The 11th-hour deal that Congress and President Obama blessed Tuesday was a missed opportunity to do something lasting and meaningful to solve the nation’s fiscal problems.
While Mr. Obama and Democrats got what they wanted in this not-so-grand bargain — the largest tax increase in the past two decades — there were no spending cuts.
That’s a huge whiff.
It did nothing to reform entitlement programs, which are at the root of the nation’s deficit woes and threaten the country’s stability. That’s strike two.
It did nothing to reform tax policies, which punish the productive segment of the nation’s economy that puts people to work. That’s strike three.
Taxes are going up this year. So is spending. So is the size of government. That’s avoiding the cliff by slamming into a brick wall.
While Democrats were successful with their soak-the-rich sales pitch, all working Americans will pay a bigger price this year for government spending. Their share of the Social Security payroll tax, which had been lowered by two percentage points for the past two years, will go back up to 6.2 percent. For someone with a median income of $50,054, that’s another $1,000 in less take-home pay annually — about $40 every two weeks.
About the best that can be said about the deal is that it makes permanent most of the Bush-era tax cuts. It also zaps the alternative minimum tax, a 1960s-era levy intended for America’s wealthiest that threatened to sock the middle class.
This measure will do little to substantially cut the deficit. The additional income taxes on individuals who earn more than $400,000 annually and couples who make more than $450,000 a year are projected to generate another $600 billion over the next decade. But that’s optimistic. People who make this kind of money will change behaviors to avoid paying higher rates.
At the same time, the promise that leaders made to cut the deficit by $4 trillion remains just that — mostly hot air. Get ready for more of it soon.
In just two months, the federal government will have to increase its borrowing limit, a change that only Congress can make. Otherwise, automatic spending cuts of $109 billion kick in.
Republicans want to use the upcoming debate on the debt ceiling to force Mr. Obama and Democrats to reduce spending. Good luck with that. What happened over the weekend doesn’t inspire confidence. Nor does it reduce uncertainty over the nation’s future. If anything, it makes things more jittery.
Such nervousness hurts consumer confidence. It makes businesses reluctant to invest and put more people to work. It threatens to snuff out an economic recovery that’s still in its infancy.
The jump in the estate tax to 40 percent, which is part of this deal, is especially unfair. Americans who have already paid taxes on income all their lives, then scrimped and saved to leave something to future generations, will now have the privilege of surrendering 40 cents out of every dollar to Uncle Sam. They now have more incentive to blow that money at a casino instead.
It’s disappointing that the Senate vote in favor of this package — 89-8 — was overwhelming, since spending cuts weren’t included. Georgia Senators Saxby Chambliss and Johnny Isakson both voted “yes,” as it had the backing of GOP Senate leaders in the Democratic-controlled chamber.
Driving passage was the urge not to go over cliff and trigger massive tax hikes and spending cuts. No one wanted that.
But because the clock was winding down, the GOP-controlled House was forced to take the Obama-Senate plan, or risk being blamed for the awful consequences.
Thus the pro-spenders successfully boxed in the anti-taxers.
Congressman Jack Kingston (R-Savannah) was among those who voted “no” for the measure, which the House approved 257-167. Congressman John Barrow, a Democrat who represents part of this area, also voted “no.”
But the real disgrace isn’t what was enacted. It’s the process that led to its approval.
Mr. Obama and leaders in Congress promise to keep working on cutting the deficit. After the latest circus, only someone with amnesia can believe them.