Analysis: Cliff deal is another pain-free punt

Congress' hectic resolution of the "fiscal cliff" crisis is the latest in a long series of decisions by lawmakers and the White House to do less than promised — and to ask Americans for little sacrifice — in confronting the nation's burgeoning debt.
AP Wire
Jan 2, 2013

The deal will generate $600 billion in new revenue over 10 years, less than half the amount President Barack Obama first called for. It will raise income tax rates only on the very rich, despite Obama's campaign for broader increases.

It puts off the toughest decisions about spending cuts for military and domestic programs, including Medicare and Social Security. And it does nothing to mitigate the looming partisan showdown on the debt ceiling, which must rise soon to avoid default on U.S. loans.

In short, the deal reached between Obama and congressional Republicans continues to let Americans enjoy relatively high levels of government service at low levels of taxation. The only way that's possible, of course, is through heavy borrowing, which future generations will inherit.

While Americans widely denounce the mounting debt, not so many embrace cuts to costly programs like Social Security. And most want tax increases to hit someone other than themselves.

"This is another 'kick the can down the road' event," said William Gale, co-director of the nonpartisan Tax Policy Center and a former Republican White House adviser. "It is a huge missed opportunity."

"Going over the cliff would have put us on a better budget path," Gale said.

The fiscal cliff's combination of big tax increases and deep spending cuts would have provided major political leverage for both parties to achieve greater deficit reduction as they worked to ease some, but not all, of its bite. In fact, the whole point of the congressionally created cliff was to force the government — which borrows about 40 cents of every dollar it spends — to begin a fiscal diet that would spread the unpleasantness widely.

Instead, Congress and the White House did what they almost always do. At the last minute they downsized their proposals, protecting nearly every sector of society from serious pain.

The accord leaves most government programs operating as usual, postponing yet again the threat of serious reductions.

Aside from the payroll tax increase, which drew little debate even though it affects almost all working Americans, the compromise will raise tax rates only on incomes above $450,000 for couples and $400,000 for individuals. That's less than 1 percent of U.S. taxpayers.

Obama had campaigned for thresholds of $200,000 and $250,000. The fiscal cliff's implementation would have made it nearly impossible for Republicans to stop him, if Democrats had held their ground.

That might have produced an ugly scene, rattled the financial markets and sparked even more partisan bitterness. But any step toward major deficit-reduction will trigger anger, threats and genuine discomfort for people who receive government services or pay taxes. In other words, everyone.

And such steps can ignite opposition from powerful interest groups, which always stand ready to give money to the campaign opponents of lawmakers who displease them. The AARP, just as one example, used TV ads and other tactics throughout the fiscal cliff debate to warn elected officials not to touch Social Security and Medicare, even though those programs constitute a major portion of federal spending.

Activists on the left and right said the new law doesn't do nearly enough to tame the federal government's borrowing habits. Rep. Darrell Issa, R-Calif., said Congress achieved nothing "other than the smallest finger in a dike that in fact has hundreds of holes in it."

AFL-CIO President Richard Trumka praised elements of the deal. But he said that in postponing $1.2 trillion in spending cuts over 10 years, and leaving the debt ceiling unresolved, it is "setting the stage for more fiscal blackmail."

To be sure, Obama and House Speaker John Boehner flirted at times with a "grand bargain" that would include much larger tax increases and spending cuts than those in the newly enacted law. And high-profile groups such as the Simpson-Bowles commission also recommended tough combinations of tax hikes and spending cuts, calling them necessary even if politically unpopular.

These ideas went nowhere.

Less than 12 hours after the House's New Year's Day vote for the fiscal compromise, renewed demands for deficit spending dominated the Capitol. Democrats and Republicans from New York and New Jersey blasted Boehner for delaying legislation that would provide $27 billion to $60 billion in federal aid to victims of Hurricane Sandy. The sums would be added to the deficit.

It's easy to defend using public money to help Americans walloped by a vicious storm. And that's the heart of the government's inability, or unwillingness, to restrain its borrowing ways.

