Fiscal cliff fix changes nothing

The legislation averting the fiscal cliff raises the top income tax rate from 35 percent to 39.6 percent.  The Wall Street Journal reports that with the phase out of certain deductions for high income earners, the top rate for 2013 is more like 41 percent.

The Journal adds in the rest of the tax liabilities: “Add the ObamaCare surtaxes on investment income (3.8%) and Medicare (0.9%), as well as the current Medicare tax of 1.45 % (employee share), and the top marginal tax rate on a dollar of investment income from a bank savings account or money-market account will be about 46 percent.”

President Obama has said repeatedly that higher income Americans should pay more taxes.  The higher tax rate in the fiscal cliff plan will take an estimated $620 billion out of the private sector over the next ten years and turn it over to the federal government.

Unfurl the “Mission Accomplished” banner at the White House.

The higher tax rate achieves a campaign promise made by the President, and supported by most Democrats, but other than that, what does it really do?

There is no guarantee the additional revenue will go toward deficit reduction, and even if it did, $620 billion falls well short of covering the annual deficit (about $1 trillion a year) and fails to make a dent in debt, which is at $16.4 trillion and growing.

In fact, the fiscal cliff plan includes over $300 billion in new spending over the next decade.

Only in Washington can negotiations over ways to reduce the deficit end with a 200-plus page bill that actually spends more money and adds to the debt.  Perhaps this exercise, more than any other, explains why the federal government has bankrupted the country.

Former Republican Senator Alan Simpson and Democrat Erskine Bowles, authors of the bipartisan report on debt reduction, say the fiscal cliff compromise represents a missed opportunity to address the nation’s fiscal woes.

“Washington missed this magic moment to do something big to reduce the deficit, reform our tax code and fix our entitlement programs,” they said in a joint statement.

Imagine that: Washington is absent on a tough decision.

Republicans and budget-conscious Democrats are quick to say the real showdown is coming in two months when Congress must decide whether to raise the debt ceiling.  President Obama has already thrown down the gauntlet, saying he will not negotiate on that issue.

“If Congress refuses to give the United States government the ability to pay these bills on time (read: go farther into debt), the consequences for the entire global economy would be catastrophic—far worse than the impact of the fiscal cliff,” the President fumed.

That’s not leadership; it’s the Commander-in-Chief misstating the argument and shifting the blame.

The beginning of another year should brim with optimism.  We are forward looking people.  We try to focus on the horizon and consider the possibilities.

But what reason is there for confidence?  The temporary exhilaration of the class warriors who want the rich to “pay their fair share” will give way to the reality the rest of us already know: the country is headed toward fiscal ruin and Washington can’t or won’t do anything about it.

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Comments

  • wirerowe

    Mnntman, Is right it can be done, his suggestions are all excellent and he is also right that it won't be done. We are a land of the timid, the scared and the entitled.

  • mntnman

    Our government is clearly broken. It has been for some time. We keep re-electing the same people. So who is to blame?

    As for the fiscal cliff, a failure of leadership, planning and negotiation lead to the deal that was made into law. One side just wants to cut, cut, cut, one side just wants to tax, tax, tax, and neither side seems to be willing or able to make hard decisions.

    So, a suggestion. Index SS cost of living. Raise Medicare eligibility to 67, then to 68 over the next years. Move SS retirement age up another couple of years over the next decade. Cut military spending on systems the military doesn't want and doesn't need. Attack the personal and corporate tax code -- make it simpler, easier and fairer. Start looking at fees for services the government provides and the public wants. We charge to enter national parks, people who go pay, so why not charge for other services we all want, but don't want to pay for with general revenue. Finally, take a long , hard look at spending. I mean the type of spending that doesn't serve the real public needs -- refocus it on infrastructure (which directly creates jobs), research and development that only government can do, and keeping a reasonable safety net in place for those who are truly unable to care for themselves, primarily the elderly and children.

    I have no doubt it can be done. I also have no doubt it won't be done. It won't be done because we have been failed by our leadership, or lack thereof as the case may be. Sad.

    • hillbilly

      One reason for SS instability is there are so many people now being paid SSI Disability benefits that never paid a dime into it. Take that judge in Huntington who approved thousands for it over the years, saying, so what it wasnt his money.. Congress needs to address this, fund and / or pay it from another source if money, not the same SS fund workers pay into for later.

