published Thursday, January 3rd, 2013

Fiscal cliff deal bad for all

  • photo
    The lights of the U.S. Capitol stayed lit as the Senate and House worked well into the night to pass the fiscal cliff legislation.
    Photo by Associated Press /Chattanooga Times Free Press.

Rep. Nancy Pelosi, D-Cal., called the scheme to partially avert the fiscal cliff "a happy start to a new year."

If more unemployed Americans, higher taxes on the middle class and small businesses closing their doors from sea to shining sea are the kinds of things that make Rep. Pelosi grin with glee, then she certainly has plenty of reasons to be happy.

But for those of us who actually live in the real world, the plan is an absolute nightmare.

The 11th-hour compromise, concocted by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, R-Ky., and blessed by President Barack Obama, included plenty of fiscal irresponsibility, economy-battering tax hikes and passing the buck.

The New Year's Day agreement postponed sequestration -- the automatic federal budget cuts scheduled to begin on Wednesday -- for two months and restructured looming tax increases. It also it managed to do the unthinkable: Shafting almost every single American at the same time.

Consider just some of the bad aspects of the scheme to avoid the fiscal cliff:

* The deal implements $10 in tax increases for every $1 in spending cuts.

* The Social Security payroll tax rollback was allowed to expire, increasing taxes on a family making $50,000 a year by about $1,000.

* Under the agreement, 77 percent of American households will face higher federal taxes in 2013, according to the Tax Policy Center, a nonpartisan Washington research group.

* The plan spikes government spending by $330 billion as a result of extended unemployment benefits, an increase in Medicare funding and extension of agriculture programs.

* The top tax rate will increase to 39.6 percent for entrepreneurs, investors, small business owners and other job creators earning more than $400,000 ($450,000 for married couples).

* The top tax on dividends and capital gains climbs from 15 percent to 20 percent (23.8 percent, including the Obamacare tax on investment income that took effect on Tuesday, according to the Cato Institute).

* The death tax -- which was 0 percent in 2010 -- is hiked from 35 percent to 40 percent for estates of over $5 million.

In total, the agreement contains $600 billion in tax hikes. To make matters worse, all of the new tax rates are "permanent," meaning that Congress would have to vote to change them. "This is a big deal," Business Insider website notes. "Almost every fiscal agreement reached by Congress since the Bush tax cuts of 2001 has been scheduled to phase out at a future date."

Not surprisingly, the accounting firm Ernst & Young found that this tax increase on job creators would cost hundreds of thousands of jobs. As a result, the plan -- with its punitive tax increase on high income earners -- is not only one of the most obvious and vile examples of class warfare enacted in American history, it is also takes jobs from the unemployed and working poor.

So why would so many members of Congress vote in support of such a bad piece of legislation?

It seems part of the issue is confusion. According to the Heritage Foundation, the 157-page bill "passed both chambers of Congress within a 24-hour period on a holiday." Quite simply, most Members of Congress had no clue what was in the bill. Most of them didn't even know how bad the legislation would be for the American people.

The other part of the problem was the fear in Washington over sequestration -- the $109 billion in automatic, across-the-board cuts to federal agencies and programs that would have occurred on Wednesday had a deal not passed.

In reality, the sequestration would be the best thing that ever happened to the bloated federal budget.

Dan Mitchell of the Cato Institute points out that almost all of the automatic "cuts" planned in the sequestration "are mostly just reductions in already-scheduled increases." Most of the actual budget reductions will come in the form of military spending and, according to Mitchell, even with the sequester, "the defense budget 10 years from now will be $100 billion higher than it is today."

The sequester is just a drop in the bucket in terms of total federal spending -- 2.87 percent of our country's $3.8 trillion budget -- but it represents an opportunity for a real victory.

Conservatives in Congress have already given up far too much by allowing such draconian tax increases to pass without getting any real spending cuts in return. Allowing sequestration to take place may be the Republican Party's last best hope to prove that there actually is a party in Congress that stands for smaller government and less spending.

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LibDem said...

"Quite simply, most Members of Congress had no clue what was in the bill." They had only 500 days to think about this.

January 3, 2013 at 7:09 a.m.
nucanuck said...

It seems that our editor doesn't like for free-loading America to begin to pay for more of what we have been getting on credit. If our Congress votes to pour Trillion$ into propping up the international banking system, then we the people owe that money. If our government decides to engage in military operations all over the world, then we the people must pay much more in tax.

