Passing modest tax increase was the "easy" part

Now that we have had time to “digest” the course of events, what exactly transpired in the nation’s capital over the holidays? I had little success in trying to reassure the older woman making $9-an-hour at a convenience store that there wouldn’t be any noticeable change in her own paycheck, but such fears are to be expected given the paranoia-mongering of the right. According to the extremists from the Dark Side, something quite distasteful occurred: Tax “increases” for a tiny percentage of Americans, and the massive social program cuts they desired to be determined later. For liberals, there are complaints that Barack Obama “caved-in” to Republicans, backing away from his campaign pledge to stand firm on taxes for those making $250,000 or more. 

But unlike in California, there was no voter-approved referendum on the issue that lawmakers were forced to abide by, and given the cement that occupied the craniums of Republicans of the Tea Party ilk, Obama knew that the $250,000 threshold was the low sum in a better’s bid. Trying to find out what would happen if there was no deal was too great an unknown to risk. Obama played his cards right by at least giving the appearance of compromise, putting Republicans in a position they could not justify. In order to judge Obama more fully, we need to see how the even tougher problem of budget cuts plays out.

That may be tougher than one thinks. The Bush tax rollback bill that was voted on is a dense, puzzling document full of repetitive phrasing—and what was gained seems almost not worth the effort. Insofar as taxes go, all it does is “amend” the so-called “The Economic Growth and Tax Relief Reconciliation Act of 2001”—which during the Bush administration produced 1/10^th the jobs netted during the Bill Clinton administration—for individuals with incomes of $400,000 or more, and couples with combined incomes of at least $450,000. Those who fall in the 25 percent and over in tax liability category will see a three percent increase in taxes, and the top marginal rate will return to 39.6 percent. Although those making $250,000 did not see their tax rate rise, they will likely see a slight rise in taxes due to the lapsing of certain itemized deductions and exemptions. However, the estate tax will remain applicable only at the much higher dollar amount than pre-Bush levels, and the top rate will rise to 40 percent rather than the pre-Bush 55 percent. Some business tax breaks will also remain in place.

How much additional revenue will this plan generate? Analysts say $60 billion a year—which sounds a lot more fact-of-the-matter than saying $600 billion over ten years. Do you know how much that is? That is $200 a year for every man, woman and child in this country. That gives you an idea on how few people are actually affected by the tax increase, and the relatively modest additional tax they will pay. I suppose that putting “billion” behind the sum sounds like a lot, but in fact it amounts to barely a drop in the bucket. In order to make any real dent in federal budget deficits, program cuts will thus have to take the lion’s share of the abuse. At the moment with just the revenue portion “decided”—or not, since House Republicans say it is only “temporary” until they trot-out their likely DOA “tax reform” proposal—the Congressional Budget Office claims that deficits will still rise $4 trillion over the next ten years.

Obviously there is a bit of a problem here. $4 trillion dollars over 10 years is $400 billion, which sounds a bit more “manageable,” but still is a massive chunk of the current federal budget. A few dollars will be saved once the country stops wasting billions in Afghanistan, but again that is relative. Naturally, the right will target the poor, unemployed and infirm, but that is still small change. Medicare will be a target, but cancelling that program without a viable alternative is foolhardy. The most massive of the so-called “entitlement” programs are government pensions and health benefits, the most generous of which go to former lawmakers. In the Republican world, that is in the “we have ours, screw you” category.

Thus when the next three delayed “cliffs” are approached over the next three months, we will have to tolerate the who-will-blink-first charade once again. Perhaps the job is too big for many of our lawmakers—particularly those who want to take the “easy” way out and cut everything in sight without acknowledging the consequences.