The House Is Still On Fire

No, that’s not a reference to the US House of Representatives, although it perhaps could be.

First off, dear readers, let’s wish Madame some stress-free (or at least minimal stress) rest and relaxation!  And thank her for covering in my own absence!

On to things, specifically ATRA, the American Taxpayer Relief Act (love those partially misleading law titles) that “averted” (at the last second) the “fiscal cliff” (slope, really). 

Yes, the fire has been “contained” so that it’s not consuming the ground floor.  Yet.  The legislators in Washington are counting on you the citizen neither knowing, nor understanding, nor caring enough, to look at the details.  If the corporate media, which partially created the “cliff” phenomenon, declares the legislation solved the problem, a busy public goes on to the diversions of their lives.  But should we?

The legislation is typical of the ridiculous legal sausage—bloated, ugly, special interest sensitive, and inclusion of multiple and seemingly unrelated areas—that Congress has become infamous for.  For instance:

The legislation incorporated (sort of) a long overdue Ag bill, although it left much out and mostly kicks it down the road for a year.  Just like most things in Washington (and often back home as well), there’s no facing of reality, or serious addressing of our very real and urgent problems.  So we get this twilight zone treatment.  And what was an Ag bill doing in the legislation, one might ask? Good question.  The trend toward omnibus bills was bad enough when we had 11 (13) separate appropriations.  Today, it's much worse, and this legislation is just another indication. 

The bill also has things about health care.  Many Medicare payments problems were kicked down the road and medical industry rewarded, although, to be fair, some exacting and clarification took place that will NOT benefit the medical industry. 

The law extended unemployment provisions for about a year.

Tax deductions and credits, especially for businesses, were extended. Far be it for the loud trumpeters who say that "closing loopholes" is the way to address deficits and avoid taxes, to actually make their actions match their words.    

As for what is supposed to be the law’s central provisions, here they are:

The payroll tax cut was not extended.  What this means is that the social security tax rate you were paying two years ago is what you’re now paying again.  While in general this is probably okay, as Social Security didn’t need the funding shortfall the payroll tax cut contributed to, the absence of other things about it is telling.  For instance, there is nothing about raising the cap on contributions, something that could solve Social Security's slight funding problem fairly easily.  And notice that of all the taxes that went back up, this one, the heaviest, hit the working poor and middle class (more on this in a bit). 

The AMT—Alternate Minimum Tax (a long-ago law designed to try to capture back some of the taxes that the rich with their accountants and lawyers often avoid)—had its boundaries adjusted so that it didn’t catch unintended middle class folks.  Much can be said about AMT, but that is a discussion for perhaps another time.

The Bush-era “temporary” tax break for dividends was made permanent.  That unearned income, which is not subject to Social Security or Medicare taxation, thus gets another bennie of a far lower tax rate than earned income taxation (you know, those rates for people earning a living rather than collecting dividends from large amounts of stock they own).  I’m aware of the false arguments about that, but as I’ve explained in The Professor blog on 14 October of last year, they don’t hold much, if any, real weight, and merely benefit the wealthy.

As for what were supposed to be the temporary Bush-era tax cuts (which should have never been enacted and blew a giant hemorrhage in the budget), most were made permanent.  Government is now taking in the lowest GDP percentage of revenue in 50-60 years, belying yet again the squealing by the rich about taxation, and a good indication that we have a deliberate underfunding problem, not just an overspending one.  

The only Bush-era tax cuts not made permanent are for the over $450,000 (note how quickly they ran away from it being $250,000) EARNERS.  Notice that’s not INVESTORS (unearned income—dividends, interest, capital gains), meaning it’s mostly a smokescreen.  Those earners also lost some deductions.

The sausage Congress put together with this law was made not subject to the Pay As You Go law provisions they set for themselves in 2010.

The matter of the debt ceiling was left open, so expect that political (but potentially highly damaging) farce shortly.

A bone they threw the public was that they didn't give themselves a COLA (cost of living adjustment), but of course they can at any time since those aren’t “raises” (raises, by constitutional amendment, can only go into force after a 2 year election has been held since the raise was passed). 

The Big Picture:  The 30+ year pattern (briefly interrupted during the economically golden age of much of the 1990s)—of starving the government by tax cuts to force reduced spending on things which benefit the general welfare—continues.   ATRA does next to nothing about our yawning chasm between revenues and expenses; indeed, it merely establishes more our illusional/delusional fantasies.  Deficits continue to be out of control, even as contractors, large corporations, and the wealthy benefit from direct and indirect government spending for them.

Most everyone should be upset about that, but the Millenials in particular should, if they are paying attention, be pissed as all hell, because they are being left a giant bag of you-know/you-don’t-wanna-know-what.