Abyss of debt still threatens America even though fiscal cliff has been avoided

No one is celebrating after America pulled back from the fiscal cliff, because it is obvious how bad the problem still is.

President Barack Obama, right, speaks as U.S. Vice President Joseph


President has threatened more tax increases, warning: “If Republicans think that I will finish the job of deficit reduction through spending cuts alone they’ve got another thing coming.” …….Photo: BLOOMBERG

www.telegraph.co.uk  –  American Way: Mark McKinnon

If the infamous fiscal cliff in America was averted, why is no one celebrating? Because the abyss below just got deeper.

Near the midnight hour on New Year’s Day, 2013, the US House of Representatives passed the American Taxpayer Relief Act of 2012, by 257 votes to 167.

The bill had already been approved in the Senate. Its intent: to avert the largest tax hike in American history.

So, why no hoopla? No “Huzzahs”? Surely these members of Congress acted heroically. Were Americans simply too hung over from their holiday parties to notice? Or, more likely, were they too weary of Washington to care?

The threatened $500 billion in tax increases had been designed, by this very same Congress, to be triggered automatically on Jan 1 if an agreement could not be reached on other ways to reduce the US government’s deficit spending.

But they represented only one facet of the fiscal threat that might have plunged the fragile American economy over the proverbial edge, where only further joblessness would gain a foothold.

More than $1 trillion in automatic spending cuts over 10 years, half of that from the defence budget, were also part of the “compromise” deal struck by Congress in August, 2011. That was during the last crisis du jour, the debt-ceiling negotiations.

As is so often the case in Washington DC dialect, words do not mean what you think they mean. That agreement was called the Budget Control Act, but did not include a budget, did not control spending, and the only act required of Congress was to delay hard decisions.

That kick-the-can-down-the-road “act” temporarily raised the nation’s debt ceiling, or borrowing limit, by $2.1 trillion, in return for some to-be-determined-later solution to Washington’s overspending addiction. If none was found by Jan 1 this year, the tax increases and spending cuts would kick in – and the combination would send the economy over the cliff.

So, here we are today. Phew! A deal was reached in the final moments of the 112th Congress and the fiscal cliff was averted, right? Well no, not really.

The Taxpayer Relief Act did indeed bring some relief: it made made permanent the tax cuts on income, capital gains, and dividends first enacted under President George W Bush and renewed under President Barack Obama, for individual taxpayers with incomes up to $400,000, or $450,000 for married joint filers. It will spare the average family from a tax increase of $1,250 this year. This is good.

But it increases federal tax on the top two per cent of earners from 35 per cent to 39.6 per cent, limits their deductions and credits, and taxes some of their dividends and capital gains. This is, sadly, necessary.

So is the expiration of the temporary two per cent cut to payroll taxes, enacted in 2010, which lowered employees’ contributions towards the social security programme. This will affect all earners, but will be most painful for middle and low-income households which depend on every dollar in every paycheck.

As a result, the average family will see about $1,000 less in income this year – a tax rise that went through quietly, with no mention by President Obama in the national address he delivered after the deal was finally struck. But, as families in real America receive their first paychecks in coming weeks, expect discontent to be loudly voiced.

And while other murky details of the deal emerge – including, oddly, millions in tax breaks for Hollywood, NASCAR stock car racing, and the wind-energy industry – the White House calculates that $620 billion in new tax revenues will be raised.

So did the deal fix the fiscal mess we face?

No. Focusing on a hangnail but not the severed hand misses the point of triage. The deal included only $1 in spending cuts for every $43 in new tax revenue. So, the abyss of debt remains – and it’s inky red and deep.

What lies ahead then for the 113th Congress, newly sworn in on Thursday? And for the President, who will be inaugurated for his second term on January 20?

Another shutdown showdown is likely in less than 60 days, because at $16.4 trillion in debt and a debt-to-GDP ratio unseen in 70 years, the federal government has once again reached its borrowing limit.

It will run out of operating funds, and a default looms in the next two months unless Congress agrees to the President’s request to raise the debt ceiling once again.

