Raincheck on the Fiscal Cliff
If your thoughts have been occupied by the "fiscal cliff" like a bad New Year's hangover there is some relief, at least for now. Today's passage of HR-8 (The Tax relief Extension Act) provides among other things a 1 year extension to Federal emergency unemployment benefits as well as a permanent extension of tax cuts for those making less than $400,000. Both measures that could keep the economy from slipping back into recession in the near term.
Still, on both sides of the aisle this last minute bipartisan agreement comes up far short of the "Grand Bargain." Spending cuts are only "deferred" for two months leaving plenty of debate for the incoming 113th congress. It seems the only part of a comprehensive overhaul of government spending cuts and revenue increases that either side can agree on is the name.
To most Republicans on the hill, a "Grand Bargain" must include severe cuts in funding and tighter eligibility requirements for "entitlement" programs including Social security and Medicare. Any new government program must have a corresponding funding source either from cuts in other entitlements or quantifiable revenue streams otherwise known as tax increases. With most of the House Republicans still adhering to the Norquist pledge they're going to need different shorthand for "revenue."
Republicans also chafe at the prospect of "overburdening" the well heeled with a bigger tax bill for fear of hurting job creation. It is large, not small business that drives the economy in the conservative view. Increasing taxes on them can only result in economic retaliation. If it sounds familiar it is indeed the theory of trickle down economics from the Reagan era.To most Democrats in congress, a "Grand Bargain" encourages investment in social programs, protection of entitlements and increased taxation on high earners. Incidentally, what constitutes a "High earner" has been a major bone of contention during the haggling over the fiscal cliff. Tax loopholes long employed by businesses to shelter income as well as subsidies to large corporations like big oil would also be eliminated under the "ideal" democratic plan.
All of this under the banner of "tax fairness" which asks more of those who have "benefited the most" to help those who have not. Of course bearing the label of "tax and spend" democrats makes their proposals subject to increased scrutiny from their Republican counterparts. A condemnation seemingly validated by funding sources that often look more like a sidewalk shell game than a legitimate revenue stream. Republicans often cite President Obama's $700 billion Medicare savings plan as a revenue source as an example.Continued on the next page