Fiscal Cliff Showdown Postponed to March

From the Jan. 2, 2013 issue of FrontPage Magazine:

Fiscal Cliff Showdown Postponed to March

By Matthew Vadum

With a cocky President Obama no doubt grinning from ear-to-ear, federal lawmakers yesterday gave their blessing to legislation that boosts income tax rates and government spending while kicking many of the “fiscal cliff” issues down the road for several weeks.

The $1.2 trillion in scheduled spending cuts –falling largely on the Pentagon– have now been officially postponed for two months. The next manufactured crisis comes March 1, the day the cuts will take effect unless Congress intervenes again to stop them.

Putting off dire problems for another day is now becoming routine in Washington, D.C., commentator Jim Antle opined on Twitter. “We have reached the point where temporarily averting self-inflicted disasters at the last second is a political success.”

The Obama-approved fiscal-disaster procrastination bill received final congressional approval in the House last night with relatively little Republican support after a prolonged fight during a long lame duck session of the outgoing Congress. Obama and Democrats got almost everything they wanted, as many Republicans dropped their long-standing opposition to income tax rate increases. Now Obama comes across to many low-information voters as a kind of champion of the middle class, and Republicans, whom the media would have painted as villains no matter what the fiscal cliff outcome, look like stubborn obstructionists who had to be forced to do the supposedly right thing.

By insisting on tax hikes only for the wealthy, President Obama skillfully played Republicans off against each other, launching what some are now calling a civil war within the Grand Old Party. Republicans were afraid of being blamed by the public for allowing taxes to rise if Bush-era tax rates, which expired Dec. 31, were not extended, so they held their noses and gave Obama largely what he wanted.

Charles Krauthammer called the measure a “complete rout for Democrats.” Many House conservatives “hate the bill for good reason … This is a complete surrender on everything.”

Bill Kristol called the bill a mess that was “ridiculous in too many ways to count” but urged House Republicans to vote for it anyway to get the issue behind them. “The two month delay of the sequester [i.e. spending cuts] will make actual governance even more difficult (how is the Pentagon supposed to plan for the rest of the year?) … And we will face another cliff when we hit the debt ceiling and the sequester again in two months.”

The stage is now set for the approaching battle over out-of-control federal spending. The bill passed Congress hours after the U.S. government bumped up against the limit on federal borrowing. In theory the government could default on its debts two months from now if the debt ceiling is not raised further.

The national debt is now about $16.4 trillion, up from $10.6 trillion on Inauguration Day 2009. But that $16.4 trillion figure is misleading. Government accounting tricks keep another $86.8 trillion in unfunded liabilities related to Medicare, Social Security, and federal employees’ future retirement benefits off the books and out of the public eye. The two figures added together produce the unimaginably large sum of $103 trillion. The U.S. government’s bond rating has been downgraded already and many more downgrades are on the horizon.

It is worth noting that the bill passed last night only because House Democrats supported it.

The measure was approved in a House vote of 257 to 167 after GOP leaders decided not to insist on government spending cuts. Speaker John Boehner (R-Ohio) and Budget Committee chairman Paul Ryan (R-Wisc.) voted for the package, breaking with House Majority Leader Eric Cantor (R-Va.) and Majority Whip Kevin McCarthy (R-Calif.) who voted against it.

In total 85 Republicans voted for the bill and 151 voted no. On the Democratic side there were 172 votes in favor and 16 against.

After going against most of the House Republican conference on such a critical matter, Boehner’s speakership may be in jeopardy. Some conservatives are pressing GOP lawmakers not to reelect Boehner as Speaker when the new 113th Congress convenes on January 3.

American Majority Action spokesman Ron Meyer told Breitbart News late yesterday that enough House Republicans have come together together in an effort to take Boehner’s gavel away. To be considered elected, a candidate for Speaker must receive a majority of the votes.

“At least 20 House Republican members have gotten together, discussed this and want to unseat Speaker Boehner–and are willing to do what it takes to do it,” Meyer said. “That’s more than enough to get the job done, but the one problem these guys face is they need a leader to coalesce behind.” Early discussion on a possible Boehner challenger has centered on House Majority Leader Cantor.

Before the House took action late yesterday, at 1:39 a.m. the Senate approved the bill by a vote of 89 to 8. The only Republicans to vote against the measure were Charles Grassley (Iowa), Mike Lee (Utah), Rand Paul (Kentucky), Marco Rubio (Florida), and Richard Shelby (Alabama). (Jim DeMint of South Carolina and Mark Kirk of Illinois didn’t vote.)

Rubio said he couldn’t vote for the bill because he “wanted to be part of solving the long-term problems this country faces. Time and again, we’re given choices here that don’t involve that.”

“The real fiscal cliff is still there,” he said. “We’ll be back here again. In March, we’ll have a showdown like this all over again.”

Many Tea Party-backed Republicans opposed the legislation because it raises taxes without reducing government spending. According to an analysis by Joseph Henchman of the Tax Foundation, the bill raises taxes by $620 billion tax increase while cutting expenditures by a paltry $15 billion. That’s a ratio of $41 in tax increases for every $1 in savings.

While the legislation preserves the lower-income tax brackets from the Bush era permanently, it raises tax rates for joint filers earning $450,000 or more, phases out exemptions for high earners and limits the personal exemptions and itemized deductions they can claim. It also raises payroll taxes for all and discourages investment by raising the capital gains tax and dividends tax for high earners.

On the positive side, the legislation approved by Congress repeals the CLASS Act, a huge unfunded mandate promoted by the late Sen. Ted Kennedy (D-Mass.) that was part of Obamacare. The Community Living Assistance Services and Supports Act would have created a new national long-term care insurance system.

Quite apart from the fiscal cliff, yesterday Americans were hit with $1 trillion in new taxes to be fully phased in through 2022 to support the president’s unpopular health care reforms.

Among the new job-killing Obamacare-related levies effective January 1 were: an excise tax on gross sales by medical device makers; a  surtax on investment income for households earning at least $250,000; and an increase in the Medicare payroll tax for married couples earning more than $250,000.

Many more tax increases are likely headed our way in President Obama’s second term in office.