Deal stalls resolution to crisis
At 11 p.m. on New Year's Day, Congress passed the American Taxpayer Relief Act of 2012. It was the culmination of months of embarrassingly public posturing and political negotiation.
Many Americans are concerned deeply at the excessive levels of government spending and debt. In particular, many realize that entitlement programs such as Medicare and Social Security are set on an unsustainable course. An examination of the Tax Relief Act shows that these concerns have been pushed into the future. The Obama administration claims it is an incremental step. In fact, it is merely a stall tactic.
A $600 billion tax increase for America's wealthiest citizens will hit job-creating small business owners hard. But it was $1 trillion below President Obama's initial demand.
Individuals with incomes less than $400,000, or $450,000 as a family, saw their current income, estate, capital gains and dividend tax rates frozen. But for how long, in light of today's environment?
Meanwhile, 77 percent of working Americans will see their net pay reduced as a result of the expiration of a 2 percent Social Security payroll tax break adopted during the financial crisis.
Republicans achieved very little, other than a long overdue adjustment applied to the Alternative Minimum Tax, tying it to inflation. The essential restructuring of entitlement programs, government spending curbs and the chronic debt ceiling were kicked down the road for what will likely be another political showdown in less than two months.
In short, Congress approved a deal that raised government revenue by $620 billion while increasing — not decreasing — spending by $288 billion. This resulted in a net $332 billion revenue increase.
Treasury Secretary Tim Geithner has warned that the government will hit its official debt ceiling of $16.4 trillion within the next two months. Of course, this does not include off-balance sheet debt — government guarantees and unfunded Medicare and Social Security obligations amounting to well over $100 trillion.
And the government continues to run a $1.089 trillion a year deficit.
Put into perspective, the $332 billion increase in revenue achieved by Congress on Jan. 1 amounts to only 30 percent of the annual government deficit. Further, it accounts for only 2 percent of the “official” Treasury debt.
From this it can be seen that the so-called “fiscal cliff” was merely a slope. It is dwarfed by the far larger and more serious “entitlement cliff,” which looms larger with every day a solution is delayed.
Although Republican achievements in the fiscal cliff negotiations were minor, Obama is expressing a determined unwillingness to negotiate over the debt limit. This threatens the dollar with further debasement, the economy with recession and ordinary citizens with increased future taxes.
Crucially, Obama has exposed a fundamental split within the Republican Party between genuine Republicans and those who are Republicans In Name Only, or RINOs. This should forewarn investors and business people that the debt ceiling likely will be raised without meaningful restructuring of entitlements or taxation.
John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Email him at email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pirates will play NL wild-card game at PNC Park after shutting out Reds
- Penguins notebook: Farnham relishes making opening-night roster
- Pitt notebook: Panthers keeping many players involved
- Rowers thrive on rainless day at the 29th Head of the Ohio Regatta
- Penn State notebook: Franklin cautious regarding injuries
- Man’s body recovered from river in McKeesport
- Penn Hills man allegedly robs Wilkins eatery
- Steelers cut Scobee, sign free agent kicker Boswell
- Nothing normal about Steelers’ standard as backups fill vital roles
- MLB notebook: Miami’s Gordon sweeps NL batting, steals titles
- Utah’s Chaffetz in race for House speaker