Welcome to ‘the year of living dangerously’ – the 2013 austerity crisis

Posted by AzBlueMeanie:

"Half a loaf is better than none" – idiom

President Obama has consistently said that he wanted a "big deal" or "grand bargain," if you will, on tax and spending issues.

Instead, small politicians negotiated a small deal under an artificial deadline to avoid the so-called "fiscal cliff" on taxes and kicked the austerity crisis down the road a couple of months into February, when the Tea-Publican economic terrorists will take this country hostage again over the federal debt ceiling, promising to destroy the economy and America's solvency if America does not acceed to their extortionary terrorist demands. John McCain: GOP Will Destroy America’s Solvency Unless Entitlements Are Cut Drastically, and John McCain's puppet boy, Little Lindsay Graham: I Will Destroy America's Solvency Unless The Social Security Retirement Age Is Raised.

So what did President Obama get in exchange for this GOP promise of "the year of living dangerously" from one manufactured fiscal crisis to the next in a series of economic terrorist acts (as outlined by the Tax Fairy, Grover Norquist proposes raising the debt ceiling ‘monthly if the President is good and weekly if he’s not’) to extort the American people out of their social security and Medicare benefits? Did President Obama get the proverbial "half a loaf" in this deal?

Sadly, the answer is "no." President Obama started out with the objective of $1.6 trillion in new revenue. Instead, he settled for a tax increase on only about the top 1% of income earners which will produce only $600 billion, possibly $800 billion after the CBO scores the expiration of tax credits on those with incomes over $250,000, over time. (The deal leaves tax revenue about $3.7 trillion lower than if the rates had reset to Clinton era levels).

Worse, Tea-Publicans and the Tax Fairy realized their fondest dream: Democrats have now endorsed making the Bush tax cuts "permanent" (no automatic expiration date) for some 99% of taxpayers.

Here are the details (compiled from several sources, h/t Suzy Khimm’s summary of the fiscal cliff deal):

— The 2% payroll "tax holiday" will be allowed to expire on January 1, 2013. Just so we're clear: Tea-Publicans are voting to raise taxes on working Americans.

— Tax rates will permanently rise to Clinton-era levels for families with income above $450,000 and individuals above $400,000. All income below the threshold will permanently be taxed at Bush-era rates. (As Sen. Tom Harkin (D-Iowa) cautioned, Democrats have now redefined "middle-class" as those earning up to $400,000 per year — “If you make $250,000 a year, you’re not middle class. You’re in the top 2 percent of income earners in America…")

— The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.)

— Combined with a 3.8 percent surcharge on investment income adopted as part of Obama’s health-care initiative — a tax that takes effect in January — the top rate on investment income would rise to 23.8 percent for high-income households.

— The estate tax will be set at 40 percent for those at the $450,000/$400,000 threshold, with a $5 million exemption. That threshold will be indexed to inflation, as a concession to Republicans and some Democrats in rural areas like Sen. Max Baucus (D-Mt.). (Rep. Chris Van Hollen (Md.), the ranking Democrat on the House Budget Committee, called the final agreement a “sweetheart giveaway to the wealthiest 7,200 estates in the country.”)

— The 2009 expansion of tax breaks for low-income Americans: the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit will be extended for five years. 

— Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000. 

—The full package of temporary business tax breaks — benefiting everything from R&D and wind energy to race-car track owners — will be extended for one year. 

— The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class. (This is the best feature of the deal, and a major accomplishment.)

— Scheduled cuts to doctors (27%) under Medicare would be avoided for a year through spending cuts that haven’t been specified (the "doc fix").

— Federal unemployment insurance will be extended for one year, benefiting those unemployed for longer than 26 weeks. This $30 billion provision won’t be offset by spending cuts elsewhere. 

— A nine-month farm bill fix will be attached to the deal, Sen. Debbie Stabenow told reporters, averting the newly dubbed milk cliff. (Son of "Milk Cliff" returns in nine months.)

The pay freeze on members of Congress and all other federal civilian employees, which Obama had lifted this week, will be re-imposed. (I fully appreciate denying members of this "less-than-do-nothing" Tea-Publican Congress, the "Worst. Congress. Ever." any pay raise, but what did federal civilian employees do to be punished for the abject failures of this Congress?)

What this deal does NOT do:

The deal will not address the federal debt-ceiling (something President Obama wanted, and says he will not negotiate — yeah, right.)

The sequester will be delayed for two months. (The White House wanted two years.) Half of the delay will be offset by discretionary cuts, split between defense and non-defense. The other half will be offset by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when they’re moved over. (So now the Tea-Publican economic terrorists have a second hostage in addition to the federal debt ceiling).

At least one positive thing can be said: no giveaways on Social Security, Medicare, or Medicaid.

President Obama hopes to gain additional tax revenue by seeking to limit tax breaks when the battle moves to the federal debt ceiling in the new year. On Monday, he insisted on a one-to-one "balance" of new revenue and spending cuts, which caused Tea-Publicans to howl that he had "moved the goal posts."

The "Millionaire Boys & Girls Club," aka the U.S. Senate, approved this so-called "fiscal cliff" deal in a vote in the wee hours of New Year's Day by a vote of 89 to 8. What is missing from most reporting is the timing of the vote. Tea-Publicans had to wait for the Bush tax cuts to automatically expire at midnight so they could claim that their vote early this morning was for "a tax cut for 99% of Americans" (ignoring the 2% payroll "tax holiday" expiration which is a tax increase for most Americans). They are still beholden to the Tax Fairy, Grover Norquist and his talking points.

The so-called "fiscal cliff" deal now moves to the House where the Weeper of the House, John Boehner, said the House would “honor its commitment to consider the Senate agreement.” In other words, he cannot guarantee passage or amendments that would require a conference committee and another Senate vote. We will see later today.

Democrats openly worried that if Mr. Obama could not drive a harder bargain when he holds most of the cards, he will give up still more Democratic priorities in the coming weeks, when hard deadlines will raise the prospects of a government default first, then a government shutdown. Senate Passes Tax Increases on Wealthy Americans – NYTimes.com. As Paul Krugman noted today, "Republicans will go right from this negotiation into the debt ceiling in the firm belief that Obama can be rolled." Conceder In Chief?

UPDATE: John Boehner's lieutenants in the House, Eric Cantor and Kevin McCarthy, briefly opposed the Weeper of the House leading a revolt over the Senate bill that fizzled after they failed to attract enough support for an amended bill. A straight up or down vote went to the House and passed 257 to 167 to send the measure to Obama for his signature. House Republicans reverse course on amending bipartisan Senate deal:

With 151 Republicans voting “no,” the GOP tally fell far short of a
majority of the GOP caucus. That broke a long-standing preference by
Boehner to advance only bills that could draw the support of a majority
of his Republican members. [The "Hastert Rule."]

* * *

Boehner himself cast a rare vote: He supported the bill. So did Rep.
Paul Ryan (Wis.), the GOP’s vice-presidential candidate last year, who
parted ways from Sen. Marco Rubio (R-Fla.), a potential 2016
presidential contender, who voted against the measure.

But other top GOP leaders voted no, including Majority Leader Eric Cantor (Va.) and Majority Whip Kevin McCarthy (Calif.).

The TanMan, is a "leader" whom no one is following. Will someone step up to challenge him this week for Speaker of the House?

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