Happy New Year to all you “cliff danglers” out there. Do you feel any differently? Today, we woke up to a new year and a new economic reality. We have officially fallen over the “fiscal cliff,” … or have we?
That’s right; our government has done it again. Wasted months and months on rhetoric and political postering, waited until the last minute, scrambled around, put together a “half-assed” deal that the Senate passed in the wee hours of January 1 amid much fanfare and sent to the House for consideration. (Incidentally, what are the chances that any senator has actually read the bill he or she approved in such haste?) If the House approves the measure, not a sure thing, President Obama will sign it, and we will climb back over the “fiscal cliff,” conveniently, before the financial markets open tomorrow. Thus, we will have fallen over the “fiscal cliff,” but not really. If you are confused, don’t worry, so, apparently, are our elected officials. i
Among other provisions, the bill raises income tax rates and limits deductions on individuals earning over $400,000 and on households earning over $450,000. Additionally, it leaves the Bush middles class taxes rates in place and extends unemployment benefits for the long-term unemployed, which were due to expire. I have no problem with that, but I do have a problem with the fact that it defers any spending cuts for two months. That’s right. The government has done what it does best, what I predicted might happen. It deferred a difficult decision; it “kicked the can down the road” once again. It created another “fiscal cliff” in two months. Let the next Congress worry about it. For those of you who are not keeping score, the end of February just happens to be when the U. S. will need to have its debt ceiling limit raised, which has to be approved by Congress. Those negotiations should be fun!
PREDICTION AND CONCLUSION
Many conservative representatives have expressed displeasure with the bill, but I believe the likelihood is the House will pass it. Politically, they have been backed into a corner and have little choice. However, they will not be happy, and they will remember this. Consequently, they will be less prone to compromise prospectively. Therefore, this may prove to be a pyrrhic victory for the Dems.
Also, let’s not forget that the country does have a $16 trillion debt that still needs to be addressed by judicious, perspicacious spending cuts, not last minute backroom dealing. Debt reduction is essential for the long-term health of our economy. Unfortunately, based upon the track record of the Obama Administration and the current mood of the electorate I see little chance of that occurring in the near future.