Wednesday, January 09, 2013

The Fiscal Cliff

I know I am late to this, but I have a reputation for political ranting to hold up around here, and I can't let that slide;-) And, since Congress didn't really do anything other than push the fight off until March, I am actually kind of early on that front.

To recap, in the summer of 2011, during negotiations over raising the debt ceiling, Congress and the President made a deal that automatic tax increases and spending cuts would be implemented on January 1, 2013, unless they reached a longer-term deficit reduction agreement. Not surprisingly, they reached no such agreement, and the cuts and tax increases...which inexplicably developed the nickname "The Fiscal Cliff" hit on January 1. At the last moment, they made an agreement to avert this...basically doing nothing more than moving the deadline to March where we can have the same fight all over again.

Honestly, my thoughts on this are long and complex, and won't fit in one blog post, so it will likely stretch into several. And you will probably lose interest long before then;-) But as usual, I understand these things pretty well, I am good at asking people who really know to explain them to me, and I can generally translate them from technical speak to real-people speak pretty well, too. So that's what I will try and do here.

First of all, what we should never lose sight of is that the Congress (and the President to a lesser degree) made a very conscious, very deliberate decision to create the fiscal cliff. This wasn't just something that "happened"...18 months ago, they took pro-active actions that were entirely intended to do just what they did: create this kind of panic.

I really can't say that enough...this "crisis" came about because our 435 Congresspeople and 100 Senators, with their 9% approval rating and 85% re-election rate decided that it would be in the best interest of their constituents to create a completely phony deadline with very real consequences.

And to go even further than that, they whole thing is around managing our completely inexcusable deficit spending, which is also the result of very conscious, very deliberate decisions made with very well-understood consequences. And before I blame this entirely on the people in Congress, I'd lack to throw some blame on the people that elect them...because we are in this mess because our elected officials did precisely what we elected them to do, and precisely what they promised. This is our own fault.

Party-wise, they are both wrong. Intensely wrong. Democrats (as articulated by the President) espouse the basic opinion that we can maintain our level of spending and solve our fiscal problems by very slightly raising taxes on only a very small number of people and cutting some defense spending. Whether it's the wealthiest 1%, 2%, 5%, whatever...basically, the message to most voters is "You can get everything you want, and someone else can pay for it." The problem with that is that mathematically, it simply doesn't work. There are not enough rich people that earn enough money to close a trillion dollar (and growing) annual deficit.

Further, their basic premise that entitlement programs are above reproach is absolutely indefensibly stupid. You can't promise a pension and lifetime healthcare to someone from age 62 until death and not recognize that simple demographics make that completely unaffordable in very short order. At least not while you also preserve their right to get as many pills, as many tests and as many procedures as they want while being as fat and unhealthy as they want with no repercussions.

Republicans are no less wrong, and they are probably even more obstinate. They seem to be living by the credo that raising anyone's marginal tax rate by even 1% represents an affront to the sensibilities of Washington and Jefferson. And that only allowing a married couple to pass $2.5 Million to their children at death before anyone pays a nickel of tax on it is basically as unpatriotic as firebombing the White House.

Their magical solution to fixing the budget is to cut out "government waste", although they preface that by noting that there is absolutely no government waste in the $800 billion defense budget. They are a little bit more willing to make changes to entitlements, but that willingness is limited...they want to make sure that those changes don't impact anyone over about age 30 (in other words, people who don't currently vote...)

There is, indisputably, a lot of wasteful spending, and government is terrible at holding itself accountable for the effectiveness of its programs. We have entire Departments (Energy and Education come to mind) that were created with very specific, very identifiable goals...goals towards which they have made zero, or in some cases negative, progress. Yet we throw more and more money at them every year as if that will solve the problem.

But what, really, is the scope of that? If you exclude Social Security, Medicare, Medicaid and Defense, the entire Federal Budget last year was $1.3 Trillion...which means you would need to cut everything in order to balance the budget.

So, to give you some idea of the scope of the problem. For Democrats to reach their goal of closing the budget gap exclusively by cutting defense and raising taxes, they would need to cut Defense in half and then raise everyone's taxes by 40%. Not just the richest 1% or 5%...EVERYONE. Whatever you paid in Federal taxes last year (income tax and other Federal withholding taxes), add 40% to it and ask yourself if you think that is a fair price to pay for the government you get.

For Republicans to reach the goal of balancing the budget without touching current entitlements, without raising taxes and without cutting Defense, they would need to eliminate every other part of the Federal Government. No Veterans Affairs, no justice system, no Treasury Department, no foreign aid, no NASA, no nothing. Oh, and no Congressional salaries, while we are at it;-)

So, in conclusion...Congress manufactured a crisis out of thin air, and then refused to have a discussion to solve their own crisis. Oh, and they gave themselves a raise.


Brian said...

We need to get you on Morning Joe.

Nilsa @ SoMi Speaks said...

I love your posts like this - you're offending everyone and therefore no one (or something like that). =) Question: Was the budget truly balanced when Clinton was in office? And if so, what the hell has happened since then that we've basically screwed ourselves out of ever balancing the budget again?

steffi2282 said...

Ha, thanks for that. With your posts I am always get the infos we (in Europe/ Germany) are not getting trough the media.
I really like your political posts.
And I would be veryinterested in the answer to Nilsa's question.