Every federal dollar, and every federal program, has avid supporters who can defend their functions. And every sector can explain why higher taxes would burden struggling people at the lower end, and "job creators" at the higher end.

High levels of government service. Low levels of taxation. Big deficits to make up the difference. That's what Americans have demanded and gotten from their federal government for years.

The agreement by Obama and Congress to spare Americans the pain of a fiscal cliff is right in line with that tradition.

Charles Babington covers Congress and politics for The Associated Press.

Comments

Vladtheimp

Just a couple of things that the AP writer missed in this generally accurate story:

1. Although he noted "The deal will generate $600 billion in new revenue over 10 years" what he missed is that the deal will increase federal spending by $332 billion over the same period.

2. He failed to mention the pork and handouts in the Obama/Senate bill which we have to pay for - Hollywood tax breaks, wind energy, Puerto Rican Rum, NASCAR, growing algae for fuel, etc.

3. Although he notes the House did not vote on up to $60 billion for Hurricane Sandy relief (which would be added to the $332 billion in additional spending)he did not explain that the reason the House Republicans did not vote on the Obama/Senate bill is that it included pork unrelated to relief for victims of the hurricane, including $13 billion in funding to mitigate the next potential storm, a $17 billion Community Development Block Grant slush fund, funding for fisheries in Alaska, museum roof repairs in Washington, D.C., and tree planting. (It now appears the spineless republicans have caved on that as well).

Maybe we should be told the whole truth about how these politicians are not letting any crisis go to waste for their own special interests and their own re-elections.

Lanivan

Vlad - you'd complain about the rope you were hung with. For all the time, energy, and gray cells you expend on politics, your constant, consistent, and redundant political impaling must become exhausting. How about this for a New Year's Resolution - running as a primary challenger to Congressman Huizenga?

Vladtheimp

Sorry to inject some inconvenient truths about pork in the bill, notwithstanding the democrat/media narrative that Obama saved us from going over the Fecal Cliff: here's the rest of the story

"Here's what happened: In late July, Finance Chairman Max Baucus announced the committee would soon convene to craft a bill extending many expiring tax credits. This attracted lobbyists like a raw steak attracts wolves.

Former Sens. John Breaux, D-La., and Trent Lott, R-Miss., a pair of rainmaker lobbyists, pleaded for extensions on behalf of a powerful lineup of clients.

General Electric and Citigroup, for instance, hired Breaux and Lott to extend a tax provision that allows multinational corporations to defer U.S. taxes by moving profits into offshore financial subsidiaries. This provision -- known as the "active financing exception" -- is the main tool GE uses to avoid nearly all U.S. corporate income tax.

Liquor giant Diageo also retained Breaux and Lott to win extensions on two provisions benefitting rum-making in Puerto Rico.

The K Street firm Capitol Tax Partners, led by Treasury Department alumni from the Clinton administration, represented an even more impressive list of tax clients, who paid CTP more than $1.68 million in the third quarter.

Besides financial clients like Citi, Goldman Sachs and Morgan Stanley, CTP represented green energy companies like GE and the American Wind Energy Association. These companies won extension and expansion of the production tax credit for wind energy.

Hollywood hired CTP, too: The Motion Picture Association of America won an extension on tax credits for film production.

After packing 50 tax credit extensions into the bill, the committee voted 19 to 5 to pass it. But then it stalled. The Senate left for the conventions and the fall campaign. Meanwhile, House Republicans signaled resistance to some of the extensions -- especially for green energy.

A Republican Senate aide familiar with the cliff negotiations tells me the White House wanted permanent extensions of a whole slew of corporate tax credits. When Senate Republicans said no, "the White House insisted that the exact language" of the Baucus bill be included in the fiscal cliff deal. "They were absolutely insistent," another aide tells me. (The White House did not return requests for comment.)

Sure enough, Title II of the fiscal cliff legislation is nearly a word-for-word replication of the Family and Business Tax Cut Certainty Act of 2012. http://washingtonexaminer.com/ti...

