American Elephants

The “Cliff” Deal, Or The Lesser of Two Evils? by The Elephant's Child

The Fiscal Cliff deal is not a happy one,but it is better than the alternative.  Much of politics seems to end up in lesser of two evils territory. Then you get into a philosophical debate about when you can accept any evil. Republicans may have learned that Barack Obama does not negotiate. “Bipartisan” is a word he may use in speeches and remarks but it means no more than his other careless self-glorifying words; it does not occur in his actions.

The stopgap bill signed to avert he fiscal cliff and spare most taxpayers from sharply higher taxes left Republicans despondent, Democrats publicly obedient, but privately furious, because it didn’t soak enough of the rich. Mr. Obama said it fell short of “my preference” for “a larger agreement, a bigger deal, a grand bargain.”

And of course he blamed congressional Republicans for his failure to get the deal he wanted. Unlike former presidents, Mr. Obama does not believe that he has any personal obligation to bring about a compromise. The serious negotiating is left to subordinates, he skipped the final talks on the fiscal-cliff deal, only to appear on television to inform “members of both parties” that he and the American people were anxiously awaiting a last-minute accord, as if he were uninvolved in the budget wrangling. When it was all over, he sent out a video to tell his supporters that his success was all due to their efforts.

President Obama cultivates no allies in Congress; he attacks them in speeches and public remarks. He may come back at a crucial stage of the negotiations with new demands. He announced that he had not agreed to any spending cuts and would not agree to any in the future. Mr. Obama’s approach is that he gets to win, because he is the president, and important.

The tax changes included in the bill hashed out includes the first increases in the top income-tax rates in nearly twenty years. For millions of wage earners, the immediate effect is the end ot the two-percentage point payroll-tax cut that was part of a 2010 deal. It is called the payroll-tax, but lowered the employee portion of the Social Security tax, putting Social Security in even more dire straits. The expiration of this stimulus will cost working Americans $125 billion a year.

The top rate on ordinary income for joint filers earning more than $450,000 a year, who already pay far more than their fair share, will rise to 39.6% ($400,000 for single filers).

Here’s the interesting part. Perhaps you remember that the Democrats have been railing against “the Bush tax cuts” for 12 years. The Bush tax cuts have just been made permanent for 99% of the American people.

The alternative minimum tax has been adjusted to keep it from enveloping more taxpayers than it was designed to do. The current fix expired at the beginning of 2012.

The estate and gift tax exemption remains at $5 million or more per individual vs. the $3.5 million sought by the president. The current 35% top rate increases to 40%.

The definition of  the rich does not include General Electric, Citigroup, Diageo, Goldman Sachs, Morgan Stanley, the American Wind Energy Association and the Motion Picture Association of America, NASCAR, StarKist Tuna. Corporate Welfare still reigns.

The tax on the rich will not bring in the money intended. The economy will not recover as quickly as Mr. Obama has assumed. And we still have some big battles ahead. Raising the taxes to 100% on the rich would not make a significant cut in the deficit.  We are spending way more than we take in. That simply does not work in the long run. Democrats do not want any cuts in spending. They do not want any reform in entitlements. Hey, the markets went up, what’s the big deal? The markets, like the Democrats are dealing with the short term. They are concerned with their personal power and the next election. A “grand bargain” indeed.



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