by Walter Brasch
Talk show hosts and other bloviators have spent hours giving their versions of the fiscal cliff. In fewer than 750 words, I'll explain the truth.
Taxes and the deficit are intertwined. If Congress can't come up with a plan to solve those problems, the U.S. will jump into the abyss of a deeper recession than existed under the latter years of the Bush--Cheney administration.
Let's first look at taxes.
The Bush tax cuts expire at the end of this year.
The idea of the cuts was to spur the economy and give what is loosely called the "jobs creators" a slight push to hire more people.
But, the millionaire "jobs creators" held onto their money. They continued to downsize and outsource jobs, making even more money--which they used to buy whatever trinkets that rich people spend money on.
If Congress can't agree on tax rates, beginning Jan. 1, 2013, every American will see a restoration of tax rates to a level that is about what they were before the Bush tax cuts. The lower- and middle-classes will be hit harder than the upper class.
President Obama, contrary to
what the screaming harpies of the extreme Rightwing claim, doesn't want to
raise taxes. He wants the tax cuts to continue for 98 percent of all
Americans--the ones making less than $250,000 a year. He wants to restore--note that word, restore, not raise--the tax liability for the richest 2 percent of Americans. The
rate to the rich would still be below the rates they paid during most of the latter
half of the 20th century. Even billionaires like Bill Gates and Warren Buffet
agree that the rich need to be paying more.
The Republicans, knowing where their financial base is, demand that the tax cuts be extended to everyone. Their compromise was to allow the cuts to apply to everyone making $1 million a year or less. That would be net income, not gross income. Millionaires could still make $3 million a year if they can scam $2 million in deductions. Their rates would still be lower than almost any time since the income tax was first created in 1913.
The President countered with a $400,000 limit. That would include about 99 percent of all Americans. House Speaker John Boehner, however, found that a segment of his Republican party don't want a compromise; they are determined to uphold some kind of a non-legal pledge to Grover Norquist that there would be no tax increases--ever-- even if it is to restore, not raise, tax rates.
The second part of the problem is that of entitlements. The Republicans are willing to do some horse-trading. They won't continue to hold 99 percent of Americans hostage if there are cuts in "entitlements" and programs that would significantly reduce the deficit. These entitlements benefit mostly the 99 percent. The Republicans even say they'll consider closing some tax loopholes used extensively by the upper class. But, they won't tell us what those loopholes are, even though the President has several times asked for specifics. Apparently, the Republicans believe releasing such information is classified, much like battle plans in Afghanistan or the number of toilet paper rolls the Pentagon buys.