    • Medman

      mntman, right on. It is a hopeless exercise to think we will eventually vote the "bastards" out. As referenced in my earlier quote from Tocqueville, voters will elect the politician who gives them our tax money and will get rid of any who speak about cuts in anything. We will be a Socialist country within the next generation.

  • DWM

    Hop,

    Don't blame me, I didn't vote for the bum. His idea of fairness is taking something from someone that did earn it and giving it to someone that didn't earn it. If that worked and resulted in a robust economy, that would be great. Unfortunately, the end result of the actions of our Hugo Chavez is that the country's standard of living will decrease, drastically. It will not raise the poor, just lower the standard of living of the wealthy, upper middle class, middle class and lower middle class. And I'm convinced, this is what he wants, a poorer USA, one that does not have the means to do good in the world.

    • GregG

      "His idea of fairness is taking something from someone that did earn it and giving it to someone that didn't earn it."?? Kind of like a person that works under a Union contract all of his/her working years to earn a retirement and benefits package and then 3 years after retirement the government allows the company to stop paying said benefits? Is that whay you mean??

  • hillboy

    I can't see this as a victory for Obama regardless of how the media portrays it. It's too soon to get all agitated because no spending cuts were included--it's not over yet. Taxes and spending cuts negotiations were essentially separated--the fiscal cliff negotiations ended up focusing mainly on taxes, while spending cuts will be the bigger focus in the looming debt ceiling negotiations.

    Circumstances, which were largely created by the Republicans, gave Obama the advantage in the fiscal cliff negotiations. It is debatable whether he got out of it all he could have in terms of increased revenue. The Republicans, I think, may have more of a negotiating advantage in the next round, although they will probably have to actually specify where they want cuts to be made. That should be interesting.

    There is no way to balance the budget through either just spending cuts or just tax increases, without throwing the economy into a nosedive. It will take some of both--both sides have to give. Good luck with that.

  • Shadow

    The way that the POTUS operates, I am firmly convinced that his desire is to bankrupt this country and drive it into chaos and revolution. How can any person except for an idiot believe in a money tree and he is not an idiot. The problem is that he is assisted by the Fed and others. There is no question that Medicare should be revised. How crazy is it to give a blank check to any health provider in this country and that is what a Doctor's Order is.,For repeat visits, drugs, rehabilitation, etc. It is uncontrolled and unmanageable and now we have Obamacare which only increases the waste. If our Representatives don't hold the line on the Debt Limit, we will be toast in four years. Then "Lock and Load" time.

  • TD

    Wirewoe, we could cut $150 billion annually from defense and still be outspending the next ten nations combined, most of whom are our allies.

    The big enchillada is healthcare. The 10 nations closest to ours in standard of living(England, France, Germany, Japan, etc...), and personal income, have an average annual cost of $3,450 per citizen. Our cost is over $7,100 per citizen, there is no justification for this maddness. You may be all an proud American and say ours is better but in fact those ten nations have a life expenctancy of almost a year longer than us. They all have universal healthcare, imagine not worrying about going bankrupt just because you become ill.

    We cannot fix our debt and competitive problems without tackling this issue. Sadly, Obamacare does not address the fact that we need a big time correction in the industry.

    We could fix all our financial problems with ten simple steps, but it won't be done because there are powerful wealthy people who want no change and they have mouth pieces like Hoppy to convince the masses out here their positions are sensible when in fact they are the policies that created this whole mess.

  • Hop'sHip

    Right, Hoppy. We need to start waging war against the real villains in this, the lazy, greedy poor. Hoppy is one of the few who comes to the defense of those beleaguered wealthy folks who lack the influence of the wretched poor. Hoppy is a champion for those minorities that are often overlooked by the lame stream media, the wealthy and the polluters.

    • Shadow

      Somehow, you come across as being envious of those that got an education, worked, and saved their money. In a lot of cases they went out of the State, left their home place except for an occasional visit, and came home to retire only to have the Government steal their money for those that have no gumption. Are you envious of those people?

      • Hop'sHip

        You seem to have problems reading, Shadow. Maybe you should come out into the light. If you read my posting you find that I commend Hoppy for his defense of the poor rich. In 1979 in this country, the top .1% made incomes 47 times greater than the average of the bottom 90%. Today it is 220 times greater. So obviously these people are much smarter and harder working than those rich people back then. It is only right that they have people like Hoppy, you and me to support them when they are so maltreated by the government. Anyone who would think otherwise is obviously gumptionless.

