What to Make of the Fiscal Cliff Deal?

By Sharon Ward, Third and State

Tell us what you think about the Fiscal Cliff deal. Take our two-question survey.

The agreement reached by President Obama and Congress on January 1 was both historic and disappointing – and it leaves much unsettled. The urgency of the Fiscal Cliff has dissipated, but significant threats remain to federal funding for state and local services as well as refundable tax credits for low-income working families, Medicaid, Medicare and Social Security.

There is much to dislike in this agreement. It makes permanent most of the Bush era tax cuts, ensuring that income from dividends and capital gains will be taxed at a lower rate than income from work. It makes permanent the estate tax but locks in a tax rate that creates a huge windfall for the top 0.3% of households. Sequestration cuts – the automatic spending cuts that members of both parties hated and the President said would not occur – have been postponed for two months, with three-quarters of FFY 2013 cuts ($85.6 billion) and $109 billion in annual cuts after that still in law through 2022. The President’s line in the sand on raising tax rates for the top 2% of earners got pushed way back, with top rates kicking in at $400,000 for an individual and $450,000 for a couple. A low-wage earner might need 20 years to make that much.

The agreement is at the same time extraordinary. Eighty-five Republican members of Congress voted with their Democratic counterparts to raise taxes on wealthy Americans – no small feat in a Congress defined (some might say dominated) by its Tea Party members, Grover Norquist, and fealty to the no-tax pledge. Even toward the end, the House of Representatives stood firm in its defense of tax cuts, failing to muster enough votes for Speaker John Boehner’s “Plan B,” which included significant spending cuts and limited tax hikes to millionaires and billionaires.

On the plus side, the agreement abandoned the plan for “chained CPI,” a new measure of inflation that would have reduced future cost-of-living increases for Social Security, veterans’ benefits and other critical benefits. There were no additional spending cuts. The family tax credit programs – including the Earned Income Tax Credit and Child Tax Credit – were protected, and improvements made to those credits were extended for five years. Emergency unemployment insurance benefits were extended for laid-off workers who would have faced a significant immediate threat if we went over the cliff.

So what happened? The framework for the debate has always been the same: a grand bargain that would achieve a deficit reduction target of $4 trillion through a combination of cuts and new revenue. 

The President took what could be considered a realistic path – pressing for tax cuts for the middle class and tax hikes for the top 2% who could most afford it (and have done the best over the past decade). He largely succeeded, and while that is a significant victory, it does not raise enough revenue to stabilize the nation’s debt. This will end up putting significant pressure on the spending side of the ledger.

Already much of the press on the agreement is calling for significant new cuts, without acknowledging the $1 trillion in cuts already agreed to in the Budget Control Act of 2011. Plus, the President has lost the leverage of the Fiscal Cliff deadline.

The next fight will take place over the next two months when Congress will have to act to raise the debt ceiling, probably in February. Sequestration cuts will be announced on March 1 and scheduled to begin on March 27, the date that the continuing resolution governing current year spending expires. 

The President acknowledged that the debate is not over in his January 2 press conference and made two strong statements; that the vote on the debt ceiling should not be tangled up in the larger deficit reduction plan, and that new spending cuts have to be matched one for one with new revenue. Still, few are optimistic that Congress will take a reasoned, balanced approach to resolve the remaining issues, as The New York Times notes:

In the weeks to come, Republicans will use not just the debt-ceiling threat, but also the $100 billion across-the-board cuts known as the sequester, delayed for two months in this week’s deal, and the potential shutdown of the government when the current spending resolution expires in March. Standing up to brinkmanship will require a level of resolve that the president has yet to fully demonstrate.

It is also unclear where new revenue will come from given the long-term agreement on the Bush tax cuts and the fact that the President has taken corporate tax reform off the table, arguing that loophole closures should be dedicated to corporate tax reduction. The easiest and most politically popular option, higher marginal tax rates on wealthy individuals, is done. The other options (capping the value of tax deductions for home sales or charitable contributions) will be harder to accomplish.  

So what’s at stake moving forward?

