Think the sniping and deal making over America’s “fiscal cliff” is all over? Think again.
The “cliff” bill may have passed the House 257 to 167 with mostly Democratic support but this fight is far from over.
Despite headlines that claim this bill will avert certain doom and that taxes will go up on the rich, disaster still looms and taxes will go up for most households.
“The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.”
The deal also doesn’t cut spending but instead adds $4 trillion in spending over the next decade according to the non-partisan Congressional Budget Office.
Don’t worry though, everyone is doing their fair share. Hollywood is getting an extension on their tax breaks, so is NASCAR and algae growers, rum producers and electronic motorcycle manufacturers also get a break.
This deal also will see $41 in tax hikes for every $1 in spending cuts, and of course the spending cuts are outpaced by all that new spending in the bill, some $330 billion in new spending.
If anyone doubts that America has a spending problem then they need to look at the image below which comes from the business website Zero Hedge. The red line is the annual deficit which currently stands at more than $1 trillion while the green line stands for the just over $62 billion in expected new tax revenue each year. Click through on the link to get the full perspective.
Over the next few weeks we will see more arguments about what more needs to be done. The automatic spending cuts known as “sequestration” have been put off for two months and so we will see a return to brinksmanship once the new Congress is sworn in.
John Boehner, the House Speaker, had offered President Barack Obama a deal that would have generated more tax income simply by closing loopholes and special tax deals. Obama rejected that insisting that tax rates had to go up.
Why would Obama say tax rates had to go up?
To Obama higher tax rates are a matter of fairness, even when increasing those rates might mean less money for the government. He has said it more than once including during a debate moderated by ABC’s Charlie Gibson. In questioning Obama, Gibson pointed out that the government has taken in more revenue from capital gains taxes when the tax rates have been cut as compared to when they were raised.
“Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness,” Obama said.
Obama is an ideologue who sees high taxes and high spending as morally sound, it is central to his agenda and his identity. If you listen to the rest of his answer to Gibson back in 2008, Obama said that you don’t increase spending without finding cuts elsewhere to pay for them.
He didn’t do that here and he won’t do that when the next deal comes.
America is in a sorry state today.