THE president who campaigned for a second term on the theme of sticking it to the wealthy was able to do just that — although not quite to the extent he'd hoped — as part of an 11th-hour deal that keeps the nation from tumbling over the “fiscal cliff” but does little to deal with serious debt drivers.
“A central promise of my campaign for president was to change the tax code that was too skewed toward the wealthy at the expense of working middle-class Americans,” Barack Obama said Tuesday. “Tonight we've done that.”
Now for some perspective: Increased taxes will bring in about $620 billion. The national debt is increasing by $6.6 billion per day.
What else was accomplished? Not much. The agreement is more stopgap than “grand bargain.” It does nothing to address the nation's biggest cost drivers — Medicare, Medicaid and Social Security.
Every member of the Oklahoma delegation except U.S. Rep. James Lankford, R-Oklahoma City, voted for the bill. Those who did so said the alternative — across-the-board tax increases and major cuts in domestic agencies, including defense — left them little choice. “Let's recognize we avoided what could have been a terrible outcome,” said U.S. Rep. Tom Cole, R-Moore.
Under the bill, individuals earning more than $400,000 annually (and couples earning $450,000-plus) will see their tax rate climb to 39.6 percent from 35 percent. Obama had wanted that jump to hit individuals earning $200,000 per year and families making $250,000, folks he incessantly called “millionaires and billionaires.” They will also be made to pay more on dividends and capital gains. They will even lose part of the deduction for charitable contributions. How's that for helping the poor, Mr. President?
The Bush-era tax rates that Democrats once thought were a bad idea but now embrace will remain in place for most taxpayers. But the bill didn't prevent a 2-percentage-point cut in the Social Security payroll tax from expiring, a break worth about $1,000 for typical families.
Lawmakers did do middle-income families a favor by indexing the alternative minimum tax for inflation, instead of allowing a tax increase to kick in. Doctors won't see cuts in their Medicare reimbursements. Child tax credits and earned income tax credits will be extended. The wind energy tax credit was renewed.
However, the proposed cuts in defense and domestic programs are still with us. This agreement simply delays them for two months. And this deal isn't exactly jet fuel for the economy. Ben Schwartz, chief market strategist for Lightspeed Financial, summed it up this way: “Regardless of a deal getting done, people on Wall Street are not going to run around giving high-fives.”
Social Security, Medicare and Medicaid remain untouched, indeed unapproached. Republican U.S. Rep. Paul Ryan came up with a serious plan to reform Medicare and was portrayed by Democrats as wanting to kick grandma to the curb. Suggestions to raise the retirement age for Social Security, or reduce benefits for the wealthiest workers, were rejected and their proponents demonized. The president asked a bipartisan commission to produce a plan to reduce the deficit, the group suggested changes to Social Security (among other things) and Obama spiked the recommendations.
The deal reached this week was better than no deal at all, given the alternative. But because Obama and his party aren't serious about reducing the nation's exploding and crippling debt, we'll be back on the edge of the cliff again soon.