        • bulldog95

          You are somewhat right about those that are maltreated by the government. The poor, not the poor rich, but the POOR are the ones being maltreated buy the governement. (and yes buy was intended) The safety net for people to be helped out for a couple of months is one thing, but for many that very safety net swallows them whole and they never get out of it. Those people are no longer making a living and that is a big reason why that poor/rich divide has grown.

    • Shadow

      If I accused you wrongly, I am sorry but I read it as a bit of sarcasm on Hoppy's positions.

  • Sampeer

    It is not that Wahsington can't do anything about the fiscal mess, it is that they won't. The Wall Street Journal carried an article this morning entitled "Crony Capitist Blowout". You might want to read it, because it is a real eye opener. For example, Michigan Democrat Debbie Stabenow was able to retain an accelerated tax write-off for owners of Nascar tracks (cost: $78 million), distillers are able to drink to a $222 million rum tax rebate and then there are the "Green Energy tax credits.

    Another thing the article pointed out is how members of the Senate Finance Committee voted on August 2, 2012 "Tax Extenders" bill that became part of the Fiscal Cliff Bill. Our own Jay Rockefeller voted in favor along with 6 republicians. The committee vote was 19-5 in favor.

    Congress and the President are no longer leaders. They are little more than prostitutes sellilng entitlements for votes. In the process they are destorying this nation. Be it social welfare or corporate welfare, they are stealling the future from our children and grand children. The vast majority of our elected leaders are malignant narcissists more than willing to destory a nation for the own benefit.

  • CaptainQ

    Hoppy, this entire 'Fiscal Cliff' drama was perfectly played by President Obama. He allowed it to expire on January 1, then he and the Democrats 'swooped' in like Superman to 'save the day' on January 2, essentially 'blackmailing' the GOP dominanted House to pass the Senate bill under the threat of a cratering economy and financial fear if it wasn't passed. Others have said this too, but all of this was engineered to make Obama and the Democrats appear to be 'knights in shining armor' and thus the GOP as the 'evil firebreathing dragon' that needed to be slayed. Have to give credit where credit is due, Obama played this scenario brilliantly.

    When all the cheering from the Obamafans in the Main Stream Media subsides, we can all see that this bill is, at best, a temporary fix to a long term situation. Sure, Obama got to 'stick it' to the rich, but where are the deep spending cuts needed to help balance the Federal Budget? Washington is going to need to 'find' every dollar they can when the full provisions of ObamaCare kick in next year. Where will the TRILLIONS of dollars needed to fund this bureaucratic boondoggle come from? And what will we all do when the economy slides back into recession in 2014 when businesses are forced to lay off workers, slow production and, in extreme cases, shut down due to the rising costs associated with their end of ObamaCare? Oh yeah, I forgot, over 1,100 business entities and unions were able to obtain TEMPORARY waivers from ObamaCare (nearly all of the them with ties to the Democrats, surprise surprise). These firms can sense the impending doom that ObamCare will deliver to the U.S. economy, which will, in turn, force even MORE American companies to ship their operations overseas to avoid it.

    Yes, America avoided the so-called 'Fiscal Cliff', but there's another even BIGGER one coming in the near future to our country, a cliff President Obama and the Democrats created all by themselves. This cliff is called ObamaCare and will do far more damage to this country than anyone realizes right now. With Medicare, Medicaid and Social Security going broke, the LAST thing America needs is yet another costly underfunded social program, but that's exactly what ObamaCare is. The sad part about it is, ALL of us will feel its effects next year. America is running out of options. We can no longer spend more than we take in, no matter how 'just' the cause is. China's not going to underwrite this extra government spending forever and someday soon, they're going to wan their money back.

    Time for Congress and the President to quit 'kicking the can' and DO SOMETHING about this NOW, while there's still time. But they won't, that's a very SAFE prediction to make.

  • NorthernWVman

    FLAT TAX! I can't scream it loud enough. Who will decide what is a "fair share?" Reign in spending. Each party plays favorites to their so called constituents simply for power, control and votes. If people really knew some of the wasteful spending that is done in our true entitlement programs, welfare, etc. (I not talking SS) they would be appalled. We have truely lost a sense of community when we could rely on each other and not the government. We as a society have been polarized and divided. We have done it to ourselves with the help of media outlets and politicians.