Sequestration cuts. The current plan locks in three-fourths of the cuts ($85.4 billion) plus another $4 billion in discretionary cuts in the current year (FFY2013). While there is some hope current year cuts will be reduced, it is more likely that the debate will center on knocking back the devastating sequestration cuts for 2014 and beyond.

Working family tax credits. One of the surprises of the debate was the targeting of the Child Tax Credit and Earned Income Tax Credit programs, which are refundable for very low-income working families. While the fiscal cliff agreement continues those programs for five years, including the improvements that specifically benefit low-income families, there is grave concern that their refundability may be in jeopardy.

Medicaid. The health care program was excluded from sequestration, but cuts are likely to be on the table. Since states jointly fund this program, reduced federal participation will just shift costs to states. On the plus side, Medicaid is key to the promise of coverage under the Affordable Care Act, so protecting Medicaid is likely to be a high priority for the administration.

Entitlements. Chained CPI might return, as well as cuts to Medicare and Social Security. 

Pressing for additional revenue will continue to be the key to avoiding new deep cuts to health care, education and other critical services. While the Fiscal Cliff no longer looms, the Debt Ceiling Cliff is just over the horizon.

Romney Caught Lying About Tax Plan

Mitt Romney has been caught lying.  Surprise, surprise!  This time his claim that six studies have validated his claim that cutting taxes won’t add tot he deficit doesn’t add up.  Did he and Paul Ryan think no one would fact check their oft repeated claim?  It turns out that four of the “studies” were blog posts or op/ed articles.  Some were written by the same guy.  None were academic studies.  The two that were came from right wing think tanks like AEI.  No non partisan academic analysis supports their claims.  In fact they say it drills a $5 trillion hole into the federal budget.

Facts matter.

A Few Cutting Remarks

Throughout the country, the taxpayers have been revolting. Shocked by the enormity of the taxpayer revolt, and the untimely retirement of several hundred politicians, today’s current legislators, civil servants, and business executives have suddenly became the “people’s champions.” In a parallel universe, we can report the following, just since the latest election:

— Congress got the taxpayers’ message, and cut tax-supported junkets to only 15 per member. “The people have spoken,” said Rep. Horace Sludgepump from the Bahamas where he was on a fact-finding tour for the Maritime subcommittee. However, Rep. Sludgepump cautions that forcing Congressmen to stay at home and work for a living could bring chaos to the nation. Nevertheless, he promises to cut expenses even further three months before the next election.

— The Department of Defense was able to significantly reduce its budget by cutting back on the hours its golf courses and officers clubs were open. Complaining about the cuts were tax-reforming members of Congress whose districts were in the golf club re-appropriation. However, they were voted down by congressmen from Iowa, Kansas, Nebraska, and South Dakota who were pleased to tell their constituents there would be new naval bases in their states.

— The Governor’s office announced that although the administration was forced to make severe cuts in education and human services, by strict cost-counting measures it was able to maintain staff salaries, and keep off the unemployment lines 125 administrative assistants, 265 executive assistants, 835 assistants to the administrative assistant, and 1,255 deputy special assistants.

— The budget cuts directly affect the nation’s 200,000 homeless veterans. But, there’s an upside to this. Sixty-three-year-old Cpl. Willie Joe Lumpkin, a veteran of the Vietnam and Persian Gulf wars, re-enlisted. “After being downsized three times in the past decade and having the bank foreclose on my mortgage,” says Lumpkin, “at least I now have a bed and meals.” Lumpkin is expected to have shelter in Afghanistan for at least the next year.

— The president of Mammoth State University said that it too will cut expenses. Beginning next semester, the university will eliminate the departments of history, journalism, and philosophy, recruit high school students with at least a “C-” average who are willing to pay the increased tuition rates, add low-paid graduate assistants to teach megasection classes formerly taught by full-time professors, and cut the library budget by 35 percent. When asked if those changes weren’t severe, the President replied, “We tried to be as humane as possible. We allowed our 1,249 administrators to keep their jobs, have maintained our $6 million football program without restriction, and added three more PR people to better explain the mission of the university.”

