Leadership / Management | Legislative / Regulatory | Taxation

Fiscal cliff: We have a deal … sort of

You really have to hand it to Congress. Its approval ratings are so low that it apparently has stopped even pretending that it's working on our behalf. "Let's just do whatever we want," our elected officials seem to be saying. "They can't hate us any more than they already do."

Exhibit A: The fiscal cliff. As the Senate scrambled to piece together a deal on New Year's Eve, CNN sent out a "Breaking News" alert indicating that the House would not vote on a deal before the Jan. 1 deadline. The alert included this mind-warping passage:

"There would be little practical difference in settling the issue (Dec. 31) versus (Jan. 1), sources said. One exception: If lawmakers approve a bill on (Jan. 1) -- after tax rates have technically gone up -- they can argue they've voted for a tax cut to bring rates back down."

I'd laugh, except it's not funny.

Anyway, you know the rest by now. The Senate passed a horribly unbalanced bill at 2 a.m. on Jan. 1, the House spent New Year's Day politicizing the hell out of it, then finally passed the measure by a vote of 257-167. 

After all of that, here are some key points in the deal, according to CCH:

  • The income tax rate for individuals making more than $400,000 a year and families making more than $450,000 a year will jump from 35 percent to 39.6 percent.
  • The deal does not reverse a scheduled payroll tax increase that would help finance Social Security. According to the New York Times, that "means that about 77 percent of households would pay a larger share of income to the federal government this year. … The tax this year would increase by two percentage points, to 6.2 percent from 4.2 percent, on all earned income up to $113,700.
  • The alternative minimum tax is permanently adjusted for inflation, which Forbes contributor Kelly Phillips Erb calls "the biggest surprise in the bill."
  • It pushes back the deadline for mandatory "sequestration" spending cuts to March 1, meaning we'll have to go through a lot of this nonsense all over again in two months.

The fact that the deal does not address spending cuts angers House Republicans, and they have a point. President Obama himself said he wanted a balanced deal that features both tax hikes and spending cuts. Not only did the Senate plan forego spending cuts for the time being, it theoretically could add nearly $4 trillion to the deficit over the next decade, according to the Congressional Budget Office -- though under largely unrealistic circumstances.

Whatever. It all boils down to just one thing to me: Even under the most dire economic circumstances, it's just politics as usual inside the Beltway.

The only possible good that could come out of all of this would be if our elected officials took stock of the public's outrage and said to themselves, "Never again."

What are the odds?


Bill Sheridan