Published on -1/3/2013, 10:24 AM
The United States has avoided going over the fiscal cliff, thanks to Congress' ability to find the least possible amount of common ground at the last possible moment. On New Year's Day, the House gave lukewarm passage to a bill that prevents large income tax increases for the majority of Americans. Some 21 hours earlier, the Senate had done the same although by a clearer margin.
We will, in turn, offer the barest minimum of praise to the nation's elected leaders for not purposefully throwing the economy back into recession -- which likely would have happened without a deal.
For the 151 Republicans and 16 Democrats who voted against the measure: What were you thinking? That sending international markets into turmoil and raising taxes was preferable to whatever principle you were guarding? That after two years of bitter standoffs, sequestration and partisan wrangling you suddenly thought compromise was possible the day after the deadline? For shame.
By not going over the cliff, Americans will be able to keep approximately $500 billion in their own pockets instead of sending it to Uncle Sam. Only 0.7 percent of the wealthiest citizens will see their income taxes increase. The Bush-era tax cuts were made permanent for those individuals making less than $400,000 and couples under $450,000. Tax rate brackets are now locked in place for income derived from salary as well as dividends and capital gains. The alternative minimum tax finally has inflation pegged to it and many individual and business tax credits will not need to be voted on every year. Designed to bring certainty to the tax code, all of these moves were long overdue.
The bill, which President Barack Obama signed Wednesday night, also prevented $109 billion in across-the-board cuts to defense and domestic programs that were scheduled to take place this week. The so-called sequestration Congress had imposed on itself to reduce deficits by $1.2 trillion over the next 10 years was avoided.
In short, the watered-down deal gave confidence to Wall Street and international markets. It also prevented credit rating agencies from downgrading the nation's debt load. We reiterate that to have allowed either of those events to take place would have been shooting the economy right in the head. Irresponsible wouldn't begin to describe our elected leaders if that had happened.
But we shouldn't get too excited about the deal either. It will, after all, add $4 trillion in new debt over the next decade. That figure should surprise only those conservatives who long have argued that tax cuts don't have a cost. Yes, they do.
As for reigning in spending on entitlement programs, nothing happened. The proverbial can has been kicked down the road -- and not very far. These talks will start in earnest almost immediately after the 113th Congress is sworn into office, as the debt ceiling will need to be raised again just to pay for items already approved.
And most Americans will see their federal tax obligations go up right away. By concentrating on the income tax rates, Congress and the White House neglected to extend the 2-percent temporary reduction in Social Security payroll taxes. For the past two years, a family making $50,000 a year was able to keep an extra $1,000 annually to spend as they chose. No more. As a result, almost 80 percent of the working public will pay more in overall federal taxes this year than in 2012.
The cliff was avoided, but virtually all the hard work remains. We hope member of Congress will dedicate themselves to solving real issues rather than mere posturing for their next re-election bid.
Editorial by Patrick Lowry