GOP likely to capture senate in 2012

Just as 2006 and 2008 were disastrous for the Republicans, the election of 2010 was a disaster for the Democrats. The Republicans won control of the House of Representatives by winning 63 seats, but although they won six seats in the Senate remained the minority party by a margin of 53-47 (including two independents who side with the Democrats). There is a strong chance that the Republicans will complete their takeover of Congress in the 2012 elections.

The party affiliation of the senators who are facing re-election this year gives the Republicans a decided advantage. Including the two independents, the Democrats will be defending a total of 23 senate seats while only 10 Republicans are up for re-election. This alone would favor the GOP since it has to defend fewer seats while having more opportunities for gains.

To make matters even worse for the Democrats, many incumbent senators are retiring rather than face angry constituents in a re-election battle. This means that neither candidate in the general election in these states will have the advantage of incumbency. Democratic senators who have already announced their retirements include Kent Conrad (N.D.), Joe Lieberman (Conn.), Jim Webb (Va.), Herb Kohl (Wis.), Jeff Bingaman (N.M.), Daniel Akaka (Hawaii), and Ben Nelson (Neb.). Connecticut leans Democrat and Nebraska leans Republican, but the rest of these states are tossups according to the Cook Political Report.

There are also two Republican senators retiring, Jon Kyl of Arizona and Kay Bailey Hutchinson of Texas. Both of those seats are generally considered to be safely in Republican hands. Texas is rated as strongly Republican while Arizona is likely Republican.

Cook also considers Montana (Jon Tester, D) and Missouri (Claire McCaskill, D) to be tossups. On the Republican side, Massachusetts (Scott Brown) and Nevada (Jon Ensign) are also considered tossups.

Several other Democratic seats might also be in play. Florida is rated as leaning Democrat in the re-election of Bill Nelson, but the state has been a tossup in recent elections according to 270towin.com. Likewise, Debbie Stabenow of Michigan is given the edge by Cook, but the economic woes of this Rust Belt state, home of Detroit and the auto companies, might make voters discard the Democratic incumbent.

The states of Ohio, West Virginia, and Pennsylvania make interesting cases as well. The three states lie atop the Marcellus Shale, a geologic formation that contains an abundance of oil and natural gas. The energy boom in these areas has created jobs that are very vulnerable to the regulation of fracking, which the EPA has considered. President Obama’s “green” environmental initiatives may hurt the Democrats in these states.

Ohio is already a swing state with one Republican and one Democratic senator. The Democrat, Sherrod Brown, is up for re-election. Ohio has picked the winner in the last four presidential elections. Pennsylvania’s senate delegation is similarly split with Democrat Bob Casey up for re-election, although it leans more toward the Democrats than its two neighbors. West Virginia has two Democratic senators with Joe Manchin facing re-election, but the state has voted Republican in three of the last four presidential elections.

With a large number of vulnerable Democrats, the Republicans have a good chance of winning enough Democratic seats, while defending the few vulnerable Republican seats, to take a majority of the senate. This is especially likely in a year with an unpopular president facing re-election in a poor economy. Neither of Georgia’s two senators is up for re-election this year.

To control Congress, the Republicans must also maintain control of the House of Representatives, whose 435 members all face re-election. Since the Republicans hold more seats in the house they obviously have more seats to defend so the question is whether the Republicans have more seats vulnerable than the Democrats.

An important variable in the house races is that 2010 was a census year. Based on 2010 census data, house districts were redrawn over the past year. Slower growth in blue states and emigration to red states means that states that typically vote Republican will gain seats in this election while several Democratic states will lose seats. Georgia’s congressional delegation will gain one member after this year’s election. Additionally, since the Republicans won heavily in state races as well as in Congress, the GOP had an edge in the redistricting process, allowing them to redraw districts to favor Republican candidates.

According to the most recent Cook Political Report, only one Republican seat is counted as likely to go Democrat, while two Democratic seats are likely to go Republican. Five Democrats are in districts that lean Republican, while only three Republicans are in districts that lean Democrat. Georgia’s John Barrow (D-12) is one of the Democrats in a Republican leaning district. The Republican challenger, as yet undetermined before Georgia’s primary, is up by 12 points.

Cook has also identified 20 districts as tossups. Of these, 14 are leaning Republican and six are leaning Democrat, but, as the name implies, tossups could go either way. In fact, with nine months to go before the election, a variety of factors from scandals to economic news to a war with Iran could change the dynamics of many races.