  • ShinnstonGuy

    I don't care if you pick the D-side or the R-side, they have failed us all. And where was McKinley, Capito, Rahall, or Rockefeller in all this? I realize they aren't on specific committees, but now is not the time to follow a failed committee structure. Break out and say something! Even moderate Manchin was able to at least get out there and say, "Enough is enough."

    Personally I would like to see all 538 of these jokers kicked out the door. Instead of an "Occupy" movement, we need a "Term Limits" push to get these old fogies out of here!

    • Wowbagger

      I have long thought that the biggest shortcoming of the founders was that they failed to anticipate the rise of the professional politician class. 1787 would have been a REALLY good time to propose term limits and they didn't.

      The problem with establishing term limits under the current system now is that first these old fogies (I can think of better terms, but not here) have to vote to term limit themselves.

      Probability 0.0!

  • TD

    A couple quick points, Wirewoe is correct about Medicare, it is the big issue. Hoppy, why aren't you calling for giving the gov't power to negotiate drug prices? That simple move alone would save over $50 billion a year but George W. made it illegal to negotiate and Republicans have blocked the change time after time. Why not call for ending the tax breaks for shipping jobs overseas, that would return one to two million manufacturing jobs to America and would generate billions annually in tax revenue but again Republicans have blocked it.

    This is a first step, a small step because when Obama essentially gave Republicans everything they wanted in a deal to cut 4 trillion from the debt($3 in spending cuts for every $1 in new taxes), the TEA partiers just couldn't bring themselves to say yes.

    NO!!! What you want to do is the same old REpublican line of complaining about the debt but standing against any real change. You and George W. set this country on a path to riun and have stood in the way every step to prevent changing that course, incredibly still believing anything you say on this matter is worth listening to.

    • NorthernWVman

      Is that the same old $3 to $1 that was promised to Reagan that never came to fruition. Rhetoric rhetoric.

    • wirerowe

      TD I would aknowledge calling republicans who opposed all tax increases as being extremists. But the deal that the President negoiated and a republican congress agreed to had significant tax increases and also apparently spending increases. I would call any democrat who now opposes significant spending cuts including the 'entitlements" as extremists.

    • bulldog95

      Lets be honest about how the spending cuts are promised. I may be off on the year but they usually look something like this. Spending to be cut on year 7 on a 10 year outlook. When do the taxes kick in, year ONE, right now. The left would not vote for tax increases on year 7 with spending cuts taking place year ONE. And why is that you may ask, its because it can be changed the following year and the spending cuts get removed or kicked down the road even further, but the taxes are already locked in.

    • Medman

      TD, You may not be aware that Obama took a lot of flack from the Left because he negotiated a deal with the drug companies early-on in the healthcare negotiations to keep them from lobbying against Obamacare. The deal they struck was to not allow Canadian drugs on the Medicare plans. There are links on the Washington Post documenting this.

  • Medman

    The. American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.

    Alexis de Tocqueville

    • CaptainQ

      Amen, Medman, and that day has already passed decades ago. God help us all.

  • wirerowe

    hoppy the $600 billion in new taxes represents approximatley 6% of the new debt over the next ten years if you are optimistic and assue that deficits average $1 trillion a year. Sure the military needs to be cut. But the real money is in medicare and medicaid.Medicaid and medicare are great programs but are not sustainable without increasing premiums, reducing spending or increasing elgibility requirements. The unfunded liability for medicare is 2 or three times the current debt of $16 trillion. The president and his party are in power and have absolutely no intention of doing anything about spending cuts or curbing medicare and medicaid. If you suggest that we need to rein in these programs you are immediately labeled an extremist, a racist or a wing nut. I am not hopeful for the country going forward.

    • GregG

      And just who is to blame for the "unfunded liabilities" of SS and medicaid/care? Oh, we get the usual line of "people are living longer". Once in awhile someone will slip and say, "we don't have enough individuals paying into SS, medicaid/care", but we never hear a reason as to why less people are contributing. Could it be because our workforce has shrunk? Which brings me to the next question...Why has our workforce shrunk? I'm not hopeful for the country going forward either, because the greed of Big Business is behind the wheel.