether the agreement announced Monday evening turns out to be truly a victory for Obama or a lost opportunity, as many of his liberal critics feared, will depend heavily on how that next battle turns out.” More on the legislation.  “The compromise dodges one cliff, but it sends Congress barreling toward another. In two months, the delayed $110 billion in spending cuts will again kick in. At the same time, the U.S. will face the need to increase its borrowing limit, a change that can only be made by Congress. That sets up another rancorous fight, one with potentially more damaging consequences. Republicans want to use the debt ceiling to extract spending cuts. Mr. Obama has said he won't negotiate.” It’s concievable the ground will be better for Republicans when the focus is spending, not taxes.  But Republicans have proven time and again that they cannot negotiate to save their lives.  “The source said it was the president who insisted the final deal include a pay down on the sequester, and a tax increase that hit individuals making at least $400,000 a year and $450,000 for households. Senate Minority Leader Mitch McConnell started negotiations at $750,000, and then moved to $550,000 before giving in and agreeing to $450,000 for households.” Next time, perhaps they ought to find someone with a bit more pith and vinegar. Of course, the Democrats did sideline Reid for Biden, so they’ve got their own challenges. 
Here’s the final vote on the Senate deal.  Paul Ryan’s explanation of his Yes vote will be the standard: “The American people chose divided government. As elected officials, we have a duty to apply our principles to the realities of governing. And we must exercise prudence. We must weigh the benefits and the costs of action—and of inaction. In H.R. 8, there are clearly provisions that I oppose. But the question remains: Will the American people be better off if this law passes relative to the alternative? In the final analysis, the answer is undoubtedly yes. I came to Congress to make tough decisions—not to run away from them.”
Some thoughts on debt.  “If and when the federal government services and pays down its gargantuan debt, it will be distributing massive amounts of money to its lenders in the private sector and the rest of the world. There is no a priori reason to think this will be bad for anyone. Debt becomes problematic, however, when the money borrowed is put to unproductive use, because that leaves the borrower without the resources to repay the loan, and that will eventually disappoint the lender. Most of the money that Uncle Sam has borrowed in recent years has not been put to productive use, and that is a big problem, because the economy has not grown sufficiently to pay back the debt. The federal government has borrowed trillions of dollars in order to 1) send out checks to individuals who are retired, unemployed, disabled, and/or earning less than some arbitrary amount; 2) pay salaries to millions of bureaucrats, 3) subsidize bloated state and local governments, and 4) subsidize corporations engaged in activities (e.g., wind farms, ethanol production) that would otherwise be unprofitable. The money was essentially wasted, since it wasn't used to create new sources of revenues with which to service the debt in the future.” More on federal budget fantasies. 
RELATED: High earners prep for a significantly higher tax burden.  How the RSC scored the bill.  Simpson-Bowles has a sad.  Nothing certain but more debt and taxes.  Adding $4 Trillion to the deficit.  Mickey Kaus was prescient.  Mortgage debt relief extended.  The housing scandal everyone has forgotten.  Housing: 2.5% year over year change in asking prices.  AIG uses ad campaign to thank taxpayers for bailout.  Auto sales forecast to break 15 million.  Avis to buy Zipcar.  Surge in UK manufacturing.  Eurozone year in review. 
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Erick Erickson on the serious need for an update to the GOP’s approach to economic policy.  “With the McConnell Tax Hike of 2013 headed into law, consider that yet again the Washington Republicans have sided with the Washington, DC Democrats to keep a marriage penalty in the tax code. Married earners filing jointly get punished by doing so. The Republicans must have serious tax reform ideas. Those ideas should start with a much flatter tax with far fewer deductions. Those deductions should favor married couples with kids making it easier for one spouse to stay home through high deductions for a household with one earner. But likewise, the Republicans should consider in a two income household of joint filers, the second income earner should pay less tax on that income. While the default rule should always be to never use the tax code to encourage or prohibit behavior — it should just be about raising revenue — as long as Washington intends to do that, the Republicans should favor a tax code that rewards two parent nuclear households with multiple children and, through the use of generous deductions, provide incentive for one spouse to stay home. That would not only help reduce the supply of workers in the workforce at a time of decreased demand for workers, but would also ease the burden of the social safety net. Beyond the income tax, the payroll tax affects more Americans. The Republicans have exempted more and more Americans from paying taxes each time they have cut taxes. But the payroll tax remains. The GOP should, while focusing on a simpler income tax, spend far more time addressing the burden of the payroll tax on the middle class. Tax simplification with a bias toward families must be a Republican goal. Highlighting the gimmes to cronies and demanding their end will restore Republican credibility on taxes.”
