I have a degree in political science, but I’m getting fed-up with all the politics, and lack of real leadership, in Washington, DC these days. This “fiscal cliff” deal is a prime example of what is wrong with big government. It’s enough to make a preacher cuss. And I’m a pastor. Darn it!
The “fiscal cliff” was a “problem” manufactured by the President and Congress 17 months ago during the 2011 showdown over increasing the debt ceiling.
Interestingly, we really never heard anything about it during the presidential campaign.
And then – SHAZAM – the day after the election, the news media were all over the looming “fiscal cliff.” And in other news, President Obama was reelected.
All of this could have been resolved in 2011 – and it even could have been dealt with during the budgeting process last summer – instead of kicking the can down the road to the end of 2012…and the first day of 2013.
But no, it had to be resolved at the last minute (actually, 23 hours *after* the last minute of 11:59 p.m. on December 31, but I digress) in the so-called “American Taxpayer Relief Act” (all 150 pages of it that no one had time to read).
Here’s What the President’s “Balanced” Approach to Resolving the Fiscal Cliff Looks Like
The president *said* he wanted to take a “balanced” approach to resolving the fiscal cliff. Which everyone thought meant tax increases and entitlement spending cuts.
Everyone but him, I guess.
Cause what he got were plenty of tax increases, but little in the way of entitlement spending cuts.
In fact, not only are there no substantive spending cuts, but there are huge spending increases.
Early estimates from the Congressional Budget Office said that for every $41 in tax increases, there is only $1 in spending cuts.
But after the dust settled, the CBO recalculated and surmised that there are *only* $10 in tax increases for every $1 in spending cuts.
To add insult to injury, during his speech shortly after the late-night fiscal cliff vote in the House, the President had the call to talk about the “need” to make even more “investments” (spending) to keep our economy limping.
Is it just me, or does it seem that President Obama is not really serious about cutting entitlements and reforming federal government spending at all?
What About Deficit Reduction?
The President also said he wanted deficit reduction as part of this deal, but that is missing from this compromise.
In fact, it actually *increases* the deficit by $4 trillion over 10 years!!!
This prompted Simpson-Bowles Commission leaders (and Campaign to Fix the Debt co-founders) Erskine Bowles and Alan Simpson to say:
“Washington missed this magic moment to do something big to reduce the deficit, reform our tax code and fix our entitlement programs.”
According to the Committee for a Responsible Federal Budget, the US government’s debt is on a upward path over the next ten years, reaching 79% of GDP by 2022!
But don’t worry, because the Federal Reserve is *really* good at printing more money! 🙂
What Did this Do to Help Unemployment?
Did the fiscal cliff deal do anything substantively to help resolve America’s serious unemployment problem? No.
It does extend unemployment benefits for a year and provides incentives for employers to hire military veterans, but it doesn’t really deal with the core issues surrounding the unemployment crisis.
What the Fiscal Cliff Fix Did Accomplish
1. Preserved Tax Cuts for Some
The bad news is that the Bush-era tax cuts expired on December 31, 2012. The good is that this fiscal cliff compromise makes those tax cuts permanent for 99% of Americans – individuals earning less than $400,000 a year and couples earning less than $450,000.
2. Increased Taxes for High Earners
Those high earning individuals making over $400K, and couples making over $450K, will see their tax rates go up from 35% to 39.6%. In addition, they’ll pay higher capital gains taxes on investments (the rate rises from 15 to 20%) and the new Obamacare tax of 3.8%
3. Increased Payroll Taxes for Everyone Who Works
The payroll tax holiday expired on December 31, 2012, meaning that the payroll tax (which pays for Social Security) for employees and self-employed workers will rise from 4.2% to 6.2%.
Hello my fellow pastors, this means your self-employment taxes are going up as well!
According to Kiplinger, this will cost the average family an extra $1,000 in taxes next year; two-earner couples could owe an additional $4,000 or more.
4. Put off Sequestration for 2 Months
The automatic $1.2 trillion in “sequestration” budget cuts (including $600 billion in cuts in the defense budget) that were set to take effect on January 1, 2013 have now been put off until March 1, 2013. And will have to be debated all over again.
5. Alternative Minimum Tax is Permanently Indexed for Inflation
The alternative minimum tax, or AMT, will be permanently indexed to inflation, after years of temporary fixes.
6. Renews Certain Child Care, Tuition, and Research and Development Tax Credits.
7. Puts Off a 26.5% Cut in Medicare Reimbursements for Doctors for Another Year.
Yeah, the government has been moving from “managed care” to “managed costs” when it comes to Medicare. What makes people think Obamacare would be different down the road?
8. Renews Federal Milk Price Supports
This supposedly will keep the price of milk from going to $7.00 a gallon.
Really? What is this, the 1950’s? How many Americans know that the federal government subsidizes the price of milk? Well, at least you and I know now.
Personally, we don’t drink the stuff. We drink homemade rice milk and banana milk instead. But ice cream…now you’re getting personal!
9. Gives $430 Million to the Millionaires in Hollywood
To supposedly encourage TV and film production in the United States. Why? Would they rather go to Bollywood instead? I don’t think so.
And please…don’t tell me that the federal government is subsidizing movies that glorify gun violence at the same time that the President is talking about more gun control.
10. $331 Million in Tax Credits to Railroad Operators
11. $222 Million to Puerto Rico and the Virgin Islands
This is through returned excise taxes collected by the government on rum produced in the islands and imported to the mainland. Makes sense, I guess.
12. $70 Million to the Millionaires Who Run NASCAR
Why? Because some tracks aren’t making enough money?
13. $59 Million for Algae Growers
To encourage the production of cellulosic biofuel – whatever that is.
14. $4 Million for Electric Motorcycle Makers
Because maybe the people who don’t want to buy a federally subsidized electric car would like to buy a federally subsidized electric bike instead?
What’s Your Take on the Fiscal Cliff Compromise?
Well, that’s my take on the fiscal cliff compromise and the “American Taxpayer Relief Act” that was rushed through Congress and passed in the middle of the night.
This whole thing has got me praying more for our President and Congressional leaders, that they will work together in a respectful way to find real solutions to our nation’s financial problems and not heap trillions and trillions of debt upon future generations.
What’s your take on the fiscal cliff compromise, and what do you like most and least about it?
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Brick By Brick Investing | Marvin says
The list can go on and on! it really is ashame. I cannot believe it! A quick side question though, how do you make homemade rice/banana milk?
Money Wise Pastor | Rich Avery says
Marvin, thanks for your comment! To make banana milk, my wife takes one banana, 1 cup of cold water, and 1/2 tsp vanilla and blends it all up in our blender (we use a VitaMix). We all love it on cereal instead of milk. But it is good on its own, too.
Making rice milk takes a bit more effort. Instead of typing out my wife’s recipe, I searched online and found one that looks the same: http://www.5dollardinners.com/how-to-make-rice-milk/. We found it was way, way, way cheaper to make it than to buy it at Costco (which was already a better price than the local health food stores), but obviously takes some effort. Our two daughter need to stay off dairy as much as possible, so that’s why we’re into the rice milk and banana milk.