Failure was not an option. The Fiscal Cliff senario was set up by Congress to force Congress to deal with the serious policy and financial issues facing the federal government. They created a worst-case-senario that would punish everyone with higher taxes across the board and major federal spending cuts. In a 24 hour period, Congress looked back a the agreement made in August 2011, and simply said “never mind.”
The Budget Control Act of 2011, passed by Congress and signed into law on Aug. 2, 2011, temporarily resolved a debt ceiling crisis by increasing the limit $2.5 trillion and implementing $900 billion in never-to-be-seen spending cuts in exchange for $1.5 trillion in future deficit reductions that too, will never happen. In short, if Congress didn’t get those $1.5 trillion in reductions made, we would “fall over the cliff,” immediately triggering $1.5 trillion in cuts effective yesterday.
During the last two days, that agreement was completely tossed out the window. Congress hit the deadline, never coming to any sort of resolution and simply changed their collective minds. Congress can do that you know, make an agreement 16 months ago and just make a decision to change the entire agreement … that’s what they do.
Afterwords, they had the gumption to congratulate themselves for getting something fixed when they have done no such thing. They failed again. They made a promise to the country they would get something done, instead they changed the rules and claim victory.
The GOP is a bunch of spineless fools who simply don’t get it and have completely lost their way. It’s over for the grand old party. Years ago, my small donations to Republicans and to the RNC stopped, and I’m glad they did. Conservatives will need to double-down on taking control over the party or we’ll soon see years of Democrat rule as a new conservative party builds strength.
Last night’s agreement…
- Eliminates the 2 percent payroll tax holiday increasing taxes for everyone. 77 percent of households have to start paying the full payroll tax again.
- Increases the income tax rate for individuals earning more than $400k and families earning more than $450k. This effects about the top .5 percent of taxpayers – less than 725,000 families – and they will be lucky to get an additional $20 billion a year in revenue from that group. Remember we were told the $200k to $250k-plus group could bring us $80 billion in a best-case senario. That $20 billion won’t even cover 2 percent of the estimated 2013 deficit and nothing more.
- Increases taxes on dividends and capital gains.
- Implements an Alternative Minimum Tax (AMT) fix to avoid tax increases for some who would be caught by that stupid adjustment.
- “Permanently extends” the Bush tax cuts (income tax rates we were paying Dec. 31) for those earning less than the $400k/$450k threshold. I put “permanently extends” in quotes since we all know they are coming for everyone soon. Congress can change their mind of course.
- By extending benefit programs, Congress increased spending $33 billion a year for the next 10 years – $330 billion in new spending.
- There are no tax cuts. They did not make the federal government smaller. They did not return power to the states. The federal government budget will continue to grow.
Yesterday Jim and I mentioned during the big radio show $41 in additional spending for every $1 in cuts – which was the Congressional Budget Office (CBO) estimate yesterday morning. Late yesterday, the CBO changed it to $10 in spending for $1 in cuts. These are all SWAGs – swinging wild-ass guesses – so it’s perfectly acceptable to change ratios in a dramatic fashion since it’s all about the marketing. The 41 to 1 ratio was a bit much…
The Hill reports that CBO dropped the estimate to the less controversial but still unbalanced 10:1 ratio after the Joint Committee on Taxation weighed in on its provisions. “The CBO estimate comes after the Joint Committee on Taxation estimated it would reduce federal revenue by $3.93 trillion over the next 10 years when compared to current law,” The Hill wrote.
The CBO’s revised estimate predicts that the bill would add just under $4 trillion to the national debt over the next ten years.
You can bet the spending cuts will not happen at all. Mitt Romney was asked if he would accept $10 in cuts for $1 in tax increases and he said no. He was chastised by the press, but he knew the cuts would never come. Now we have the absolute reverse – $10 in tax increases for $1 in cuts. We’ll never see the cuts, and I guarantee we’ll see additional spending. There are never any cuts, ever.
During the first two months of the 2013 fiscal year, the deficit was $292 billion. This is after a $1.2 trillion deficit for 2012 and if all things remain the same (they will not) the deficit could hit $1.7 trillion for 2013, but we’re almost assured of a $1 trillion plus deficit.
Good luck to you all! We’re heading for another big inside-the-beltway media storm in less than two months when we must deal with the fact we hit the debt ceiling on New Years Eve.