Taxes are kicking in.  “Five new tax increases take effect on Jan. 1 to help pay for the nation’s health care overhaul. New provisions of the Affordable Care Act require affluent taxpayers to pay more for Medicare and, for the first time, have their investment income subject to Medicare taxes as well. Also, people who use flexible spending accounts for health care expenses will pay higher taxes. And taxpayers who spend a lot out of pocket on their health care will find it harder to deduct those expenses from their taxable income, raising their tax bill. Individual consumers won’t be the only ones paying higher taxes. Importers and manufacturers of certain medical devices will face a 2.3 percent excise tax on U.S. sales in 2013. The new measures are slated to raise $24.2 billion next year and more than $258 billion through the year 2019, according to the Joint Committee on Taxation.” And don’t forget the FSA cap, which hits parents of developmentally disabled kids the hardest.
Companies prepare. “Certain employers could see health-related costs go up as a result of the law's requirements, and they are weighing how to respond. One possibility would be to opt out of providing health coverage altogether, as employees will have new coverage options outside the workplace—for the employer, the penalties are lower than the typical cost of insurance. But employers are considering a range of more moderate steps to limit their expenses. Decisions will need to be in place well before next fall, when benefits enrollment typically begins and the new exchanges are supposed to begin operating… "They want to measure twice and cut once," said Bryce Williams, managing director for exchange solutions at consulting firm Towers Watson TW +0.20% & Co. One first step may be trimming or eliminating coverage for retired workers, particularly those who aren't old enough for Medicare and will have many more insurance options in 2014 than today… 2014 will bring significant change for many smaller companies above the 50-worker threshold, and those in industries such as retail and restaurants that have lots of lower-income and part-time workers. Some offer no health benefits today, or limited coverage that won't meet the law's standards. Upgrading to richer plans could raise costs substantially; failing to do so could trigger the penalties, which can amount to $2,000 or $3,000 for each uncovered worker, depending on the circumstances, with the first 30 employees exempted from the count.”
The government has ruled that must offer coverage to dependents, but it doesn’t have to be affordable.  “In a long-awaited interpretation of the new health care law, the Obama administration said Monday that employers must offer health insurance to employees and their children, but will not be subject to any penalties if family coverage is unaffordable to workers. The requirement for employers to provide health benefits to employees is a cornerstone of the new law, but the new rules proposed by the Internal Revenue Service said that employers’ obligation was to provide affordable insurance to cover their full-time employees. The rules offer no guarantee of affordable insurance for a worker’s children or spouse. To avoid a possible tax penalty, the government said, employers with 50 or more full-time employees must offer affordable coverage to those employees. But, it said, the meaning of “affordable” depends entirely on the cost of individual coverage for the employee, what the worker would pay for “self-only coverage.”  The new rules, to be published in the Federal Register, create a strong incentive for employers to put money into insurance for their employees rather than dependents. It is unclear whether the spouse and children of an employee will be able to obtain federal subsidies to help them buy coverage — separate from the employee — through insurance exchanges being established in every state. The administration explicitly reserved judgment on that question, which could affect millions of people in families with low and moderate incomes. Many employers provide family coverage to full-time employees, but many do not. Family coverage is much more expensive, and the employee’s share of the premium is typically much larger.”
Robert P. George on this NYT oped from Georgetown law professor Louis Michael Seidman criticizing the Constitution:  “A lot of progressives really do think what Seidman (and only a few others) are willing to say: "Let's give up on the Constitution." Although Seidman's declaration is startling to us, early progressives were often explicit in severely criticizing the Constitution. It was, they insisted, an 18th century document wholly unsuited to the circumstances of 20th century life. In 1908, future President Woodrow Wilson (my own ancestor in the McCormick chair in Jurisprudence at Princeton, but not, I hasten to add, in philosophy) contrasted the "Newtonian" vision of the American founders with a "Darwinian" understanding of government which was, in his view, much to be preferred. When the public could not be sold on the idea of ditching their Constitution for a progressive alternative, the progressives sought to accomplish by creative reinterpretation of the old Constitution what they could not (or not fully) accomplish by formally altering it by the constitutionally prescribed processes. And so progressive jurists and legal scholars came up with the idea of a "living Constitution"—a Darwinian wolf in Newtonian sheep's clothing. Professor Seidman is willing to ditch the disguise.”
