The thing to realize about the American psyche, as we begin 2013, is that once a benefit has been delivered to the populace, it’s extremely difficult to retract that benefit. Perhaps this is true for all the world’s populations, but it seems especially true in the U.S. And the fear of losing that delivered benefit, will cause the masses to react in great anger and frustration, which then will result in highly dysfunctional and injurious behavior. It’s a provable fact that actions taken out of fear, anger, or paranoia will inevitably result in some very bad decisions. And so it is with the never ending, and forever ongoing charade known as the fiscal cliff. As it stands at the time I’m writing this piece, the Senate has passed the legislation to get us off the fiscal cliff; but now the House is posturing about how bad a deal it is, and many members have threatened to vote no on the Senate bill, which means we will go over the cliff. My guess is that the House will screw around with this today and tomorrow, and then, protesting the entire time, will wind up passing the Senate bill just as the clock is running out.
The main feature of the fiscal cliff that has so many people anxious, is the expiration of the Bush tax cuts, which will cause all tax payers to fork over more of their income to the government. This is the part now, where taking away a benefit, once delivered, becomes nearly impossible. If the Bush tax cuts are allowed to expire, tax rates would revert back to where during the 8 Clinton years in the 1990s. At that point in time, tax rates had been significantly reduced during the Reagan years in the 1980s. It’s true that after Bill Clinton became President in 1993, he did managed to squeeze through a small increase in the rates Ronald Reagan managed to get Congress to lower. But even with that increase, tax rates were considerably lower than they had been in all the time since World War II. At one point during and after the war, the top marginal tax rate was 91%, versus the 35% that exists today. Also, if Al Gore had been allowed to take the Presidency that he won in 2000 (don’t get me started on that one), there never would have been the Bush tax cuts, and all of us would still be paying the same amount of taxes that were in force since early in Bill Clinton’s presidency. Rates that everybody became used to, and were generally not a big deal. But people did get the benefit for about the last 10 years of keeping more of their income; and I’ve said, a benefit once given, is nearly impossible to retract.
Now here’s where the fun part, i.e., delusion and dysfunction kicks in. Everyone knows that we, as a country, are producing mind-boggling budget deficits every year, well north of a trillion dollars annually. Nearly everyone agrees that those deficits are unsustainable, and they need to significantly shrink. The common sense approach toward reducing deficits would seem to be in cutting spending and increasing revenue. On increasing the revenue side, Obama and the Democrats have a modest proposal to increase the marginal tax rate by 4.6% on couples earning more than $250,000 a year, which constitute about 2% of the richest people out of our 310 million population. (You can do the math as to how many people would be affected.) However, tea party Republicans acted as if they were stricken with rabies, by frothing at the mouth at the thought of raising anybody’s taxes, including the rich and super-rich. The bill just passed by the Senate supposedly represents a compromise whereby the 4.6% marginal increase would apply to couples making $450,000 annually, maybe 1-1.5% of the super fortunate among us. House Republicans, in full delusional mode, are saying even that’s too much and are threatening to scuttle the whole deal.
On the expenditure side, it’s the Congressional Democrats that have hijacked the cloak of delusion from Republicans, by pretending that fixes aren’t needed to reign in Social Security and Medicare costs. Those 2 benefits for seniors are literally bankrupting the country, and pretending that nothing should be done to reform those programs reaches new heights in the arena of delusion. Especially since the fixes needed are relatively simple. All it takes is increasing the eligibility age of those programs from 65 to 67, and then eventually to 70. Applying the Social Security and Medicare taxes on all income would also help. Raising the eligibility ages on both programs would be entirely justified since longevity ages have significantly increased since the passage of their legislation. Social Security was enacted in the 1930s, when living to the age of 65 was a big deal. Today the longevity rate for most Americans is approaching 80.
In the end, it’s not so much the dysfunctional behavior of government representatives, as it is the incredibly dysfunctional action of the populace that voted for such a highly partisan and divided government in the first place. Even if, by some miracle, we avoid going over the fiscal cliff, more trauma will ensue as the year unfolds. The debt ceiling will have to be raised shortly, and most Republicans are opposed to raising it unless substantial spending cuts are made, cuts that are opposed by most Democrats. If the debt ceiling is not raised, then large chunks of the government will have to be shut down and shuttered. We are the only country in the world that voluntarily shuts down its government due to partisan bickering. Appropriations bills will have to be passed, again with vigorous partisan divide on on both sides of the aisle. And the President and Congress will constantly be at each other’s throats due to the extreme polarization and poisoned political atmosphere that currently exists.
As I said at the outset, fear, anger and paranoia will almost invariably lead to bad decision-making, and that’s exactly what has happened in both the political and social arenas. And now we have to live with the consequences of that bad decision-making for at least the next 2 years. Happy new-year everyone.