Just because most people would like less spending doesn't mean that we shouldn't be taxed for the things that Congress has authorized. Clearly the Bush tax cuts came at a time when Congress was spending more and that has been a formula for disaster.

Now we have to begin to work toward a return to fiscal responsibility while trying to avoid an economic collapse. Congress is walking a tightrope of their own making and more taxes will have to be part of any solution. Repblicans need to get real.

January 3, 2013 at 7:49 a.m.
AndrewLohr said...

How to cut spending? Create a new tax form that lets each taxpayer choose between one dollar for a program and one cent for the taxpayer. Most of us would take a penny for ourselves over a dollar for Big Bird or contraceptives.

January 3, 2013 at 9:48 a.m.
BigRidgePatriot said...

Holly crap Batman! nucanuck thinks we have a revenue problem!

Since marxists seem to think the government should rightly have control of everything in our lives we might as well turn it all over to the bureaucrats and let them work it out. I am sure they will let a little bit trickle past their monuments to themselves and their parties to buy some bread for the serfs.

January 3, 2013 at 12:46 p.m.
nucanuck said...

BRP,

Don't put words in my mouth. I say that if Congress spends money, we owe it whether we like it or not. Just because you or I don't approve, that doesn't mean that we shouldn't be taxed for it.

It's easy to say bomb Iran or over-throw Assad or send a mission to Mars, or spend billions on banks and food subsidies, but we owe that money and we should be taxed at the time each expendature is approved. That concurrent taxation would become it's own brake on expenditures.

That is the true conservative view.

January 3, 2013 at 5:35 p.m.
timbo said...

Nucanuck.....you are half right on one thing, we need to pay for things we spend money on we just don't need to spend so much money. I have talked to a lot of conservatives who wouldn't mind paying more taxes if it went right to the deficit and spending was severely cut.

Also, Obama wouldn't know fiscal responsibility if it bit him on the ass. Neither did Bush for that matter. If you want to tax our way out of this mess, Obama should have let ALL of the Bush tax cuts expire. This symbolic tax increase for the "rich" is Obama posing as the friend of the working man. He is just playing you fools.

The big money is in the middle class and that is who he will go after next. Then he will increase spending to continue to buy votes. He is not interested in cutting spending at all. Going over the fiscal cliff was the only responsible, balanced approach

January 4, 2013 at 9:07 a.m.
BigRidgePatriot said...

nucanuck said... "It seems that our editor doesn't like for free-loading America to begin to pay for more of what we have been getting on credit."

Sorry for "putting words in your mouth". It sounded like you thought us "free loaders" supported the reckless spending of those idiots in Washington. You are right, all of us dumb serfs should have seen through all of the lies and empty promises from the ruling class and kicked them to the curb decades ago. Unfortunately, many of our fellow citizens have been duped by the socialist propaganda machine.

Washington has a spending problem. I have a very serious problem with being expected to hand them my wallet because some joe with strong socialist tendencies needs someone to pay for the expansion of government they supported so enthusiastically. It was certainly predictable that many would fall into the wealth envy trap and let that draw them into supporting legalized theft from fellow citizens. Do you ever question your role in supporting the expansion of government? Do you see the danger in having half of the population now dependant on government in some way? Are you to dim to see where Washington is taking this?

January 4, 2013 at 12:46 p.m.
Easy123 said...

BRP,

"Unfortunately, many of our fellow citizens have been duped by the socialist propaganda machine."

You just lost all credibility, Karl.

"I have a very serious problem with being expected to hand them my wallet because some joe with strong socialist tendencies needs someone to pay for the expansion of government they supported so enthusiastically."

You are expected to pay taxes and you always will be. But keep going with your "socialist" rant. You'll never understand what socialism actually is because you use the word for everything that doesn't coincide with your political viewpoint.

"It was certainly predictable that many would fall into the wealth envy trap and let that draw them into supporting legalized theft from fellow citizens."

There is no "wealth envy". There is only a hatred of the poor. Also, sane people call this "legalized theft" taxation. I guess WingNuts refer to it differently.

"Do you ever question your role in supporting the expansion of government?"

