The Right Opinion

Far From the Fiscal Cliff Finish Line

A House vote looms.

By Arnold Ahlert · Jan. 1, 2013

It looks as if the fiscal cliff will be averted – maybe. Early New Year's morning, the Senate passed a bill, in a bipartisan vote of 89-8, eliminating the tax hikes on most Americans while raising them on the rich. Automatic spending cuts that would have kicked in as the result of the sequestration have been postponed for two months. The deal was cobbled together by Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-KY). It now goes to the House where its chances of passage remain unclear. “Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members – and the American people – have been able to review the legislation," said Boehner and other GOP leaders in a written statement.

The agreement was reportedly put together at around 9PM New Year's Eve, when two of the major sticking points were finally overcome. Republicans surrendered ground on the across-the-board spending cuts, delaying for two months the $109 billion in spending reductions aimed primarily at the Pentagon, as well as some domestic agencies. The White House gave ground on the estate tax, with the top rate pegged at 40 percent while exempting the first $5 million for individual estates, and $10 million for family estates. Thus estate taxes go up, but the exemption levels are increased.

With regard to taxes, the Bush tax cuts remain in place for individual Americans making less than $400,000 and couples making $450,000. Caps have been imposed on itemized deductions and personal exemptions will be phased out for individuals making $250,000 and couples earning $300,000. Taxes on both capital gains and dividend income would rise from 15 to 20 percent on income over $400,000 for individuals, and $450,000 for families.

The dreaded alternative minimum tax, originally enacted to ensure that wealthy Americans could not completely avoid owing taxes by way of loopholes, was one of the more sensible agreements emerging from the deal. It was finally indexed for inflation, exempting 30 million middle- and upper-middle-class Americans from owing an average of $3000 in additional taxes. In a victory for the president, the child tax credit, the earned income tax credit, and as much as a $2,500 tax credit for college tuition have been granted five year extensions. Several business tax credits, including accelerated depreciation for investments in business equipment and property, credits for research and development costs, and those for renewable energy sources have been extended for one year at a cost of $64 billion.

On the more dubious side, unemployment benefits will be extended for another year without any commensurate offset, meaning another $30 billion will be added to the deficit. Democrats point to figures released by the Congressional Budget Office (CBO), which estimated keeping the benefits would raise GDP by two-tenths of a percentage point in the fourth quarter of 2013. This has been touted as the equivalent of 300,000 jobs. Less touted is the cost of $100,000 for each of them.

The agreement also includes yet another suspension of the so-called "doc fix," blocking a 27 percent reduction in Medicare payments to physicians for another year. The $25 billion cost of this suspension will ostensibly be offset by other, as yet unspecified, reductions in medical expenses. And finally, the deal reinstates the 6.2 percent Social Security payroll tax that had been cut to 4.2 percent two years ago.

Both Senate Republicans and the president gave the agreement a tentative thumbs up. "The president wanted tax increases, but thanks to this imperfect agreement, 99 percent of my constituents won't be hit by those hikes,” said Senate Republican Leader Mitch McConnell. “There's more work to do to reduce our deficits, and I'm willing to do it,” said President Obama in a statement. “But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans.”

Yet the deal is far from the finish line. Although the House is scheduled to meet today at noon, Breitbart News is reporting that a conservative group, American Majority Action, claims that House Speaker John Boehner lacks the necessary support to get the deal through the Republican-controlled chamber. AMA spokesman Ron Meyer sent an email to reporters Monday, saying he's “heard directly from senior GOP conservative members in the House that Speaker Boehner does not have a majority of support from the GOP caucus – not even close.”

Boehner himself has refused to endorse the deal, yet he has promised to offer a vote on it, or a GOP alternative, perhaps as early as 1PM. Undoubtedly, House Democrats will vote for it. House conservatives? “It's three strikes in my book and I'll be voting no on this bill,” Rep. Tim Huelskamp (R-KS) told CNN Tuesday morning. Huelskamp expressed his dismay regarding the effect the legislation will have on small businesses, as well as the one sticking point that undoubtedly resonates with his fellow conservatives: all the serious spending cuts have been deferred.

