About the best that can be said of the much-ballyhooed “fiscal cliff” deal is that it could have been worse. The same can also be said of almost anything, including history’s worst calamities, but in this case the deal at least momentarily postpones the greater calamity that still lies ahead.
As a result of the last-minute accord there won’t be an across-the-board reversion to the Clinton-era tax rates, which even the Democrats conceded would have been a very bad idea, and it puts off for two months any “sequestration” budget cuts, which even the Republicans dreaded because they would have come mostly from national defense. This modest achievement was sufficient to fuel a strong rally on the stock markets, although it should be noted that the guys on Wall Street stage a big rally every time the United States or the European Union or any other flat-broke political entity comes up with another scheme to stave off bankruptcy for another few months. Everyone outside of Wall Street will surely find something to hate about the bargain.
The most rock-ribbed conservatives are infuriated that the congressional Republicans surrendered to a tax hike on “the rich,” which in this case turns out to be people making $400,000 or more in a year. Obama had originally insisted on a definition of $250,000 per annum, and given the public’s vengeful attitude toward the affluent the Republicans can claim a small victory, but the tax hike will still be a drag on economic growth and its effect on the deficit will be negligible at best, so the conservatives can be forgiven their grumbling. The agreement also allows a temporary payroll tax cut to expire for about 77 percent of workers, on the other hand, so perhaps one can take solace in the realization that such a large portion of the country can now be considered part of the hated rich.
More appalling yet to a conservative sensibility are the spending increases included in the deal. The wizards at the Congressional Budget Office somehow found a miniscule $15 billion worth of budget cuts in the deal along with its $620 billion of increased taxes, a 41-to-one ratio that the president would call a “balanced” approach to deficit-cutting, but they also concluded that the deal will wind up adding nearly $4 trillion to the national debt over the next ten years. Among the many provisions in the bill is a continuation of benefits to some two million unemployed workers, and one Democratic congressman was frank enough to state that the fiscal cliff bill basically means “an unemployment check is in the mail.”
All that gnashing of conservative teeth allows the president and his cheerleaders in the press to claim a rousing victory, and much of the public will probably agree. Obama resumed his Hawaiian vacation to celebrate, adding another $3 million of government spending in the process, and he seems not to have taking any of the public relations beating that George W. Bush used to take for a summer break in Crawford, Texas. Some incurably optimistic conservatives expect that the public will at long last be aware that the Bush tax cuts extended to the middle class and that soak-the-rich schemes don’t make a dent in the deficit, but the public’s imperviousness to obvious truths should have been made apparent by the last election. A typical Obama fan called into Sean Hannity’s radio program Wednesday to gloat about his guy’s big win the “physical cliff” negotiations, insisting that the president had thwarted a concerted Republican effort to raise taxes on everyone but the opulently wealthy, and he’ll likely persist in such misconceptions for the remainder of his days.
Still, the president’s political victory will prove short-lived, perhaps ending this week when the first paychecks of the year are issued and that 77 percent of workers hit by the restored payroll tax discover they are now the nouveau riche, and the more brazenly realistic liberals are already lamenting that the opportunity for tax hikes on everyone has passed. There’s another potential end-of-the-world imbroglio over the debt ceiling scheduled for another month or so, too, and by then even the press cheerleaders will find it hard to disguise the fact that Obama intends to spend on a level that will require more revenue than even the hated rich can provide. The Republicans won’t necessarily win that round, either, but the president will still lose another stash of political capital.
The president and congress will probably negotiate some sort of scheme to stave off bankruptcy, and the guys on Wall Street will stage another big rally, but ultimately the country will bump its head against a bond market-imposed debt ceiling that even congressional acquiescence cannot raise. The “fiscal cliff” deal does nothing to prevent that fateful day, and only hastens it.
- Bud Norman