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Tax and Cut Armageddon

Forget the threat of the end of the Mayan calendar later this year- American political and governmental dysfunction is a more realistic doomsday scenario.

This article in the Washington Post lays it all out. As soon as the withering, vicious, nasty and exhausting national campaigns end this November- our government will have to figure out how to deal with the expiration of the Bush tax cuts on all Americans-middle class and rich alike. That’s also the time the temporary payroll tax cut expires.

Meantime, because of their inability to compromise on a deficit reduction package that was supposedly the solution to the debt ceiling fiasco of last year- a bunch of automatic budget cuts are scheduled to hit the Pentagon and the poor.

In a normal world where politicians put country ahead of party and ideology- the solutions would be easy. There would be compromise on the Bush tax cuts, extending them for middle class folks so as not to burden their finances in a still stubbornly recession-like economy. There would be consideration of allowing them to expire for the top earners. The increased revenue could then be used, in part, to help pay for the continuation of payroll tax relief that mostly middle income Americans have now come to depend on over the past couple of years and that add to the average consumer’s spending ability.

Normal politicians would then split the difference on cuts in Pentagon spending and entitlement programs. All in all, you would have actually engaged in a little budget discipline while still managing to keep some of the tax cut incentives necessary to incent spending and grow the economy.

But, of course, we do not have normal politicians in Washington right now. We have a system that is broken with massive ideological rifts preventing any semblance of compromise or rational governance.

And it’s too bad because there are positive signs out there for the American economy. Home builder sentiment is at its most positive point since the start of the recession. A new USA Today/Gallup poll finds 58% now optimistic about an economy recovery.

But the people who invest and spend on America look at governmental gridlock and see nothing but uncertainty ahead. Small businesses are going into their shells and slowing their pace of hiring. Defense contractors are freaking out and they’re slowing their hiring too. And God help you if you’re not one of the well-off in this society- because the concept of a safety net will be tattered beyond recognition as the government cuts Medicaid, food stamps, college loans- you name it.

If the President would like to get himself re-elected, you’d think he would address this tax and cut Armageddon that’s looming in November, because the very prospect of it could strangle our current anemic recovery and fatally injure his electoral chances. And if Republicans want to be taken seriously and not viewed as a party taken over by uncompromising ideological rigidity, you’d think they’d take seriously that their electoral success looks just as threatened as the President’s.

Some worry about Europe and whether countries like Greece and Italy will default. Some fear that date in December when the Mayan calendar supposedly ends. I laugh at those measly threats. Our biggest fear should be the American politician. If only they could offer leadership as well as they play politics.

Congress: Where Failure is Always an Option

November 21, 2011 Leave a comment

Chart courtesy of the office of Senator Michael Bennet


Already less popular than Venezuelan dictator, Hugo Chavez, BP during the oil spill, Nixon during Watergate, lawyers, the IRS and Paris Hilton, Congress seems intent on finding a new bottom in the hearts of the public. The so-called congressional Super Committee’s failure to find even modest savings and revenues to address the federal deficit is just one more example why people seem to really despise Congress.

There is plenty of blame to go around on both sides and this is not an opinion forged out of a need to sound non-partisan. The combination of cowardice and partisanship is very, very powerful and both Democrats and Republicans are proving that, in this Congress, playing politics trumps national interest every time.

Democrats have not been serious about addressing the cause of much of our deficit-spending- entitlement programs like Social Security and Medicare. Why? Because the choices are painful and politically unpopular. Republicans, to their credit, finally gave in a tiny little bit and for the first time in recent memory, agreed to a modest rise in tax revenues but then sabotaged the whole thing by demanding that the Bush tax cuts not be allowed to expire at the end of the year- without identifying ways to pay for them.

With this failure, Congress has now opened the door to more failures over the next couple of months. Extended unemployment benefits may not happen. Keeping payroll tax cuts going into next year are, inexplicably, at risk.

Worst of all, Congress is expected to debate over the weeks ahead, whether to water down, delay or eliminate the triggered cuts that were supposed to take place if the Super Committee failed to do its job. The idea was that these cuts, many of them amounting to deep slashes in Pentagon spending, would surely pressure lawmakers into making a deficit deal. After all, who wants to be blamed for weakening America’s military?

If they try to weasel out of those triggered cuts, you can kiss even our AA+ S&P rating goodbye.

Clearly, no one cares up there on Capitol Hill. They don’t care if America is downgraded by credit agencies. They don’t care about endangering national defense. They don’t care about the unemployed. They don’t really care about reducing deficits. They give all the above considerable lip service- but the results tell the real story about the priorities of our politicians. They care about only two things; immediate political survival and getting on the gravy train when they leave Congress so they can continue to enrich themselves.

Representatives from both sides took to the Sunday talking-head shows to blame each other and finger point. No last-minute emergency negotiations. No burning the midnight oil. No college try. Nothing.

They are, however, working on the statement expected today- describing their failure to reach a deal. Maybe they won’t find a way to agree on that either.