Congressional Republicans caved in to the Democrats this week, surrendering their principles in order to pass a bill that merely delays the looming fiscal cliff by two months. This is the first time Republicans have voted for a tax increase in 20 years. House Speaker John Boehner (R-OH) strong-armed Republican members of the House into supporting it, no doubt by threatening them with loss of their committee positions should they dare to oppose it. The Wall Street Journal described the massive sellout in an editorial, “The Senate-White House compromise grudgingly passed by the House is a Beltway classic: the biggest tax increase in 20 years in return for spending increases, and all spun for political purposes as a ‘tax cut for the middle class.’"
Members of the Senate received the 154-page bill only three minutes before voting on it, not enough time to actually read it. The bill is full of pork unrelated to fixing the fiscal cliff. It contains $59 million for algae growers, in order to encourage the production of environmentally correct biofuel. Electric motorcycle manufacturers are given a $4 million green energy tax credit, and there is a wind tax credit for $12.1 billion. $430 million is awarded to Hollywood producers to expense up to $15 million of their project costs. Another $70 million in pork is designated for NASCAR, and a rum tax subsidy for Puerto Rican rum makers.
Only eight Senators voted no on the Senate's fiscal cliff plan. The five principled Republicans who stood up to the Democrats were Marco Rubio (R-FL), Rand Paul (R-KY), Chuck Grassley (R-IA), Mike Lee (R-UT), and Richard Shelby (R-AL). The House voted to pass it by 257-167. Some of the House Republicans deceitfully only voted against the bill when they knew it would safely pass without their yes votes, including Majority leader Eric Cantor and Whip Kevin McCarthy.
All working Americans, not just “the wealthy,” will see their income decrease due to $600 billion in tax increases inside the bill. Americans making less than $10,000/yr will see a 1.3% decrease in income, and those making $10,000-$20,000/yr will see a 1% decrease. The payroll tax cuts are ending, which means a typical family making $50,000/yr will have $1,000 less annually. Those making more than $400,000/yr or $450,000/yr per couple will see steep tax increases. This will drastically affect small business owners, who provide most of American jobs. Small businesses will end up with a whopping 55% marginal tax rate when taxes such as state taxes are included. The top capital gains and dividends rates are increased to 20 percent, which will cripple investment. The Democrats know that raising taxes on the rich will only bring in enough money to fund the federal government for eight days, but insist on hiking their tax rates to Clinton-era levels in order to stir up class envy - red meat for their base.
There’s only $1 in spending cuts for every $41 in tax increases. This is a far cry from Boehner's fake principled stand in 2011 when he said it was non-negotiable that every dollar increase in spending be accompanied by a dollar of spending cuts. Apparently when Boehner isn't crying, he fakes talking tough. During the negotiations, he told Senate Majority leader Harry Reid (D-NV) to “Go f*** yourself,” then turned around and caved on almost everything.
Last August, Republicans agreed to increase the debt ceiling limit up to $16.4 trillion in exchange for spending cuts this month. Republicans backed down on that, too, irresponsibly postponing those cuts for at least another two months as part of the bill. At the same time, according to the non-partisan Congressional Budget Office and the Joint Committee on Taxation, the bill increases spending by $330 billion. The new tax rates are permanent and don't expire, which means it will be much more difficult in the future to change them.
Sadly, members of Congress usually known for their fiscal responsibility like Pat Toomey (R-PA) have bought into the compromise. Toomey defended the legislation, saying, "This legislation is the best we could do for taxpayers and job seekers."
Boehner has been such a failure as Speaker of the House that Washington Post columnist Charles Krauthammer is speculating that House Majority leader Eric Cantor might replace him. Boehner is up for re-election as Speaker on January 3, 2012, and just 20 votes are needed to oust him. Of course, there may not be enough House Republicans who dare to vote against him, because he's bought them off by threatening to remove them from committee positions.
Boehner's defense is that the Bush tax cuts would have expired if Republicans hadn't agreed to a compromise with the Democrats; doing nothing would have automatically increased tax rates. But perhaps that would have been a good thing – force the Democrats' hand so they get blamed for increasing taxes.
This fix only staves off the fiscal cliff crisis for two months, until the government runs out of money again. There are three more fiscal cliffs coming up this year; raising the debt ceiling again and implementing the deep spending cuts, known as the “sequester,” will both come up again in two months. On March 27, the short-term continuing budget resolution expires and new action will need to be taken to continue authorization of federal government spending.
This bill is more of the same redistributionist schemes from the Obama administration, directing income to certain favored groups of people over others. The bill does nothing to solve the $48 trillion fiscal crisis of funding Social Security and Medicare. The government spends almost $30,000 annually on each American household, and over 40% of Americans are on some type of government program. It is an unsustainable path, sending the country even faster down the road to ruin. Fortunately for Obama and the Democrats, since Republicans caved and supported the fiscal death wish, Democrats will escape sole responsibility down the road, enabling them to repeat it all over again.
Inevitably, the government will be forced to take the austerity measures countries like Greece are now taking. In Greece, public sector employees have lost up to one-third of their salaries, and many judges are taking a 30% pay cut. Getting a doctor's appointment takes months.
The ruse of fixing a “dire fiscal cliff” will be used by Democrats over and over again in the future to get Republicans to give them what they want; taxes and spending increases. Yet the actual fiscal cliff is never fixed, it is only band-aided for a short period of time – then there can be another “dire fiscal cliff.” The way Congressional legislation works is too difficult for the average American to understand. The Democrats get away with saying they are only raising taxes on the wealthy because the average American does not understand the gimmicks they use, such as not calling a tax cut extension a tax increase. Until capitulators like Boehner are removed and replaced with principled conservatives who know how to explain the smoke and mirrors to the American people, the country will continue to go off the fiscal cliff.