Posts Tagged With: fiscal cliff

DELUSION AND DYSFUNCTION

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.

 

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OVER THE FISCAL CLIFF WE GO

By now you should have all heard about the “fiscal cliff” and how we are about to plunge over it, if Congress does not act by around Christmastime. Lots of luck with that. The fiscal cliff came into being in August 2011. The voters, in their infinite wisdom during the November 2010 elections, elected  a Democratic majority in the Senate, but a Republican majority in the House of Representatives. Most of the newly elected House members were Tea Party stalwarts, with a supposed mandate to sharply reduce Government spending by cutting the budget. Then, in July of 2011, a piece of legislative idiocy known as the debt-ceiling had to be raised in order for the Government to go on functioning. The debt-ceiling, which is not stipulated anywhere in the Constitution, mandates that the Government cannot borrow anymore money above an amount previously designated by Congress, unless Congress passes a new law designating an increased amount of debt. I know that this is utter nonsense that attempts to appeal to voters who otherwise are not paying attention to the machinations of the way things get done in Washington, but this nonsense is codified in statute.

So, if any of you haven’t fallen asleep yet, I’ll plow on with more explanation of how Congress functions on the taxpayers dime. Thus, back in July 2011, if the debt-ceiling wasn’t going to be raised on Government spending, where 40 cents out of every dollar spent had to be borrowed, it would have meant that major components of the Government would have to be shut down, and Federal employes sent home with no paycheck. It would have meant missed social security or medicare payments, as well as failure to pay Defense and other Government contractors. It would have meant that if you had payed for a trip to any of our national parks, such as Yellowstone or Yosemite, (over 300 million people visit our national parks every year) you were out-of-luck since park personnel would have been sent home, and the parks closed. You get the picture. But catastrophic or not, House Republicans vowed they would not go along with raising the debt-ceiling unless the Obama administration agreed to drastic cuts in Federal spending to begin January 2013, as well as renewal of the Bush tax cuts through the end of 2012. Otherwise the Government would be shuttered, starting August 2, 2011. Just before midnight on August 1, Obama caved, and agreed to all the Republican demands, and the Government was allowed to stay in business through the end of 2012.

By now, those of you that haven’t fallen asleep are probably propping open your eyelids with toothpicks, but, hey, I didn’t make the rules whereby the Government functions in all its splendor. So now we are in December 2012 and the “fiscal cliff” which sounds a lot better than “congressional stupidity” is about to befall us in just a few weeks. If the Administration and Congress can’t come to an agreement, the Bush tax cuts expire, and taxes go up for nearly everyone. This will be noticed immediately in reduced paychecks due to increased tax withholding. Automatic budget cuts will take effect, including a $50 billion annual cut in Defense spending. This has a lot of  Republicans all upset, since spending on military hardware and troops is the holy grail for conservatives. As if the Defense budget was funded by the money tree that grows in the Pentagon courtyard. Small Defense contractors, heavily concentrated in the Washington DC suburbs of Northern Virginia and Maryland, are claiming that they will have to close their businesses should these Defense cuts be allowed to take place. Other non-Defense contractors are also claiming they will have to reduce payrolls or shutter their companies, causing more unemployment and further weakening an already tepid economy. And so it goes, on and on.

President Obama is willing to reinstate the Bush tax cuts for all Americans, except the wealthiest 2% of the population. For them, (couples earning over $250,000) the marginal tax rates would go up 4.6% on earnings after $250,000. Which is where they were during the Clinton years. Yet Republicans are absolutely not willing to accept 98% of the loaf. They are insisting that it has to be either the entire 100% of the loaf, or no bread at all. After all, doesn’t everyone know that a small marginal tax increase on the richest 2% of Americans will cause an irreparable breach in the very space-time fabric of the universe. A breach that can never be healed and will eventually cause the universe to crumble into a heap of ashes. That, in effect is the Republican position on income taxes, and they’re not budging from it.

The Republicans also want to overhaul social security and medicare to lower their costs, both of which are unquestionably breaking the budget. In this instance, it’s the Republicans that are facing up to reality, and the Democrats that are being irrationally stubborn in refusing to come forward with reform plans that are clearly necessary for those 2 giant entitlement programs. Raising the eligibility age for both programs to 67, and eventually to 70, would make them solvent overnight. And such action would be completely justified because the life span of Americans has significantly increased since these programs were enacted. So there you have it- the GOP won’t budge on on a tax increase for the rich, and the Democrats are just as stubborn on reforming social security and medicare. If both parties hold to their positions we go over the fiscal cliff come January.

Awhile back I wrote a piece on the failures and dysfunctions of democracy, and democratic forms of government in general. I pointed out that Winston Churchill had said that democracy was the worst form of government, (except for all the others that have ever been tried.) And now with this extreme polarization among the ruling parties in this country, dysfunction has never been more clearly highlighted. I believe that members of both parties become highly agitated just at the thought of having to compromise with the other side. Thus, we appear to be stalemated. My feeling is, that at the last minute, some sort of agreement will be reached preventing our plunge over the fiscal cliff. Or not.

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