There are a few other trends that favor Republicans as well, however. While a poll of party affiliation by Gallup currently shows Democrats with a two point advantage over Republicans (29-27 percent or 45-45 including leaners), the real story is that Democratic Party affiliation has fallen sharply since November 2008 when Barack Obama was elected. At that point, the Democrats led by 37-28 percent (51-40 including leaners). The current numbers are even slightly more favorable to Republicans than they were at the time of the 2010 congressional landslide. Even though Democrats have made some gains in the Rasmussen generic congressional ballot over the past few weeks, Republicans still hold a slight edge there as well.

Perhaps most ominous to Democratic incumbents is that only 31 percent of Americans believe that the country is headed in the right direction according to Rasmussen. For the party that has held control of the presidency and the senate for the past four years, as well control of the house for the first two years of the Obama presidency, that statistic is probably not a good sign.

A big part of the problem may be that when the Democrats had unfettered control of Congress, they pursued an unpopular agenda. Instead of focusing on jobs and the economy, they passed an expensive stimulus package that had no noticeable effect and then spent the next year on health care reform. The Affordable Care Act was unpopular when it passed in 2010 and has not become more popular with the passage of time. The most recent Rasmussen poll shows that Americans favor the law’s repeal by 53-38 percent.

In contrast, the Republicans swept into Congress on two simple principles: To cut spending and stop tax increases. They succeeded in resisting Democratic attempts to raise taxes, but their promise to cut spending has been less successful. Nevertheless, the Republicans in the house did hold federal spending to almost zero growth in 2011 over the loud objections of President Obama and the Democrats in the senate. As a chart from USGovernmentspending.com shows, even holding federal spending level is an improvement over the increases seen in past decades.

Some of the recent trends, like the gains in the generic congressional ballot that favor the Democrats, may be byproduct of Republican bickering in the presidential primaries. Until a nominee is picked, President Obama and the Democrats will be able to remain above the fray. However, as the Republican primary draws to a close, the president will begin to attack his new opponent and the general election campaign will begin in earnest.

This article originally published on Examiner.com:
http://www.examiner.com/elections-2012-in-atlanta/gop-likely-to-capture-senate-2012

Fair Tax flaws

Recently an Alert Reader commented on the article “Fair Tax basics” on this site.  The reader noted in part that the “Fairtax sounds great but check out the fine print http://fairtaxfineprint.blogspot.com/.”  The link is to a blog critical of the notion that the Fair Tax will also tax governments.

The text of the Fair Tax bill does confirm that the definition of the word “person” does include governments, which means that local, state, and even the federal government will be taxed if the Fair Tax becomes law.  This is counter-intuitive.  It seems nonsensical that the government will be forced to pay a consumption tax to itself. 

Only people pay taxes.  Corporations and governments have no money that they don’t get from people, so when a corporation or government is taxed, the money it uses to pay that tax comes from real people.  In the case of the government, it comes from taxpayers.  Therefore, it seems that the Fair Tax would merely shift the tax burden to local and state governments as they increased taxes to pay the Fair Tax.

To get an answer to this question, the Atlanta Conservative Examiner called the expert.  Neal Boortz is the coauthor of two Fair Tax books and host of the Neal Boortz Show, a syndicated radio talk show based on Atlanta’s WSB AM-750 on Tuesday, April 12.  Boortz pointed out that the problem with the Fine Print blog’s argument is that the government already pays taxes.  Governments directly pay sales taxes on goods and services that they buy as well as Social Security and Medicare taxes on payroll.  There are also indirectly pay embedded taxes on the goods and services that governments buy.  These include payroll taxes of the workers that make the product being purchased. 

The Fair Tax would eliminate many of these taxes that governments already pay indirectly (although not the sales taxes levied by local and state governments).  By specifically and directly taxing governments, the Fair Tax simply takes the money that governments have paid indirectly in the past and makes it a direct payment.  Theoretically at least, the change is a wash.  Because prices of goods and services would fall without embedded taxes, the total paid out should remain approximately the same with the Fair Tax making up the difference.  Additionally, Boortz stated that he was working on a position paper to answer the charges from the Fine Print blog.

More than a new sales tax

A second objection to the Fair Tax it is simply a sales tax that would cause prices to rise by 23%.  This does not consider the fact that the Fair Tax replaces other federal taxes.  As those embedded taxes are removed, the price of goods and services should fall to an equilibrium point.  The Fair Tax would be added to the lower price so that the actual final price paid on new items would be approximately the same as it is today.  Used items would not be taxed and would therefore be cheaper than they are today.

