WASHINGTON, DC, January 1, 2012 ― On New Year’s Eve, President Obama and the Senate hammered out a deal designed to cushion our fall from the fiscal cliff. Under the deal, $15 billion in spending cuts ($2 billion of which are supposedly going to take place in 2013) were offset by $620 billion in tax increases.
According to Obama, who in 2011 promised a balanced approach of three dollars in spending cuts for every dollar in new taxes, this is a balanced approach to the problem. This new version of “balance” comes out to $41 in taxes for every dollar in spending cuts.
The bill was passed by the senate in an 89-8 vote at 2 a.m. Tuesday.
The numbers are misleading. The fiscal cliff deal reportedly increases spending by $330 billion; but the 157 page bill (at a cost of $4 billion per page) actually tacks $4 trillion on to the deficit over the next ten years when you add up all the new spending minus the projected tax revenue.
Thanks to intentionally misleading language, many Americans will sigh in relief and go on their merry way, thanking their senators for votes well cast.
This deal follows the precedent of tax now-cut later, with cuts never actually coming due. President Reagan fell for it in 1982 and later claimed that signing the no-cut budget bill was his biggest failure as a president. Bush Sr. also fell for the tactic in his presidency. The tax to spending cuts he and Congress agreed to then were 1:3 and 1:2 respectively, and never took place.
Chances are, the dollar agreed to in spending cuts for each $41 in new taxes will never happen, either.
President Obama, in a press conference reminiscent of campaign appearance, had crowds both in front and behind him, smiling and cheering whenever he spoke about higher taxes on the rich, and how he forced the Republicans to cave.
For those Americans who are aware of the true cliff our economy stands upon, the one that involves a perpetual state of default against the only debtors Washington can get away with defaulting on (you and me), there is nothing to cheer about.
All indications are that this country will never make its finances sustainable. We will instead continue to inflate the debt bubble that will burst catastrophically, tossing not only this country, but most of the world into depression when it does.
The fiscal cliff was meant to be a wake-up call to our elected leaders. It was meant for them to take a year and look at the big picture, including tax reform, entitlement reform, social safety nets and paying down the debt.
The fact that the entire year this was meant to take place was the year prior to a presidential election, and therefore 100 percent dedicated to campaigning, was either a blatant display of ignorance, or a brilliant political move, allowing the can to be kicked down the road a bit further in hopes that it would be somebody else’s problem.
The House of Representatives will receive the bill next. It will undoubtedly be amended heavily, sending it back to the Senate to be rejected, with the likely result that the fiscal cliff will hit us with full force.
In the meantime, we have also breached the debt ceiling, though US Treasury Secretary Timothy Geithner says we can go on for about two months using “extraordinary measures” before bringing the government to a halt.
The Republicans in Congress will demand that spending be cut in exchange for raising the debt ceiling, but the debt ceiling will be raised, and the spending cuts will almost certainly not materialize. If the US credit rating slips again, it will have little real impact, as the U.S. is currently the least ugly option in a world full of ugly investment options.
It is sad that Americans have settled for “it could be worse,” rather than expecting the greatness we once had, and will probably never have again.
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