On July 9, I wrote a post about the President coming down strongly in favor of extending the tax cuts for Americans making less than $250,000. In that post,I stated:
We will see tax fairness this year. I believe the GOP has run out of excuses. Obama gave them the tax cut extension 2 years ago, in return for DADT being repealed-- and the economy reacted exactly as many suspected. While some may criticize President Obama for not doing things fast enough, perhaps the long game is worth it in the end.
Two and a half weeks later, the Senate voted to reject the GOP Tax Plan and passed the Democratic plan
. As I stated then, it is what the President has been proposing all along.
You will recall that the extension of the Bush Tax cuts a while back gave us the repeal of DADT -- but it also gave us what was called the Super Committee. I wrote about it last year
. It was created during the Debt Ceiling fiasco during the summer of 2011. It was important then and it is important now. The super committee did fail
, and as I wrote then, the repercussions of it include:
* Increased investor uncertainty. Investors already have little confidence Republicans and Democrats can bridge a yawning ideological divide over tax policy and who should shoulder the burden for reducing deficits. The U.S. Congress has had trouble passing even routine legislation this year, leading to repeated disruptions of government services.
* The committee's failure is unlikely to trigger another downgrade of the U.S. credit rating. Rating agencies have said they will look at a range of factors in making any decision but that the committee's washout will not be decisive.
* Republicans are already making noises about altering the $1.2 trillion in automatic spending cuts, or sequesters, that are due to kick in 2013 as a result of the super committee's failure. They want to soften the planned $600 billion defense cuts. If Congress starts tinkering with the sequesters, however, financial markets could become unnerved by the unraveling of savings seen as already "in the bank." Again, the 2012 elections could determine the fate of these cuts.
* Democrats and Republicans will try to use the super committee's dead end for political gain. Democrats will say the outcome is further evidence Republicans just want to protect the rich from sharing the burden of deficit reduction. Republicans will argue that, once again, Democrats fail to grasp the gravity of escalating costs of healthcare benefits.
* The White House had been bracing for days for the committee's failure and believes President Barack Obama can weather it without major political fallout and may even be able to score points against Republicans as he seeks re-election.
As I said then, it was mostly political. Mostly
. However, there is an important issue looming here: Defense Cuts. $600 billions dollars of defense cuts. Remember the Trigger?
If the committee fails to agree on a package or the full Congress fails to pass it, a so-called "trigger mechanism" would enact $1.2 trillion in automatic spending cuts to serve as the second installment of deficit reduction measures.These cuts would be split between the national security and domestic arenas, but the biggest entitlement programs would be excluded from these automatic cuts.
So now what? People are getting nervous, and rightfully so. WaPo writes
The deep federal spending cuts scheduled to take effect at the start of next year may trigger dismissal notices for tens of thousands of employees of government contractors, companies and analysts say, and the warnings may start going out at a particularly sensitive time:
Days before the presidential election.
By law, all but the smallest companies must notify their workforce at least 60 days in advance when they know of specific job cuts that are likely to happen.
Obama administration officials say that the threat of layoffs is overblown and that Republicans are playing up the possibility rather than trying to head it off. The Labor Department said Monday that it would be “inappropriate” for contractors to send out large-scale dismissal notices, because it is unclear whether the federal cuts will occur and how they would be carried out.
Republicans reacted with fury, saying it is the White House that is playing politics.
What does all this have to do with tax cuts?
Republicans have seized an opportunity to attack President Obama over the planned cuts to defense spending, while Obama is pointing at the GOP, saying he will not roll back the spending reduction without Republicans agreeing to higher taxes on the wealthy to help tame the nation’s debt. (snip)
Republicans, led by presidential contender Mitt Romney, have called for delaying the automatic cuts, which were put in place last year to close the nation’s budget gap. He also wants to stop the tax increases, which would occur when tax cuts adopted under President George W. Bush expire.
Democrats, including Obama, insist that they will postpone the spending cuts only if Republicans agree to increase taxes on the wealthy to help reduce federal borrowing.
The Republican controlled house has an out. They can vote for the tax bill passed in the Senate last week. It's really that simple. Tax cuts for the majority of Americans and the certainty of knowing there will be jobs for them going into the new year. It's almost as if this were planned.
It's been slow, arduous and frustrating to see the way things have been happening in Washington DC since the 2010 elections. The GOP has resisted EVERY step of the way. Obama has been accused of coddling them and being too flexible. I understand the frustration people have had with that, but here we are, in August with 3 months before the election and it appears as though slowly and painfully, this is going to happen. I really do believe that the GOP is going to HAVE to act on this tax issue. If not, they will be going home to constituents wondering why they don't have a job. People will want to know why it was more important to protect tax cuts for the wealthy over employment. For 98% of Americans, no tax cut in the world can put food on the table; only jobs can.
The Clock is ticking.
House Republicans today — by a vote of 170 to 257 — defeated a Democratic proposal to end the Bush tax cuts on income above $250,000. 19 Democrats joined all the Republicans in voting down the bill. The House Republican plan would instead extend all of the Bush tax cuts, as well as fast-track “tax reform” that includes more giveaways to the wealthy and corporations.
The House did vote to extend Bush-era tax cuts for one year by a vote of 256 to 171. 19 Democrats supported the measure, 1 Republican opposed it.
I would say that the GOP is the one taking Americans off the fiscal cliff.