Richard Epstein on one of those Constitutional freedoms:  “This month, the Supreme Court will hear a case, coming out of Florida, addressing the longstanding conflict between the constitutional protection of property rights and the state’s desire to preserve its pristine wetlands from destruction by real estate development. The current law on this thorny topic, in Florida as elsewhere, gives the state the final authority to decide whether these wetlands should be developed. The state can let the development proceed as planned when its effects on the wetlands are minimal. But whenever the effects are more substantial, the state can refuse to permit the development of the land unless the landowner agrees to “mitigate” any resultant harm to the environment… The situation that is now before the Supreme Court in Koontz shows the folly of the current law, which rejects the long-established common law baselines between neighbors. No longer does the state have to take (and pay just compensation) to satisfy its environmental goals. Rather, the entire mitigation doctrine amounts to nothing more than a form of grand theft larceny by which the state first claims for nothing a state-wide environmental easement, which it will then sell back to the landowner for the (mitigation) price that it regards as acceptable by its own standards. It is, quite literally, no better than allowing the state to confiscate land for nothing, which it then duly sells back to its original owner for a price. Ransom money involves the same dubious strategy.”
The Great Canadian Maple Syrup Heist.
Mounting an escape.
Senior Editor, Washington Nationals.
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U.S. on pace for slowest decade of population growth since the 1930s.
Refighting the Falklands.
Senate report faults Pentagon, State Dept. over Benghazi deaths.
How the Right can reclaim its edge on foreign policy.
OPEC cartel to reap record $1 trillion.   
America’s forgotten war.  The high cost of Afghan disengagement. 
Ghandi and India’s sexual violence. 
Chinese think tank: conflict inevitable over Senkakus.
Japan’s race with China to the bottom.
A welcoming immigration agenda.
How one woman made budget scolding chic. 
The states to watch on public education in 2013.
Texas manufacturing activity: Slow growth and improved company outlook.
Engineering a reversal of fortune in 2013.
The biggest underappreciated scandal of the Obama administration is the total rejection of his promises of transparency.
Warren Buffett’s golden touch hits a snag... because newspapers.
Nonprofit execs make a lot of coin.
Obamacare’s prescription: pain.
When government offers to help, it often makes a mess.
Party of science: FDA faces ethics scrutiny in wake of GMO salmon fiasco.
Thomas Sowell: Republicans deserved to lose.
Hillary Clinton, Barack Obama most admired in 2012.
Homelessness declines.
Cops in schools.
What is an assault weapon?
The NRA is more bipartisan than you might expect.
Do as I say, not as I act.  Part II. 
Absentee fathers and Newtown. 
Florida’s weird news of 2012.
Edward Curtis’ life and photography.
The pitfalls of Willy Wonka urbanism.
Modern parents have discovered table manners & the NYT is on it!
Next step for TVs: Ultra HD.
Do digital books leave readers cold?
Johnny Cash’s boyhood home tells the story of a town.
Bears fire Lovie, anger Ditka.
I mentioned how Tolkien made use of the Beowulf opening lines in the last edition – here they are being performed.
Place Beyond the Pines trailer, with Ryan Gosling v. Bradley Cooper. 
Batman or Spider-Man: WHO YA GOT?
Honestly, now: how many movies that came out in 2012 will you watch more than once?
The Thomas Friedman op-ed generator.
It’s a major award!  (We’ll have a new podcast today.)
“From dark to blazing bright.”  
The Founders and Finance, Thomas McCraw, $23.  
“The Future has always been the ally of tyranny. The ordinary Englishman has been duped out of his old possessions, such as they were, and always in the name of progress.” – G.K. Chesterton

This collection of news and notes from around the web is edited by Benjamin Domenech, research fellow at The Heartland Institute, co-host of Coffee & Markets, and editor in chief of The City. The views expressed within are his alone, and do not necessarily reflect the views of his employers.
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