The critics who claim that the Fair Tax would raise current prices by 23% more accurately describe the Value Added Tax proposed by some Democrats.  A VAT is a European-style consumption tax in which a tax is added at each stage of production of a good.  Unlike the Fair Tax, a VAT would be in addition to current taxes.

Crunching Numbers

Rep. Rob Woodall

There is also some dispute over the actual Fair Tax rate.  The answer depends on how the rate is figured.  Depending on whether the rate is being quoted as tax-inclusive or tax exclusive, the rate can be as high as 30%.  The amount of the tax is the same regardless of the percentage of the rate. 

The Fair Tax website acknowledges that the rate charged at the point of sale would be 30%.  For example given on the site, if a person bought an item for $77, they would pay $23 of tax for a total of $100 ($77 x 1.3).  The tax-inclusive price is $100.10. 

When figured the other way, the rate is different.  If one begins at the total price of $100 and multiplies by 23 percent, the result is $23 of tax and $77 for the product.  The tax-exclusive price is $77.  This is akin to how income tax rates are quoted. 

Proponents of the Fair Tax say they use the tax-exclusive rate because the Fair Tax would replace the income tax.  Critics say that the lower rate is misleading.  In either example, the tax is virtually the same.

Who will pay more?

Factcheck.org reports that a Treasury Department comparison of the Fair Tax and income tax shows that the middle class would pay more.  Factcheck’s own analysis shows that those earning less than $24,156 per year would benefit when all taxes replaced by the Fair Tax are considered. Further, Factcheck says that David Burton of Americans for Fair Taxation acknowledges that high earners would probably pay a smaller share while “probably those earning between $40[thousand] and $100,000” would pay a larger share.

The important thing to remember here is that each American would control the amount of tax that they pay.  Since the Fair Tax is only levied on new goods and services, a taxpayer can reduce their tax bill by buying fewer new products.  If middle class consumption of new products decreases, that would make more money available for saving and investing as well.

An economic boon

Fairtax.org claims that the Fair Tax would entice expatriate companies to return to the US, flooding the country with capital.  The group claims that GDP would increase by more than 10 percent in the first year alone while the increasing money supply would keep interest rates low.  

Even the left-leaning Annenberg Factcheck.org’s analysis agrees that the size of the economy would grow by 5 to 7 percent, and possibly as much as 10 percent, over a period of time.  A growing economy would lead more profits, higher wages, a better standard of living, and, ultimately, higher tax revenues.

Could there be a Fair Tax and income tax?

A last major challenge to the Fair Tax is the charge that it will not be possible to pass.  To ensure that the country does not end up with a sales tax and income tax, the Fair Tax would be passed along with an amendment to the Constitution that repeals the 16^th amendment, which established the income tax.  Needless to say, it is much easier to pass a law than a constitutional amendment, which requires approval by three-fourths of the states. 

The authors of the Fair Tax have written the repeal of the income tax, the payroll tax, the gift tax, and the estate tax into the bill.  However, since the sixteenth amendment would have to be repealed separately, the possibility of having both an income tax and the Fair Tax remains a distinct possibility.  This is especially true if the Democrats took control of the government, or of a majority of the states, after the Fair Tax is enacted. 

Thus far it has been difficult for the Fair Tax to gain traction in mainstream circles.  With the current budgetary crisis, both parties can agree that major tax reform is needed.  Unfortunately, there is little agreement on what sort of reform that should be.  If it is difficult to enact the Fair Tax, it would likely be more so to repeal the constitutional income tax.

Most support for the Fair Tax seems to be among conservatives and libertarians.  Most independent voters are not aware of the Fair Tax.  Those who know about it probably do not completely understand it.  Even assuming the Republicans complete their takeover of Congress in 2012, it is unlikely that they will be able to muster the votes to pass the Fair Tax unless there is a major political realignment.  Given the dire financial state of the federal government, the current crisis may spur that realignment.

Currently, Georgia is a center for Fair Tax activism.  The Fair Tax bill is sponsored in the House by Rep. Rob Woodall (GA-7).  He is joined by sixty cosponsors including Paul Broun (GA-10), Phil Gingrey (GA-11), Tom Graves (GA-9), Jack Kingston, (GA-1), Tom Price (GA-6), and Lynn Westmoreland (GA-3).  Notably absent is Rep. Paul Ryan (R-WI), author of the Path to Prosperity.  In the Senate, the bill is sponsored by Georgia’s Saxby Chambliss and has six cosponsors, including Georgia’s other senator, Johnny Isakson.

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