Depending who you talk to, the fiscal cliff deal reached between President Obama is either a wise deal by the Dems, or a sell-out. I’m still digesting it, but am happy to share a diversity of views.
The Gist of the Fiscal Cliff Deal
First the deal. Jennifer Bendery at the Huffington Post has a good summary, that matches what I’ve been told privately:
Under the deal brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-Ky.), Congress would extend the Bush income tax cuts below the $450,000 threshold, keep the estate tax threshold at $5 million and extend unemployment benefits. It would also temporarily delay the sequester — i.e., billions of dollars in across-the-board spending cuts — for another two months.
The deal still requires buy-in from members of both parties, and Biden was set to meet with Senate Democrats Monday night to try to sell them on the package. That could prove challenging given that key progressive groups, including the AFL-CIO, made it clear earlier Monday that they would oppose any deal that raised the income limit for extending the Bush tax cuts above $250,000.
Defense Cuts, Baby
It’s also being reported that delaying the sequester another two months will be paid for by 50% spending cuts, and 50% revenue. The spending cuts will be 50% defense, 50% non-defense. That means 50% of the sequester savings are coming from tax increases, which would seem to be a pretty big concession by the Republicans, and a pretty big precedent for the future. Also a pretty big concession by the GOP, that spending cuts have to come half from defense. Regardless of the merits of the rest of the deal, those two – getting Republicans to give up their decades-long pledge not to raise taxes and not to cut defense, seems like a big deal.
I’m going to be expanding on this post momentarily, but wanted to get this up asap.
$600bn in New Revenue from Phasing Out Bush Tax Cuts for Wealthy
The Washington Post has a great summary, but the article isn’t time-stamped so it’s not clear how fresh their information is – though there is a reference to 9pm Eastern already having happened, so the article is from the last 90 minutes. One key point:
All told, the proposal would raise roughly $600 billion in new revenue over the next decade from the wealthiest 2 percent of households — less than Obama had been seeking, and less than House Speaker John A. Boehner (R-Ohio) had offered in negotiations earlier this month. But the new tax revenue was a first step, Democrats said, toward asking the wealthy to do their part in reducing record budget deficits.
Payroll Tax Cut NOT Extended – Everyone’s Taxes to go Up
What the deal did NOT do is extend the payroll tax cut – basically the money we pay into Social Security via our paychecks. That bill is back, and it will cost taxpayers (then again, how else are we supposed to fund Social Security?). From Buzzfeed’s Zeke Miller via Twitter:
Even with the fiscal cliff deal, Americans earning $50k/yr will pay $1,000 more in taxes in 2013 b/c of expiration of payroll tax cut.
Greg Sargent is arguing that there’s an argument to be made that the deal is looking pretty good.
Personally, I’m not very phased by the difference between $250,000 a year and $400,000 a year – that’s still far below what the filthy rich folks who drive us crazy make. And in any case, we got the Republicans to agree to raise taxes – that’s appears huge.
And I’ve personally never understood the estate tax. I don’t care how rich you are, it rubs me the wrong way that in this country parents should be taxed on the family money they pass down to their children. But I’m open to hearing a good argument in favor of it.
Did This Just Short-Circuit GOP’s Ongoing Hostage Strategy?
One thing that’s interesting, and I think it’s a point that Zeke Miller was trying to make to me on Twitter, is that while, sure, we have to revisit all of this in two months at the next fiscal cliff – and at that time we’ll also be dealing with the debt ceiling, we’ve already established the precedent that any domestic spending cuts are going to be met with equal defense cuts, and with twice are large of tax increases. I’m surprised the Republicans are slowing such a deal now, but they would appear suicidal to wish to revisit all of this again in two month – do the Republicans really want to vote multiple times on raising taxes and cutting the defense budget? Doubtful.
So, it’s possible that this deal just short-circuited the entire GOP strategy for constantly holding the entire country hostage for endless tax cuts and spending cuts.