And so Congress has passed a bill to avert the fiscal cliff. Details about what it contains are difficult to come by at this early stage.
A few things are known, however, and they should anger every citizen. We are being told that this bill does not raise taxes for all but the highest-earners. This is a lie. This bill does not renew the payroll tax cut enacted two years ago. According to the non-partisan Tax Policy Center (an organization with a solid track record of fairness and accuracy), this will cost the average family $1,635 per year in additional taxes. If you get paid every two weeks this means your paycheck will go down by $63. So much for the vaunted concern our politicians have for the middle class. This tax hike will take place immediately, and it will inflict the most pain on low- and middle-earners.
This tax hike will exert a powerful drag on our economy. By lowering the cash almost every household in America has to spend, it will decrease consumer spending, thereby lengthening the already historically slow recovery we have experienced.
According to the Congressional Budget Office this bill raises federal spending. Over the next decade the CBO estimates it will add an ADDITIONAL four trillion dollars to our federal debt. (The debt now stands at roughly sixteen trillion. So this bill increases our debt by about 25%.) The CBO's report states that even if the most creative, generous accounting were used, the ratio of higher taxes to (theoretical) spending cuts is 41 to 1. That is, for every $41 added in new taxes we are supposedly going to save $1 in lower federal expenditures. This, of course, is also a lie, as the federal government uses "baseline budgeting." (Hint: if you used baseline budgeting when applying for a mortgage the lenders would laugh you out of their offices.)
I certainly subscribed to the idea that Congress and the president needed to do the grown-up thing and address the fiscal cliff in a timely fashion. But never, not even in my most cynical moments, did I expect this disaster. As far as I am concerned they all share the blame: both parties, both houses of Congress and the president.
We voted for them. So I blame us, too.
So trying to distill your frustration down, I think what I'm is that you dislike how we are facing a much larger increase in taxes as opposed to decreases in spending. I agree that the ratio of tax to decreased spending is abysmal, on the other hand, were we promised that our taxes wouldn't increase at all? I guess that's not what I heard the president saying. Proportionally, the wealthy will be paying a much larger chunk of income to taxes, so yes the elimination of a 2% payroll tax cut sucks, but...yeah the government is really really in debt. Some of the hikes I agree with, capital gains and dividend rates are up to 20%. The people that make the big bucks on investments are likely making much more than than $40,000 off their investments which is where a 20% bracket would fall approximately on gross income. I also think they are still extending the bush-era tax cuts so that's something.
ReplyDeleteAlso, the congressional budget office does point out in a report that average federal tax rates have been pretty dramatically down since 2000 and proportionally most for the lower and middle classes. Perhaps it's time to raise tax rates back up to at least what was typical before the 2000's. https://www.cbo.gov/publication/43373
I'm with you, I prefer spending cuts to tax increases, but the question always becomes, where do we decrease spending and what's the effect of that? The unemployment benefits cost of $30 billions is ok with me, I know that lots of people abuse unemployment benefits, but I don't think we can just stop supporting people in the grips of poverty. The 25 billion for the doc fix is unfortunate but necessary. Without it doctors would jump ship on medicare, because they wouldn't be able to sustainably continue to see patients under medicare (especially primary docs who are the ones that catch diseases and work the most to decrease costs from avoidable conditions).
So the area where I think money can most reasonably cut is defense spending. This is because defense is one of the top three categories that get the most money. Cut 10% from defense and you cut 2% of total spending. Cut 10% of scientific research and you cut total spending by 0.2%. Federal inefficiencies should be addressed in all areas of government, but if we aren't looking at social security, medicaid, medicare, or defense, we are arguing over pennies. http://www.cbpp.org/cms/?fa=view&id=1258
I think most people already know this, but depending on political slant, either entitlement programs or defense are these magical untouchable things.
How can we change this? Congress needs to be more accountable in making tough choices that constituencies won't always be happy about it. We should stop redrawing district lines every few years to guarantee landslide victories for house seats to political parties (encourages extremism because the only threat to the job security comes in a primary). Also we should pay more attention to the underlying layers of influence (read money) that guide our politicians. The Sunlight Foundation does a great job of giving tools to the public to try and understand who is giving money to whom for what purpose. One obvious thing to me is that we should cap spending for public campaigns and address the absurdities that are SuperPACs.