— Slagheap World Airlines announced that in the spirit of national cost cutting, it would cut back its cockpit crew to one pilot and eliminate flight attendants, meals, and life rafts. “This way,” said the president, “we won’t have to penalize our loyal stockholders by lowering our return on investment.”

— The Association of American Landlords, which had lobbied extensively against annual safety inspections and property tax increases because they would be unfair to their tenants who would be required to pay higher rents, has also made concessions. Beginning September, in the spirit of tax reform, the landlords will sub-divide all apartments, and raise rents only 10 percent. “Sharing a bathroom and kitchen will bring people closer together,” said the Association president from his McMansion Media Room.

— Newspapers have been swept up in the spirit of reform. At the Daily Bugle, publisher Ben “Cash” Fleaux, from his villa in Bermuda, announced that his newspaper was forced to eliminate stories about local government, consumer and environmental reporting, and news of the courts when it cut its editorial staff by half in order to maximize profits during the Recession. To compensate, the Bugle is running more PR releases and added more stories about celebrities in rehab.

— The medical insurance industry, in keeping with the spirit of cost cutting, today announced it was cancelling coverage for 25 percent of its subscribers. “We hated to do it,” said an insurance spokesperson, “but some people insist on getting catastrophic illnesses, and that’s unfair to the rest who are healthy and don’t apply for benefits.”

— Finally, Dr. Guy Nacologist, the state’s richest obstetrician, announced that in keeping with the spirit of tax reform, he was now requiring all his patients to deliver their babies in eight months, thus saving a full month. When asked if he had also considered lowering his fees, he looked at the reporter, and then pointedly proclaimed that with the increase in country club fees, his patients were lucky he didn’t raise their costs by a similar amount.

[Walter Brasch says that since columnists are the soul of a newspaper, they should be downsized only after the last editor shuts off the lights in the newsroom. He reminds his readers that without their support, he’s likely to become unemployed and a burden on their hard-earned tax dollars. His next book is Before the First Snow: Stories from the Revolution, available at amazon.com and other stores after June 20. Also check out his YouTube video.]


Obama Caves On Tax Cuts, Social Security

Oh for the days when we had a Democrat in the White House…  Barack Obama doesn’t compromise he caves.  Instead of hanging Republicans for voting against unemployment compensation for the poor and tax cuts for the rich and stupid voters who voted for these legislators the President caved completely and, in the effort, agreed to a back door method for destroying Social Security.  Democrats will never, I repeat, never, recover if they agree to kill Social Security.  The payroll tax reduction agreed to will do just that according to expert Nancy Altman:

Given that unwillingness to raise taxes by less than a nickel on every dollar earned over $1 million, I find it unfathomable that a more conservative Congress, in two years, in an election year, will increase the payroll tax by 2 percent on the very first dollar, and every other dollar up to the cap, earned by virtually every single worker in the country. Consequently, I think we have to assume that the payroll tax holiday will be extended beyond the two years the president is proposing and quite likely could become permanent.

That means that the federal government will have to continue to transfer $120 billion to the Social Security trust funds each and every year even as it has to transfer more and more interest payments as the trust funds continue to grow and as interest rates return to more normal levels. Unless Congress acts to restore Social Security to solvency, the Treasury bonds held in trust will have to be redeemed, again on top of that new $120 billion transfer from the general fund, starting fifteen years from now, assuming Congress even continues to make the $120 billion every year before that point.


A permanent two percent cut in Social Security contributions doubles the 75 year projected shortfall. Scrapping the cap (eliminating the $106,800 maximum on earnings), tonally eliminates the shortfall today. If FICA is cut by 2 percent, scrapping the cap gets Social Security only halfway there.

The net effect will be the end of the program by actually creating a crisis where none now exists.