Can you say politics as usual, and Obama/Democrat crony capitalism, Lanivan? As far as complaining, I was a huge supporter of going over the cliff and having all taxpayers having some skin in the game of the costs of a rapacious government.

Lanivan

Let's get real and not put labels on crony capitalism. You seem to have a black and white view of the world, Vlad. Perhaps your "30 years as a federal drone", as you stated in another post, provided you with the security and safety to develop such rigid moral certainty. 35 years as a capitalist drone has created in me a different set of moral certainties. Nothing is fair; there is pork in every bill; it truly is a "dog eat dog" world; nothing is an easy fix that will make everybody happy; you have to spend money to make money; problem-solving skills trump anything else - education, family wealth, luck - in getting ahead in this country.

The key is balance. Obama is very shrewd. He didn't get to where he is through naievty and dumb luck. He's a problem-solver, but he always looks out for the middle class as well as his crony capitalists. The current Pubs, on the other hand, are unbalanced puppets of crony capitalism, with no real problem-solving skills and no desire to learn.

The current dynamics within the House GOP are toxic. They have successfully abdicated their role as lawmakers by running from any sense of responsibility or reasonable action as a House majority. They do not understand, care about, or even consider the idea of integration, of finding a balance, of problem-solving. It's their way or the highway, 24/7. "Compromise" = weakness and giving up. They have becomes demagogues, and I suspect some if not most of them don't even know the definition of the word.

There will always be something to complain about in a very gray world, Vlad - right?

Vladtheimp

I sincerely thank you – this post makes it clear to me that either you don't really consider what you write or that you have drunk the Cool-Aid so deeply that thinking doesn't enter into the equation. It seems you are like the old Chatty-Kathy doll – pull the ring and a pre-programmed recording starts up.

1. I was well over 13 years into my federal drone period before I reached the amount of time I had worked in the private sector – mostly construction.

2. Crony capitalism is epitomized by Obama tax dollar grants to fundraisers/ “Green” energy groups without benchmarks and metrics to see if they could succeed;

3. Obama got to where he is by getting opponents thrown off the ballot in Chicago, his relationship with terrorists Bill Ayers and Bernadette Dohrn; Liberation Theologist and racist Reverend Wright; various socialist parties; Tony Rezko, and numerous other questionable characters, and by selling himself as a moderate person of color who could take advantage of white guilt;

4. Problem solver? Like voting “Present” 130 times during the short time he was in the Illinois legislature (per Hillary Clinton); like letting Pelosi and Reid fashion Obamacare? Like staying aloof from members of both parties in the House and Senate?

5. Republicans abdicated their role as lawmakers – like passing numerous bills to avoid the fiscal cliff and put the country on a sound economic path that sat unvoted on by the Senate? Like Harry Reid refusing to produce a legally required budget for three years?

Sorry if this seems harsh, but your overblown and ridiculous partisan rhetoric pushed all the right buttons. If you are truly proud of the way Obama has conducted himself in these fiscal cliff negotiations, including attempting to scuttle them with naked attacks on the other side – well then, we know how you want to play in the sandbox.

Lanivan

Sheesh, Vlad - you owe me a Mea Culpa on this one (although I suspect that bit of Latin is not in your vocabulary). I pour my guts out and you not-very- effectively but yes, harshly, push back with your usual mountain of rhetorical partisan hash. I get it - you don't like Obama, or what I believe in. It would be less harsh if you didn't accuse me of drinking the Cool-Aid and being a pre-programmed Chatty-Kathy doll. What's worse, it's not even funny. Be careful of using your lists of "facts" to impale and put down - if I had the time I could throw every single point back at you with a few name changes.

"Scuttle them with naked attacks on the other side"? Seriously? Now 'fess up - you had a grin on your face when writing this, right? If not, you need to get out more.

Vladtheimp

Mea Culpa is in my vocabulary but only used where appropriate. In fact, I have a picture of you in my mind, being more flexible than I would have imagined, being able to reach behind your back and pull the ring anytime you read something critical of Obama or the democrats.

