There is an old joke about a man who falls off the top of the Empire State Building. As he passes the 47th floor, someone shouts out the window, "How are you doing?" The response comes, "So far, so good." The crazy goings on in Washington as the deadline for the fiscal cliff loomed reminded me very much of the outlook of the falling man in the joke. No matter how bad the consequences of the cliff might be, most of the folks seemed more interested in other things.
Well, now there seems to be a deal, at least one that has passed the Senate. We will soon see if the House follows suit and passes the deal. As one who thought that the proper outcome should be to just go over the cliff, I have to say that I am please with the deal. For all the nonsense headlines about the ration of tax increases to spending cuts, this deal is actually pretty good and a major victory for Republicans in principle. Sure, the press will never spin it that way, but consider this:
1) Any resolution of the fiscal cliff was always going to involve increases in taxes. The election results made that clear. The Republicans started the process with an offer for $800 billion in increases. Setting the level of those increases above $450,000 per year will protect most individuals. Small businesses will still get hit with resulting damage to the economy, but that was inevitable given the myopic economic views of the Democrats and Obama.
2) The spending cuts were really not addressed, but they were delayed. In the first two months of 2013, this subject will be revisited over and over. The issue will, however, just be whether or not to cut spending. The tax debate is essentially over. The tax chages for the middle class are now permanent. They will not expire. The GOP can no longer falsely be portrayed as holding the middle class hostage to protect against tax increases for the wealthy. Obama will be forced to realize that the majority of Americans are in favor of spending cuts by the federal government. Pressure will build up to do something, but that pressure will mostly be on the Democrats.
3) The estate tax was restructured in quite a satisfactory way. It remains in place for only the largest estates. It will still accomplish the purpose of preventing the perpetuation of enormous aggregates of wealth. It will not, however, cause the loss of family farms and small family businesses through an overly aggressive taxation system.
4) The extension of unemployment rates, the doc fix and the various tax credits was inevitable. Sadly, this seems to include the alternative energy tax credits. Billions will be wasted on schemes that make sense only as tax shelters. All those rich folks who now must face higher taxes will soon be investing in these shelters. Most will have no positive effect on the economy, but they will serve to prevent the collection of taxes. In other words, the Democrats are taking us back to the tax structures used when Jimmy Carter was president. Investment dollars will be wasted on tax avoidance and the economy will suffer as a result. These items, however, are too sacred in the pantheon of the Democrats for a deal to have been made without them. Oh well, there always is 2017.
Obviously, these are preliminary comments. I have not yet even been able to read the full text of the bill passed by the Senate, so I am relying on the news reports. Those reports are usually sufficiently inaccurate that I may be premature in this comment. Still, I think that Mitch McConnell deserves credit for getting a deal that is about as good as one could expect.
Well, now there seems to be a deal, at least one that has passed the Senate. We will soon see if the House follows suit and passes the deal. As one who thought that the proper outcome should be to just go over the cliff, I have to say that I am please with the deal. For all the nonsense headlines about the ration of tax increases to spending cuts, this deal is actually pretty good and a major victory for Republicans in principle. Sure, the press will never spin it that way, but consider this:
1) Any resolution of the fiscal cliff was always going to involve increases in taxes. The election results made that clear. The Republicans started the process with an offer for $800 billion in increases. Setting the level of those increases above $450,000 per year will protect most individuals. Small businesses will still get hit with resulting damage to the economy, but that was inevitable given the myopic economic views of the Democrats and Obama.
2) The spending cuts were really not addressed, but they were delayed. In the first two months of 2013, this subject will be revisited over and over. The issue will, however, just be whether or not to cut spending. The tax debate is essentially over. The tax chages for the middle class are now permanent. They will not expire. The GOP can no longer falsely be portrayed as holding the middle class hostage to protect against tax increases for the wealthy. Obama will be forced to realize that the majority of Americans are in favor of spending cuts by the federal government. Pressure will build up to do something, but that pressure will mostly be on the Democrats.
3) The estate tax was restructured in quite a satisfactory way. It remains in place for only the largest estates. It will still accomplish the purpose of preventing the perpetuation of enormous aggregates of wealth. It will not, however, cause the loss of family farms and small family businesses through an overly aggressive taxation system.
4) The extension of unemployment rates, the doc fix and the various tax credits was inevitable. Sadly, this seems to include the alternative energy tax credits. Billions will be wasted on schemes that make sense only as tax shelters. All those rich folks who now must face higher taxes will soon be investing in these shelters. Most will have no positive effect on the economy, but they will serve to prevent the collection of taxes. In other words, the Democrats are taking us back to the tax structures used when Jimmy Carter was president. Investment dollars will be wasted on tax avoidance and the economy will suffer as a result. These items, however, are too sacred in the pantheon of the Democrats for a deal to have been made without them. Oh well, there always is 2017.
Obviously, these are preliminary comments. I have not yet even been able to read the full text of the bill passed by the Senate, so I am relying on the news reports. Those reports are usually sufficiently inaccurate that I may be premature in this comment. Still, I think that Mitch McConnell deserves credit for getting a deal that is about as good as one could expect.
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