Do you ever question your role in supporting the reduction of government while not actually wanting to reduce government? You only want the "reduction" of programs/expenditures that you don't like. Those aren't even the highest expenditures on the budget! You still want your government to be "big" and intrusive enough to keep gay marriage illegal, give tax exemption to churches, give huge entitlements to big corporations, and a million other examples of Republicans espousing "big" government aspirations.

"Do you see the danger in having half of the population now dependant on government in some way?"

Half of the population isn't dependent on government in some way. Why do you espouse lies? The number is actually closer to 100% but you'll never see it that way. Truth escapes you.

"Are you to dim to see where Washington is taking this?"

Are you too dim to see that no serious human being believes your WingNut propaganda/conjecture?

January 4, 2013 at 1:48 p.m.
BigRidgePatriot said...

Easy123 said... "Do you ever question your role in supporting the reduction of government while not actually wanting to reduce government? You only want the "reduction" of programs/expenditures that you don't like."

I want a reduction in ALL of the programs of the federal government, elimination of many or most. I know that is probably hard for you to believe but it is quite true.

January 4, 2013 at 4:28 p.m.
Easy123 said...

BRP,

"I want a reduction in ALL of the programs of the federal government, elimination of many or most."

Which ones would you cut/eliminate first?

"I know that is probably hard for you to believe but it is quite true."

It's hard for me to believe because it is untrue. I'll prove it when you respond to my first question.

January 4, 2013 at 4:47 p.m.
BigRidgePatriot said...

Easy123 said... "Which ones would you cut/eliminate first?"

FIrst? ALL of them, NOW. How dense are you?

January 4, 2013 at 5:20 p.m.
Easy123 said...

BRP,

"FIrst? ALL of them, NOW.*

Can you be a little more specific? You would cut/eliminate Social Security, Medicare, Education, Veteran's Benefits, Defense, Unemployment, Transportation, etc., correct?

How dense are you?"

How ambiguous, evasive, and moronic can you be?

January 4, 2013 at 5:31 p.m.
BigRidgePatriot said...

Easy,

I know you. You are a typical Democrat. If I thought you were really interested in the details in the spirit of finding a way to balance the budget I would be happy to spend the time.

What will more likely happen is that you will just discount everything I take the time to offer because you think it is ALL appropriate for the federal government and think we have a simple revenue problem. Convince me you want to have an honest dialogue and I will show you how I would like to eliminate or cut every federal program, including and especially military spending. Otherwise, I don't have the time to waste on you.

January 4, 2013 at 6:56 p.m.
Easy123 said...

BRP,

It never ends with you folks. Are you so jaded in your Conservatism that you can't even have a discussion without assuming 100 things about me?

January 4, 2013 at 10:26 p.m.
nucanuck said...

BRP,

Until Congress (Rs and Ds) musters the courage to decide what to keep and how to fund the spending that they have authorized, we have a revenue problem.

Obama cannot tax and he cannot spend. Neither could Bush. We watched a Republican Congress cut taxes and raise spending during the Bush Follies. We are watching a scared split Congress now spend massively to try to cure a debt problem. Most Americans of all persuations find it difficult to believe that increased debt can actually save us, including me. Government, however, has the legal right to counterfiet money. That process is a backdoor tax that hurts those at the bottom the most, but it can magically make government oblgations diminish in relative size. It's a dirty bi-partisan trick that stiffs ALL the creditors of the US and it is now showtime.

America will be worse off for this maneuver, but I'm afraid that the cake is already in the oven.

You need to try to get over trying to blame one party over another...this behavior is reflective of whichever party is in power.

January 5, 2013 at 7:40 a.m.
BigRidgePatriot said...

nucanuck said... "Until Congress (Rs and Ds) musters the courage to decide what to keep and how to fund the spending that they have authorized, we have a revenue problem."

Those would be the words of a statist clinging to the recent expansions in the federal government. The answer is to real in the unrestrained, irresponsible growth of the Washington.

January 5, 2013 at 1:48 p.m.
nucanuck said...

BRP,

Only the party out of power gives lip service to austerity...then only until they regain power.

Austerity is only likely to be imposed when creditors from the rest of the world refuse to do business in US dollar$. At that point a tsunami of overseas dollars will return to our shores and drive the purchasing power of the dollar to unimaginable depths. Then we will cut program after program and we won't even be able to repair our own roads or feed our families. That is the real danger in continuing on as we now are.

January 5, 2013 at 4:45 p.m.
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