The delayed $1.2 trillion in automatic cuts begin in March, with the defence budget still bearing most of the burden – some $50 billion this year alone. Entitlement programmes already soak up nearly 62 per cent of all federal spending, and Medicare and social security, the two benefits aimed mostly at elderly Americans, are nearing insolvency: 10,000 ageing baby boomers are becoming newly eligible every day.

Meanwhile the President has threatened more tax increases, warning: “If Republicans think that I will finish the job of deficit reduction through spending cuts alone they’ve got another thing coming.”

The abyss of debt deepens. And the political divide widens. Democratic and Republican lawmakers are united on one front only: each hopes the other side will go over the edge first.

.

top of page ^

Tea Party Leaders Outraged Over House Passage of Fiscal Cliff Bill Read

tea party

Tea Party Leaders are expressing outrage and disappointment over the House passing a bill late New Year’s Day that allows President Obama and Congressional Democrats to raise taxes on wealthy Americans with no guarantee of future spending cuts.

www.christianpost.com  –  By Paul Stanley

“Sadly, our New Year’s predictions have all come true,” said Jenny Beth Martin, national coordinator of Tea Party Patriots. “Congress and the president had all year to do their jobs and be fiscally responsible – and, just like we said they would, they waited until the last possible moment to fail their nation miserably with a ‘fiscal cliff’ scheme to raise taxes and keep overspending.

The issue for those who believe the nation has a spending problem and not a revenue problem suddenly became a nightmare when 85 Republicans in the House joined 172 of their Democrat colleagues in supporting the measure that was sent over in the wee hours of the morning on New Year’s Day.

For the past 17 months the fiscal game of chicken rarely changed. Obama and liberal Democrats demanded higher taxes on families making over $250,000 annually and Republicans, led by House Speaker John Boehner with some assistance by presidential candidate Mitt Romney, wanted to extend the Bush-era tax cuts and reduce spending, especially on the big entitlement programs of Social Security and Medicare.

But in the end it was Obama and his team that got Boehner to go off the road as opposed to risk getting blamed for raising taxes on most every American taxpayer.

The final version that President Obama is expected to sign will extend the tax cuts for some taxpayers but individuals making over $400,000 and families over $450,000 will owe Uncle Sam more money in 2013 and beyond.

Additionally, estate and capital gains taxes will go up for the same group. The bill also extends jobless benefits for one-year and cuts Medicare reimbursements for doctors.

The Congressional Budget Office estimates the bill will add almost $4 trillion to the national debt over the next 10 years.

Judson Phillips of Tea Party Nation is even more outraged that some Republicans – including Boehner – voted in favor of the bill.

“The Republican Party has now cast itself as the Official Tax Collector for the Great Obamacare State,” Phillips wrote in an email to The Christian Post early Wednesday morning.

“Once again Republicans have surrendered their position of strength and given in to everything the Democrats wanted. This bill punishes Americans with new taxes that go not to reducing the deficit but for even more government spending. Today the Republicans stand under John Boehner’s freshly laundered white flag of surrender and America loses.”

.

Fiscal Crisis: Deal or No Deal?

 Lawmakers struggle to produce fiscal deal as ball drop set to ring in tax hikes

www.foxnews.com

Lawmakers were racing Monday to produce at least the framework for a deal that can avert the imminent fiscal crisis, as it appeared increasingly likely that the New Year’s Eve ball drop will coincide with massive tax hikes and spending cuts. A last-ditch effort over the weekend by the Senate so far has failed to produce an agreement, bringing talks — as they often are in Congress — right down to the deadline.  

Senate Majority Leader Harry Reid said Sunday afternoon that “there’s still significant distance between the two sides.” His Republican counterpart, Sen. Mitch McConnell, continued talks on the sidelines with Vice President Biden well into the night, according to an aide. 

While Biden was brought in Sunday to help referee, it’s unclear whether the three figures might be able to produce a proposal at a reasonable hour Monday. President Obama has already made clear he will press Reid to call a vote on a separate White House plan if nothing is produced. 

And even if a bill is produced, drafting it and passing it through both chambers before midnight would be a herculean task. As an alternative, lawmakers could potentially pass a bare-bones bridge bill extending current tax rates until a broader package can be approved. Or they could let the tax rates lapse, only to patch up the problem in early January. 