Yet even House conservatives may conclude the best course of action is to pass this bill, placating a majority of Americans for the moment, and get down to serious negotiations on spending cuts when the next major hurdle, namely the debt ceiling, is addressed. If truth be told, this agreement is nothing more than a dress rehearsal for those negotiations – during which the House, whence all spending bills originate, will have considerably more leverage than it has now. “The big battle is yet to come and it's over the debt ceiling,” Sen. Johnny Isakson (R-GA) said in a Monday floor speech. “That's the one where we have to find a way to make a deal. And the president is not going to make a deal by poking us in the eye.”

The rancor expressed by Isakson was illuminated by Washington Post columnist Charles Krauthammer, who referred to President Obama's “incredible arrogance” during a pre-deal press conference on Monday. “I found it astonishing….He spikes the football on the Republicans. He rubs in the fact that they were resisting a raise in rates and he made them do it. And of course, as always, he places himself hovering benignly at an Olympian level above the fray, where the children are playing in the sandbox, and he is asking that everybody be reasonable, as if he just arrived in Washington on a tourist visa," Krauthammer said Monday night on Fox News Channel's "Special Report.”

In other words, even if the House spares Americans from the consequences of the fiscal cliff today, the nation is a long, long way from the finish line – with plenty of eye-poking from both sides expected along the way.

Arnold Ahlert is a columnist for FrontPage Magazine.

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3 Comments

M Rick Timms MD in Georgia said:

Pass the damn bill. It is the best the Republicans can do on taxes right now, because foolish Americans re-elected Obama and leftist Senators that have not passed a budget in four years!!.

Conservatives must take the tax deal and then hit the ground running on the absolute need for major reductions in actual spending - not just the rate of growth, reductions from previous projections, etc. The debt ceiling debate will be the next test.

Real reductions in the actual amount of money being spent. When the stalemate comes Obama will try to claim that SS checks, and pay to military, fire and police will be the first thing cut. Why?? because he wants it that way?? Does not have to be! Republicans control the House and all money bills originate in the House. Do not let Obama set the rules for the spending debate - like he has done on the taxation side.

Sooner or later he is going to have to admit that his tax attack on the rich has produced revenue to cover only 8 days of Obama Big Government Spending. It is time for some adults to take stage and cut spending! But right now -- take the tax deal!

Tuesday, January 1, 2013 at 9:07 PM

M Rick Timms MD in Georgia said:

I am tired of people complaining that "Congress" is not doing it's job. It is Harry Reid and the Democrat Senate that is sitting on stacks of bills sent over to them by the House Republicans.

Harry Reid has single handily stopped the legislative process. No Senate Bill, No Conference committee, No Reconciliation process.

But the media continues to ignore this point and hold the Republicans out as the obstructionists when they question Obama's "my way or the Highway". Harry even say's it himself, when stating that he will not bring up the House Bills for debate.

Now with the tax issue out of the way -- the Republicans must demand spending cuts - but do not let Obama put "seniors, military, firemen, police, and teachers" at the head of the line for cuts, while blaming Republicans. Republicans can pass a bill protecting those folks from a government stalemate/shutdown and then play hard ball on cutting the real waste federal programs, foreign aid, grants, bureaucratic costs etc.
( Don't tell me that foreign aid doesn't cost that much -- it is a hell of a lot more than the 635 Billion tha this tax battle we just had manages to generate---that 6 days of Obama spending!)

The feds don't write the checks for local fire, police and teachers anyway - it's a bunch of BS. If it is not called for in the Constitution it should be cut from the federal government. That does not mean it does not need to be done - just returned to the control of the States, where folks can keep an eye on the things that are of interest to them.

Wednesday, January 2, 2013 at 4:32 PM

Wayne in Hinesville, GA said:

States rights have been stomped on so much from F. Roosevelt until now that its a crime. These Federal departments should be abolished and left up to the States. Energy, Education, House and Urban Development, Agriculture, Health and Human Services, TSA, etc. The only four the Federal government needs is Treasury, State Department, Veterans Administration, and Defense. All the rest are nothing more than usurpation of the States right to govern themselves.

Wednesday, January 2, 2013 at 11:16 PM