Analysis: Cliff deal is another pain-free punt
Speaker of the House John Boehner, R-Ohio, and Rep. Cathy McMorris Rodgers, R-Wash., right, the Republican Conference Chair, arrive at the House of Representatives for the final vote on emergency legislation to avoid a national "fiscal cliff" at the Capitol in Washington, Tuesday, Jan. 1, 2013. (AP Photo/J. Scott Applewhite)
President Barack Obama smiles as he arrives with Vice President Joe Biden to make a statement regarding the passage of the fiscal cliff bill in the Brady Press Briefing Room at the White House in Washington, Tuesday, Jan. 1, 2013. (AP Photo/Charles Dharapak)
Congress’s hectic resolution of the “fiscal cliff” crisis is the latest in a long series of decisions by lawmakers and the White House to do less than promised – and to ask Americans for little sacrifice – in confronting the nation’s burgeoning debt.
The deal will generate $600 billion in new revenue over 10 years, less than half the amount President Obama first called for. It will raise income tax rates only on the very rich, despite Obama’s campaign for broader increases.
It puts off the toughest decisions about spending cuts for military and domestic programs, including Medicare and Social Security. And it does nothing to mitigate the looming partisan showdown on the debt ceiling, which must rise soon to avoid default on U.S. loans.
In short, the deal reached between Obama and congressional Republicans continues to let Americans enjoy relatively high levels of government service at low levels of taxation. The only way that’s possible, of course, is through heavy borrowing, which future generations will inherit.
While Americans widely denounce the mounting debt, not so many embrace cuts to costly programs like Social Security. And most want tax increases to hit someone other than themselves.
“This is another ‘kick the can down the road’ event,” said William Gale, co-director of the nonpartisan Tax Policy Center and a former Republican White House adviser. “It is a huge missed opportunity.”
“Going over the cliff would have put us on a better budget path,” Gale said.
The fiscal cliff’s combination of big tax increases and deep spending cuts would have provided major political leverage for both parties to achieve greater deficit reduction as they worked to ease some, but not all, of its bite. In fact, the whole point of the congressionally created cliff was to force the government – which borrows about 31 cents of every dollar it spends – to begin a fiscal diet that would spread the unpleasantness widely.
Instead, Congress and the White House did what they almost always do. At the last minute they downsized their proposals, protecting nearly every sector of society from serious pain.
The accord leaves most government programs operating as usual, postponing yet again the threat of serious reductions.
Aside from the payroll tax increase, which drew little debate even though it affects almost all working Americans, the compromise will raise tax rates only on incomes above $450,000 for couples and $400,000 for individuals. That’s less than 1 percent of U.S. taxpayers.
Obama had campaigned for thresholds of $200,000 and $250,000. The fiscal cliff’s implementation would have made it nearly impossible for Republicans to stop him, if Democrats had held their ground.
That might have produced an ugly scene, rattled the financial markets and sparked even more partisan bitterness. But any step toward major deficit-reduction will trigger anger, threats and genuine discomfort for people who receive government services or pay taxes. In other words, everyone.
And such steps can ignite opposition from powerful interest groups, which always stand ready to give money to the campaign opponents of lawmakers who displease them. The AARP, just as one example, used TV ads and other tactics throughout the fiscal cliff debate to warn elected officials not to touch Social Security and Medicare, even though those programs constitute a major portion of federal spending.
Activists on the left and right said the new law doesn’t do nearly enough to tame the federal government’s borrowing habits. Rep. Darrell Issa, a California Republican, said Congress achieved nothing “other than the smallest finger in a dike that in fact has hundreds of holes in it.”
AFL-CIO President Richard Trumka praised elements of the deal. But he said that in postponing $1.2 trillion in spending cuts over 10 years, and leaving the debt ceiling unresolved, it is “setting the stage for more fiscal blackmail.”
To be sure, Obama and House Speaker John Boehner flirted at times with a “grand bargain” that would include much larger tax increases and spending cuts than those in the newly enacted law. And high-profile groups such as the Simpson-Bowles commission also recommended tough combinations of tax hikes and spending cuts, calling them necessary even if politically unpopular.
These ideas went nowhere.
Less than 12 hours after the House’s New Year’s Day vote for the fiscal compromise, renewed demands for deficit spending dominated the Capitol. Democrats and Republicans from New York and New Jersey blasted Boehner for delaying legislation that would provide $27 billion to $60 billion in federal aid to victims of Hurricane Sandy. The sums would be added to the deficit.
It’s easy to defend using public money to help Americans walloped by a vicious storm. And that’s the heart of the government’s inability, or unwillingness, to restrain its borrowing ways.
Every federal dollar, and every federal program, has avid supporters who can defend their functions. And every sector can explain why higher taxes would burden struggling people at the lower end, and “job creators” at the higher end.
High levels of government service. Low levels of taxation. Big deficits to make up the difference. That’s what Americans have demanded and gotten from their federal government for years.
The agreement by Obama and Congress to spare Americans the pain of a fiscal is right in line with that tradition.