That clanking sound you hear is that of the proverbial can getting kicked down the road. That can is the much-needed solution to the federal debt. This week’s “solution” was not a solution at all.
At least initially, the financial markets responded with enthusiasm to the idea that Bush era tax rates would become permanent for 98 percent of Americans. But President Obama, while scoring a post-election public relations victory with passage of a deal, caved to the Republicans by increasing the threshold for higher taxes from $250,000 (a line he vowed he’d never cross) to $400,000 for an individual and $450,000 for a couple. And as soon as people get their first pay checks reflecting a two percent payroll tax increase, the public relations glow will soon diminish. Scheduled sequestration cuts could still kick in in another two months, and debt ceiling fights will quickly escalate.
Sadly, this was Obama’s time of maximum leverage over the Republicans to raise more tax revenue and free us from yet another debt ceiling battle in exchange for comprehensive tax reform and spending cuts. He got neither. In fact, the package approved would actually increase the deficit by some $4 trillion over the next decade. Especially disturbing was the inclusion of special interest pork even in this crisis deal. Partisans will be back to the ramparts in a matater of weeks with the possible reenactment of the debt ceiling war. President Obama says he won’t get drawn into a replay, but does anyone, looking at how he got rolled this time, have confidence in his assertion?
Don’t get me wrong. The country needed to see that Congress could negotiate a deal. I wasn’t one who thought we should just go over the fiscal cliff. But this “step forward” was miniscule at best. We’re not out of the woods by a long shot, and the credit-rating institutions need much proof that this nation can reduce its debt, address our entitlement shortfall, and govern for the greater good.
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