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Monday, December 31, 2012

Fiscal Deal Emerges- Angst All Around: NEXT- Debt Ceiling Battle

By Susan Duclos

Details of the fiscal cliff deal are emerging and both hardcore conservatives and hardcore liberals are wringing their hands and screaming "our side caved."

The emerging details, via the AP, we will call the bad news, but below the quotes, we'll discuss the good news, after everyone is done stomping their feet, screaming and threatening to kick all the bums out in 2014.

The proposal in the works would raise the tax rates on family income over $450,000 from 35 percent to 39.6 percent, the same level as under former President Bill Clinton. Also, estates would be taxed at 40 percent after the first $5 million for an individual and $10 million for a couple, up from 35 percent to 40 percent.

Unemployment benefits would be extended for one year. Without the extension, 2 million people would lose benefits beginning in early January.

A Republican official familiar with the plans confirmed the details described to The Associated Press.


An agreement on the proposed deal would also shield Medicare doctors from a 27 percent cut in fees and extend tax credits for research and development, as well as renewable energy.

The deal would also extend for five years a series of tax credits meant to lessen the financial burden on poorer and middle-class families, including one credit that helps people pay for college.

The deal would achieve about $600 billion in new revenue, the officials said.

[Update] Weekly Standard confirms:

A senior Republican Senate aide passes along the tax terms of the deal being worked out by Democrats and Republicans on Capitol Hill and the White House to avert the "fiscal cliff." These terms are "locked," says the source, between Senate Republicans and the White House:
·         Permanent extension of current rates on income below $400k (singles) and $450k (married).
·         Permanent 15% rate on cap gains and dividends for income below $400k (single), $450k (married).
·         Permanent 20% capital gains & dividends for those above $400k (single), $450k (married).
·         Permanent death tax at $5M exemption but a 40% Rate (as of tomorrow, exemption would be on estates valued at $1m at a 55% rate)
·         Permanent AMT patch
·         One year extension of 50% Bonus Depreciation
No cuts have been "locked," I'm told.
[End Update]
Okay, proceed to kicking your computers, hitting your desks and basically getting it all out.

So, here is the good news.

Democrats and Barack Obama no longer have the hammer they have been hitting Republicans over the head with because middle class tax cuts will be extended, permanently.

Democrats say they are angry, distraught, disappointed and unhappy... all descriptions from the discussions around the blogosphere.

Conservatives feel betrayed because there are no spending cuts described and they "caved" on the tax cuts for those making over $450,000.

Now let me remind you what I said earlier:

Best guess is a deal will be reached, no grand bargain, tax cuts for the majority of Americans will be extended, some odds and ends will be thrown in to avoid the automatic sequestration cuts, then the next huge headlines will be the next cliff, black hole, or whatever descriptive boogeyman the media decide to use to describe the debt ceiling disaster waiting around the corner.

This is not what the White House wanted because now they won't be able to charge the GOP with holding middle class American's tax cuts  as "hostage,"and the GOP will use the debt ceiling limit as leverage to force meaningful spending cuts and perhaps then an extension of the rest of the tax cuts that don't make it into this deal.

Principles met reality and the indisputable reality is that a liberal Democrat is in the White House and Democrats control the Senate and Republicans control the House.

Obama has the bully pulpit and has been wielding the middle class tax cuts against Republicans like loaded weapon.

If this deal goes through, that weapon becomes useless to Obama and next up is the debt ceiling fight and that is where Republicans now force the spending cuts and if they don't screw it up, the remainder of the tax cuts for the job creators, investors and employers that keep this country moving.

The second this deal passes the Senate, The House and Obama signs it, headlines are going to start appearing about the debt ceiling battle looming ahead and whether conservatives admit it or not today, by tomorrow many are going to see that Republicans have much more leverage going forward now that the middle class is no longer worried about their taxes rising.

Now the discussion can stop being all about taxes and start being exactly where it needs to be.... spending and how our government makes a habit of spending more money than we have, constantly borrowing more so that they can spend more.

Before Obama and his media lapdogs start muddying the waters when he starts demanding a debt limit increase without conditions, now is the perfect time to remind Americans, as often as possible of a statement by Barack Obama in 2006:

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” he said. “It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”
It is time to wield our own hammer and start pounding as loudly as possible so that Republicans in the House can insist, demand spending cuts equal to or more than whatever amount Obama wants as an increase in the debt ceiling which in his own words is "a sign of leadership failure."

His leadership failure.

Text of - Sen. Obama, Congressional Record,  3/16/06:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.

Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion.That is “trillion” with a “T.” That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.
Numbers that large are sometimes hard to understand. Some people may wonder why they matter. Here is why: This year, the Federal Government will spend $220 billion on interest. That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. It is more money in one year than we are likely to spend to rebuild the devastated gulf coast in a way that honors the best of America.
And the cost of our debt is one of the fastest growing expenses in the Federal budget. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.
Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.
Senator Barack Obama
Senate Floor Speech on Public Debt
March 16, 2006