Fiscal cliff averted; next up, the debt-ceiling
By Logan Nee
The recent fiscal cliff, holiday-fiasco compromise left few Americans satisfied with the federal government, magnifying its already apparent, elementary animosity. Much of the debate focused on the extension of across-the-board federal income-tax rates — Bush tax cuts — that were set to expire at the end of 2012.
What exactly came of the fiscal-cliff aversion? Taxable income up to $400,000 for single filers or $450,000 for joint filers made it through the deal unscathed. For those Americans above this rate, fewer than 1 percent of U.S. households, tax rates are set to rise to 39.6 percent — the same level set during the Clinton Administration.
In addition, the deal’s failure to extend the Social Security payroll tax holiday of 2011 and 2012 will have anywhere between 77 to 83 percent of U.S. households to pay more taxes overall this year, simply because the payroll tax is returning to its previous level.
Although the payroll tax was designed to be a short-term stimulation to the economy — unlike the long-term Bush tax cuts — taxes for a majority of Americans will be increasing this year. You win some and you lose some, but overall, the deal was adequate and better than the alternative.
On Friday, House GOP leaders proposed the extension of the federal debt limit by three months, signaling the first chatter of the year on the debt-ceiling debate.
Forgive me for reiterating annual static, but a brief history is essential. The debt-ceiling has been increased 94 times in the last 68 years. Up until the mid-1990s, this was fairly routine practice. In 1995, however, the Republican House leadership demanded national debt responsibility for the first time, but President Clinton dismissed their suggestions, and the most serious government shutdown in U.S. history ensued.
Stalemates didn’t stop there. In 2011, a prolonged debt-ceiling debate got so volatile it actually led to a credit downgrade, a direct testament to the repercussions of a gridlocked Congress on the nation’s economy.
Friday’s proposal looks to be — at the least — foreshadowing a promising, smoother debate and a satisfactory conclusion.
Although the proposal included no spending cuts, it did include provisions that would require the House and Senate to pass a budget blueprint for the next fiscal year — or risk not getting paid. Deemed “No Budget, No Pay” by the bipartisan group No Labels, this addition could force Congress to make adequate cuts on a yearly basis rather than having to propose long-term cuts on a cumulative basis.
By requiring both chambers to pass formal budgets by April 15, Democrats and Republicans will be forced to identify deficit-reduction measures on a yearly basis in order to pass an annual budget. Passing a budget has been a legal obligation for the Senate and House since 1974, yet the Senate hasn’t passed one in three years. With all due respect, passing a budget could make it easier for them to do their job.
The Treasury claims the government would be missing payments to entities such as the military and senior citizens if a debt-ceiling plan weren’t made by the end of February, potentially leading to a financial crisis. But isn’t that what they always say?
House Republicans are finally getting the right idea, and that gives me optimism. Proposing a preposterous $245 billion tax decrease and entitlement reform without any precedent on annual budget decreases, like House leaders did in 1995, is equivalent to a child suddenly asking his parents to up and sell their house — knowing wholeheartedly they want to keep it out of the family’s best interest — and then, of course, points to his suggestion down the road, even though his parents don’t have enough money to pay the monthly heating bill.
It’s important to remember that good things come in small increments. Congress and the President must proceed in a responsible and civil manner. Be it Medicare, Social Security, education, infrstructure, defense — you name it, everything must be “on the table.” Most Republicans and Democrats can agree on that.
The real problem is finding a table.