As the Nevada Progressive points out, the looming “fiscal cliff” is a meaningful moment for the Republicans in the U.S. Congress. The somewhat sordid history of this “cliff” which in actuality could be more like a slight slope is summarized as:
“The United States fiscal cliff refers to the effect of a series of recent laws which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit beginning in 2013. These laws include tax increases due to the expiration of the so-called Bush tax cuts and across-the-board spending cuts under the Budget Control Act of 2011.” [link]
At this point, even the well informed may need a reminder that the term ‘fiscal cliff’ was coined by Federal Reserve Chairman Ben Bernanke, who was concerned that the impact of the failure of the Super Committee to reach an agreement would depress the economy:
“For the record, although the explanation wasn’t reported or repeated as much as the catchphrase itself, Bernanke actually said the fiscal cliff was about the large spending cuts and tax increases already scheduled to occur being far too big for the current U.S. economy to handle at one time. “I hope that Congress will look at [the spending cuts and revenue increases] and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date,” he told the committee.
In other words, “fiscal cliff” means the big deficit reductions that have been both inadvertently and intentionally scheduled to go into effect at the turn of the year are the absolutely wrong fiscal policy at that time and that the economy will be damaged if they are not changed.” [OF.org] (emphasis added)
For those likely to hit the panic button — some programs are exempted from the budget cuts: Social Security, federal pensions, and veteran’s benefits. Social Security is properly called an entitlement program, because the beneficiaries have paid into it, and it is supported by payroll taxes and its own trust funds. No one, repeat NO ONE, has “spent” money earmarked for the Social Security Trust Funds. [SSA]
For those likely to run screaming into the sage brush about THE DEFICIT, we should note that reductions in military operations in Afghanistan will reduce that beast, and we should remember that the Affordable Care Act also has some deficit reduction benefits. Cherry-picking selective think tank and editorial board musings notwithstanding, the “CBO and JCT estimate that enacting both pieces of legislation—H.R. 3590 and the reconciliation proposal—would produce a net reduction in federal deficits of $143 billion over the 2010–2019 period as result of changes in direct spending and revenues.” [WH.gov]
The central question about the ‘fiscal cliff’ is whether or not it becomes a stairway to heaven for the American middle class. It’s a cliff if the Republican controlled Congress obstructs the negotiation process such that ALL tax breaks enacted during the Bush Administration expire — including those for those earning less than $250,000 annually. It’s a stairway to heaven, if the Congress can agree to allow the tax breaks for millionaires and billionaires to expire, and retain the tax breaks for middle class families.
It’s a cliff if the Congress demands that automatic economic stabilizers like unemployment insurance support, nutrition programs, and other means by which we prevent highly volatile economic swings are cut in order to prevent the upper 1% of American income earners from having to pay any increased taxation. It’s a stairway if the economic stabilizers can be themselves stabilized, perhaps even if in slightly reduced forms.
It’s a cliff if the tax breaks for 97% of American small businesses are lost in the interest of sparing the top 0.01% of American income earners any tax increases. It’s a stairway if tax breaks for 97% of American small business owners are maintained, and the deficit is reduced by encouraging economic growth, and by taxing the top 1% more fairly.
The newly re-elected President had some words about this choice:
“President Obama said he refuses to accept any approach that isn’t balanced. “I’m not going to ask students and seniors and the middle class to pay down the entire deficit,” while higher earners get tax cuts, he said.
The President said he will ask Congress to pass a bill that will continue the tax cuts for the middle class, which he says will eliminate much of the uncertainty in the nation. After that point, he said, he and Congressional leaders can work on a compromise for the remaining tax cuts.” [CSPAN]
The President’s own words, on video (not yet embeddable) from CSPAN.