Or, in the worst-case scenario, the stalemate drags on, and more than $600 billion in tax hikes and spending cuts kicks in with no relief in sight. 

This scenario, economists warn, could easily trigger another recession. 

Several stumbling blocks emerged Sunday in negotiations that could hold up a deal in the near-term. Initially, Democrats objected to a Republican proposal that would change the way Social Security benefits are calculated — effectively reducing benefits over time. 

But as Republicans began to ease off that demand, both sides continue to haggle over which Americans should see their taxes rise. Democrats want households making over $250,000 to see a hike, while Republicans want to raise that threshold significantly. Late Sunday, Republicans voiced the most concern about a Democratic push to use new tax revenue for new spending. 

“The biggest obstacle we face is that President Obama and Majority Leader Reid continue to insist on new taxes that will be used to fund more new spending, not for meaningful deficit reduction,” said Alabama Sen. Jeff Sessions, the ranking Republican on the Senate Budget Committee. 

Reid said late Sunday afternoon the Social Security provision — knows as chained CPI — never should have been added to what would now be a basic, final-hour deal that would include taxes increases for top earners and perhaps an extension of unemployment insurance and a promise to negotiate later on spending cuts. 

Reid mentioned in passing that he had a new proposal, but a Reid staffer clarified afterward that Democrats have yet to make a formal counter offer. 

Should Congress fail to reach a deal, a mix of $600 billion on tax increases and federal cuts in 2013 would start to kick in Jan. 1. 

“We can’t accept a bad deal just because we’re here,” said Sen. Patty Murray, D-Wash. “It’s real disturbing we were thrown in a change to Social Security at the last minute.” 

Signs that a deal was unraveling surfaced by mid-afternoon when Reid said his party could not make a counteroffer to Republicans. And McConnell said he had to call Biden to “jump-start” the negotiations. 

The Senate got to work on a compromise plan after House Speaker John Boehner’s proposal in the Republican-controlled House collapsed less than two weeks ago. 

Republican Sen. Lindsey Graham said earlier Sunday the chances of Congress cutting a deal before the deadline were “exceedingly good.” However, he sounded downcast about the process and the outcome. 

“Whatever we accomplish, political victory to the president,” the South Carolina senator said on “Fox News Sunday.” “He’s going to get tax rate increases. … And the sad news for the country is, that we have accomplished little in terms of not becoming Greece or getting out of debt.” 

If Reid and McConnell cannot reach a deal, Reid purportedly will present Obama’s bare-boned plan of tax increases for families making more than $250,000 annually and extending unemployment insurance. 

Obama said on NBC’s “Meet the Press” that Congress should “first and foremost” prevent taxes increases for the “vast majority” of Americans. 

“We have been talking to the Republicans ever since the election was over,” the president said during the interview, taped Saturday. “They have had trouble saying yes to a number of repeated offers.” 

Republicans immediately criticized Obama’s remarks. 

“Americans elected President Obama to lead, not cast blame,” Boehner said. 

McConnell spokesman Don Stewart said Sunday: “While the president was taping those discordant remarks yesterday, Senator McConnell was in the office working to bring Republicans and Democrats together on a solution.”

.

Bozell Talks Fiscal Cliff on Fox: Where’s the Focus on the ‘Fiscal Insanity’ In DC?

www.newsbusters.org  –  By NB Staff

MRC founder and president Brent Bozell appeared on the Fox Business Network on Thursday to address the gridlock in Congress over a fiscal-cliff deal. Varney suggested it was “hard-core conservatives” like Bozell who would be blamed if there is no agreement. Bozell insisted there’s no focus on spending cuts, only on taxes.

Bozell slammed the “absolute dishonesty on both sides. No one wants to address the fiscal insanity that’s going on in Washington, DC.” Varney also asked Brent for his opinion on the coverage of the pro-Obama media (video below):

.

“They’re coddling Barack Obama.This guy is filing his nails while the Republicans twist themselves into knots. The media are giving Obama a complete pass on this one. They’re not holding his feet to the fire on anything. And they’re keeping the gunfire on the Republicans at all times.”

.