As for the Republicans voting against the people once again, these are the same folks who campaigned all year against the deficit and the Medicare cuts right?  I mean I wasn’t sleepwalking through those 50,000+ commercials I saw?  The brazenness of their campaigning about cutting the deficit then turning right around and voting to keep a $60 billion annual hole in it is astounding.  The stupid white men who voted for them and now have lost their unemployment insurance concerns me none.  How do have sympathy for those who consistently vote against their own economic interests?  This what they elected Republicans to do just last month after all.  My biggest issue is how the GOP voted against these bills knowing full well that a feckless, weak kneed, spineless Democrat in the Oval Office would cave to their minority demands instead of standing up for the people.

News & Notes September 3, 2010

Former RNC Chair Ken Mehlman finally came out of the closet this week.  Mark Segal of Philadelphia Gay News calls him out for his past:

Ken Mehlman, former chairman of the Republican National Committee and co-chair of President George W. Bush’s 2004 re-election campaign, who ran what was arguably the most hate-filled homophobic campaign in American political history, came out last week in a slick public-relations campaign-type interview served up by The Atlantic magazine. His actions as head of the Republican Party created antigay laws, including antigay-marriage constitutional amendments in numerous states, gay baiting, harassment, hate crimes and even LGBT youth suicides. We have not seen his type since Roy Cohn. This man has no shame. But that is not the end of the story.

I couldn’t agree more.  Coming out doesn’t negate his sorry, inexcusable actions against his own community.  Mehlman is a gay Uncle Tom.

The right wing noise machine is already calling the expiration of the Bush tax cuts for the rich “the biggest tax increase in history.”  perhaps they shouldn’t have put an expiration date on them when they were passed if they weren’t meant to be temporary.  These cuts created a huge hole in federal revenues and are one of the principle contributors to the deficit.  You cannot fear monger on the deficit and support the extension of these cuts simultaneously.  Allowing the cuts (which benefited the richest 2% of the country) to expire isn’t raising taxes.  Passing a specific bill raising taxes is raising taxes.  Several turncoat Democratic Senators are now saying they support a continuation of tax cuts for the rich.  These traitors to working people and the middle class need to find new jobs.

Here’s why:  more and more Republican Senatorial candidates are going on record saying they want to repeal Social Security.  This time they aren’t even trying to hide their agenda behind “privatization” but are simply saying the program for our elderly, disabled and orphans must be ended.  Their argument is that we can no longer afford it.  Of course their argument is based on the federal deficit which Republicans created expressly as a basis for getting rid of Social Security, Medicare and welfare programs.  They want to make their cake and eat it too.  I fear this extremist position may stoke class war.

Another oil rig exploded in the Gulf of Mexico yesterday.  Meanwhile BP, which proved beyond a doubt it cannot be trusted, says that without new drilling permits in the Gulf it will not be able to pay the reparations they promised.  Sounds as if they’re headed to bankruptcy then.  BP pledged in countless television ads they would make everyone affected whole.  Of course this was nothing more than a PR campaign but this time let’s hold them to their word.  BP is simply trying to scare the U.S. into, once again, trusting the unworthy.

Pat Toomey said his idea of gun control is a steady aim.  I’m sure that’s real comfort to the surviving relatives of every Pennsylvanian killed by gun violence, especially our police.  Has this cold and uncaring man lacking any empathy for others realize what happened recently in Pittsburgh when a deranged man driven crazy by folks like Toomey killed four police officers?  This man doesn’t deserve any support.

President Obama is considering cutting Social Security, enacting more tax cuts and extending the Bush tax cuts.  He has eliminated a second stimulus plan which doesn’t make economic sense.  remind me again that he is a Democrat, you could have fooled me.  Actually he fooled millions of Democrats into believing he was one of them.

No wonder Pennsylvania Democrats are staying away from the polls like they are carriers for cooties.  I see five or six PA Congressional Districts turning red this year.  Critz, Dahlkemper, Altmire, Kanjorski, Carney, Murphy and the open Sestak seat are all in danger of going Republican.  If Dave Argall manages to raise any money Tim Holden could join them.  I predict another bloodbath for Democrats in November, two in a row.

The only bright spot I see is Joe Sestak who is now defining Pat Toomey for voters in the fashion he did Arlen Specter last spring.  Barack Obama will come campaign for him September 20th.