WASHINGTON - Let's be clear what the "fiscal cliff" deal does and doesn't do. It permanently preserves the bulk of George W. Bush's tax cuts for most Americans, but it does not offer desperately needed new incentives to revive a weak economy and jobless labor market.
On the contrary, the 11th hour compromise is marred by higher taxes that will hinder further growth, cost hundreds of thousands of jobs, and make life even tougher for many Americans barely surviving paycheck to paycheck.
This deal, which elicited effusive praise from Obama in the wee hours of New Year's Day, would increase the top income rate tax from 35 percent to nearly 40 percent on individuals and small businesses earning over $400,000 and couples making more than $450,000. Tax credits will begin phasing out on lesser incomes, too, for individuals and small businesses earning over $250,000, thus raising their taxes as well.
It also will hit investors, the people whose money helps build businesses and create jobs. Investment tax rates will rise from 15 percent to 20 percent on stock dividends and capital gains.
At a time when venture capital -- the mother's milk of a prosperous, job-creating economy -- remains in short-supply, this is no time to be raising taxes on it. If anything, we should be cutting the capital gains tax rate to unlock capital that has been sitting on the sidelines in order to spur stronger growth and jobs.
Throw in the temporary expiration of the 2 percent Social Security payroll tax cut for every worker (raising it to 6.2 percent), and the "result of the deal, would make for the largest increase in taxes in about half a century," The Washington Post said Tuesday.
Yet there was Barack Obama, just after the Senate vote of approval, saying that raising tax on investors, business, and every American worker "is the right thing to do for our country..."
But this isn't good for either our country or our economy. These are among the worst things we could do at a time when the economy is barely growing at 2 percent and so many workers are struggling to find full-time employment.
Obama said this would help cut the budget deficit which is on track for yet another $1 trillion-plus deficit for the fifth consecutive year. But nothing could be further from the truth.
Spending reductions were put off until early March by the agreement, but don't hold your breath.
Obama's new taxes will not produce the added revenue he expects, either. Instead, higher rates will weaken the economy to the point where tax revenue will fall further or at best remain flat, insuring a line of record deficits as far as the eye can see.
Throughout the battle over the "fiscal cliff," Obama has rarely talked about economic growth or dealt with it in any substantive or effective way in his policies over the past four years.
For him, this is all about raising taxes on the wealthy, his obsessive, all-purpose cure for what ails us. The budget deficit?
Raise taxes on the rich. The national debt? Raise taxes on the rich. A weak economy? Raise taxes on the rich. Unemployment? Raise taxes on the rich.
But the economic evidence is clear that his politically-driven class warfare, and big spending, soak the rich fiscal policies have failed on every count.
Consumer confidence has dropped sharply. Retail sales were weak in November and disappointing last month as well. Unemployment is still skirting 8 percent in the fifth year of Obama's presidency with little relief in sight.
"Forecasters expect [Friday's] Labor Department to report the economy added 155,000 in December -- substantially less than is needed to pull employment down to acceptable levels," says economist Peter Morici.
There's been a precipitous and dangerous decline in the U.S. labor force throughout Obama's presidency, the chief reason why the jobless rate has fallen. Heidi Shierholz, an economist with the Economic Policy Institute, finds that job creation is so weak that workers are not being "drawn back into" the market.
If all of these discouraged (and uncounted) workers who have dropped out of the labor force were added to existing job seekers, unemployment would be nearly 10 percent. Throw in 8 million part time workers who can't find full time work, and the jobless rate climbs to
This week's 2 percent jump in the worker payroll tax will only exacerbate the emerging crisis in the labor market.
"Many more households are living paycheck to paycheck than just a few years ago given the very tough economy and the decline in real incomes. This amplifies the negative fallout from the expiration of the payroll tax holiday," says Mark Zandi, an economist with Moody's Analytics.
"The still very weak consumer confidence, due in part to lower incomes, also reinforces the negative impact" of the payroll tax hike that will begin hitting workers in their next paycheck, he said.
That, in and of itself, will create a major undertow in the economy from here on out. Economists say it could result in the loss of 500,000 to a million jobs this year, pushing the jobless rate up by at least 0.4 percentage points, if not more.
Each month, the nightly network news media puts on a "things are getting better" pep rally when the monthly jobs report comes out. But here's what they don't report:
"More than half the jobs created last month (November) were in lower-wage industries [in] retail and hospitality" services, writes Chris Kirkham of the Huffington Post.
"[E]veryone wants to make something of them, but the jobs that are being created just aren't great jobs," says business economist Kent Smetters at the University of Pennsylvania's Wharton School.
This is the harsh, human reality the White House and Obama refuse to acknowledge, and that the nightly news largely ignored throughout the 2012 presidential election.
Tax the rich, "this is the right thing to do," the president told Congress on New Year's Day. Not a word was uttered about raising taxes on everyone's paycheck.
This is the surreal reality operating within Obama's mind where he really believes "the private sector is doing fine." Remember that one?
Now, his second term mantra in behalf of raising taxes on a limping, job-challenged economy is "it's the right thing to do" -- even when more than half the jobs being created in his economy are low- paying ones that won't feed a family or pay a mortgage.
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