You make good points, Dan. I agree with most of them. Here are a few reactions, though.
ReplyDeleteMr. President, don't look me in the eye and say you've cut taxes when you know damn well you raised them. And again, the way you raised them does the most harm to the very lower- and middle-income people you built your reelection campaign around.
No taxes were cut. A few previously enacted rates were continued, that's all.
I agree with cutting defense spending, and with the importance of funding scientific research.
Dan, you listed four major federal expenditures but you left out the largest one of all: servicing the debt. Unless we seriously reduce federal expenditures there is no solution. None.
In the Youtube video that I watched he said that he and Congress "prevented tax hikes", which he did, not all of them, but the ones that would have brought our economy to a halt. Also, I disagree that low-income families got the short end of the stick. The Atlantic analysis points out that, "The end of the payroll tax holiday will reduce take-home pay for lower-income families by hundreds of dollars. But the tax changes at the top are measured in the hundreds of thousands of dollars." http://www.theatlantic.com/business/archive/2013/01/fiscal-cliff-deal-faq-what-just-happened-and-what-it-means-for-you/266743/
ReplyDeleteAlso, I was listing areas of our budget where we can consciously decide we will reduce spending. You can't cut spending on debt, you can only increase the allocation of spending that goes towards paying it back, so that interest is less in the future.
Here's the video in which he doesn't say he cut taxes: http://www.youtube.com/watch?v=9tuztHPq95o
ReplyDeleteAlso, the bill permanently enshrines Bush era tax cuts for all people below the 400,000 dollar income rate indefinitely, which he did not have to do, and most democrats really din't want to do, this makes it much harder for taxes to be raised on middle-class and lower-income families in the future, which should be considered good news for those who want the focus to be on less spending in the future and not on increasing taxes.
Dan, I am not arguing with you so much as calling out the spin coming from all sides (as usual). You do make good points and you are well-informed. But here's the bottom line:
ReplyDeleteBecause of this bill virtually everybody who earns income in any way will pay higher taxes, starting now.
Our friends on both sides of the aisle approved new spending that will come to at least 4 trillion over the next ten years.
This is why I am not joking when I say that often, the best we can hope for is a Congress and president who do nothing.
Dad, I appreciate that you aren't sugar-coating your opinions and you are being honest. I also appreciate the libertarian perspective you gave to me in that sometimes an intrusive, authoritarian, or overly funded government is indeed wasteful. All that being said, your comments still anger me. I think if you are going to call out the spin of politicians, you need to be careful to accurately portray what the politicians are allegedly promising. President Obama's speeches are heavily laced with rhetoric, but in this case I think it's incorrect to call Obama out because he was promising to cut taxes. I never heard him saying that. I could be wrong, there's probably a video out there that proves so, but his overall message to me consistently suggested he wanted to increase taxes on wealthy and to eventually decrease federal spending. He acknowledged in his video yesterday that he accomplished the former without really touching the latter.
ReplyDeleteI know that you aren't joking when you state, "the best we can hope for is a Congress and president who do nothing." Again, I appreciate you are being honest, but again, this statement pisses me off. Whether you intend it or not, the connotation of this statement suggests to me a disrespect for the role American government has played in our well-being. We are incredibly lucky to live in this time and place and I personally believe a lot of that blessing derives from the structure of our government and the people who run it. The statement also has a connotation of fatalism to me. It suggests that we can't really expect our lawmakers and chief executive to do better, so let's just not expect them to do anything. I expect my government to do better. And maybe this is a frustrating and unsustainable attitude to have, but I still choose to have it, to expect my lawmakers to do better, and to be disappointed when they don't do well, and to push them to get it right next time.
I know I'm young, and have yet to experience the slog of political cycle after political cycle, I know that a lot of things I think and believe will likely change in the future, but I still think it's dangerous to lock into a mindset that expects nothing or the worst from our government.
I'm sharing a lot of strong thoughts so I think I should back up and make clear that I'm most willing to challenge your thoughts and opinions because you're my dad and I happen to respect and value your thoughts and opinions more than 99.9% of the rest of people (the same can be said for Mom's opinions too). I hope my comments don't come off as me disrespecting you because what I want to come across in a big picture sense is exactly the opposite.
ReplyDelete