I note the wasteful and irresponsible pork in the fiscal cliff and Sandy relief bills, which were not noted in the Tribune article, and one pull of the ring brings forth a defense of pork, a fawning description of Obama, and an attack on Republicans in general and House Republicans in particular – the pre-program having nothing to do with the topic of pork Obama and the Senate stuck in these “vital” crisis driven bills before they went to the House.

No matter the topic, criticism of Obama causes another ring pull and another diatribe against all Republican policies, all Republicans, and mostly in a Daily Kos demeaning and dismissive tone (minus, thankfully, the profanity).

I recognize I am guilty of defending my beliefs, and being perhaps hyper-sensitive to the anti-constitutional excesses of the Obama administration, but I at least attempt to craft my opinion to the topic at hand and not issues broadsides using the same tired talking points. It gets tedious trying to interject some facts against the constant barrage of charges of Republican thuggery juxtaposed with genuflecting at the altar of Obama/Liberalism. So much so that I have to re-think the value of doing it at all. So, Lanivan, maybe you have won through attrition (not yet a promise).

au revior

Lanivan

Guerre d'usure? If your comment is serious, I wonder if you even read mine. I can not spar/debate talking points that I believe to be false, moot, or both. It's not about the constitution, Obama, liberalism, crafting opinions or even your version of the facts versus my version. It's about warfare - class warfare, the preservation of surging wealth inequality versus some attempt at balance and integration. To repeat - I can take every objection you make and plug in a republican name/event. While I genuflect at the alter of balance and integration, you genuflect at the alter of those promoting wealth inequality.

Why is it that people who think in extremes do not seem/want to understand those who do not? I do thank you, the educator Vlad, for giving me many reasons to research topics I wouldn't normally.

Bonne chance

Lanivan

See - even Obama Chatty-Kathy's read conservative articles. As a rule, they tend to be balanced...http://www.forbes.com/sites/real...

Lanivan

Something to read while you are re-thinking....maybe this from Maureen Dowd, who is always quite scathing towards Obama, will give you some clarite du soleil on a gray day....http://www.nytimes.com/2013/01/0...

Lanivan

If you're still reading, Vlad, this one's for you...don't let the source (Aljazerra) turn you off - this is good......http://www.readability.com/read?...

Walking Alive

Wow! I never would have guessed you were not a NASCAR fan! That blows.

Wingmaster

I haven't stopped by for a couple of weeks and see you two are still at it...Jeez! Nothing changes Lan is a lib and Vlad a staunch conservative. There will never be a point where this mental jujitsu will solve anything. It appears the point is to see who can get to checkmate position rather than actually come together to solve the problem...come to think of it thats exactly what we have in Washington. Carry on! Glad to see your still having fun. Meanwhile I'm going back to preparing my bunker!!!

Lanivan

Hey Wing! Good to hear from you....Happy New Year! Yes - as you can see, Vlad has been valiant, but it's just not the same without all of you guys tearing apart my every comment. Actually, some things have changed - I used to be a moderate pub, but Vlad has convinced me I'm definitely an Independent now. But the war of wills continues here on these pages the same as on Capitol Hill.

Anyway, in the spirit of bipartisan sniping, I offer this - the January 5 cover of the Economist magazine, complete with your buddy John Boehner in German leiderhosen and Obama in a French beret. Chuckles guaranteed. Don't get too comfortable in your bunker - don't be a stranger! ......http://www.economist.com/news/le...

Vladtheimp
Lanivan

Funny!! Chuckling....

And, for you....http://www.youtube.com/watch?v=T...

LessThanAmused

My God....why don't you two just get a room and be done with it????

Lanivan

What kind of room did you have in mind - a padded cell?

LessThanAmused

Works for me, but I'd vote for any type of room that doesn't include internet access for at least a month.

Lanivan

Oh dear, so sorry you're not amused....

Vladtheimp

Dziekuje!

Post a Comment

Log in to your account to post comments here and on other stories, galleries and polls. Share your thoughts and reply to comments posted by others. Don't have an account on GrandHavenTribune.com? Create a new account today to get started.