Fiscal cliff 2012 – after the deal

There is no deficit problem. The existing deficit is a result of the Great Recession, itself caused by a housing bubble that the very rich caused and enriched themselves on, and who now are in the forefront of a ‘hoax’ called ‘the deficit problem’ and who now lead calls to fix the ‘problem’ by reducing taxes on the rich and cutting programs that benefit the other, less than super-rich, part of the society. The deficit is also caused by the Bush tax cuts and two major wars that the Bush administration did not see fit to fund. For Obama’s part in this 21st century form for swindle, see Dean Baker’s quotes further on.

What follows is a sampling of responses to the budget deal cut between the Congress and Obama. LSW could be accused of picking only commentators who appeal to LSW’s sense of logic. Should you disagree, write a comment.

Dean Baker

“In other words, the financial markets responded as many of us non-insiders predicted. As long as it was clear that a deal would be forthcoming, they didn’t give a damn about the fiscal “cliff” deadline. Chalk this one up as yet another example of the experts – the people who report on the budget and the economy for the Washington Post and other major news outlets – not having a clue.”

Medicare and Social Security are protected at least for awhile. Raising the age of Medicare eligibility and changing the cost of living adjustment formula are for now off the table.

Extended unemployment benefits are extended.

Obama acceded to raising the level of income where the Clinton tax rates apply to $400/450000 from the level of $250000 that he had campaigned on. Obama held all the cards in these negotiations and yet backed off his campaign commitment to tax those making over $250000. Does anyone believe him when he says he will not negotiate on raising the debt limit?

“This is a president who encouraged members of Congress to vote for the Troubled Asset Relief Program (Tarp) in 2008 with a promise that he would put bankruptcy cramdown for mortgage debt (allowing restructuring of housing loans for people with distressed mortgages) at the top of his agenda once he took office. This is a president whose top aids boasted about “hippie punching” when they ditched the public option in the Affordable Care Act. This is a president who has explicitly put cuts to social security on the agenda, while keeping taxes on Wall Street speculation off the agenda.

And this is a president who decided to put deficit reduction, rather than job creation, at the center of the national agenda – even though he knows the large deficits are entirely the result of the collapse of the economy. And, of course, he is the president who appointed former Senator Alan Simpson and Morgan Stanley director Erskine Bowles to head his deficit commission, enormously elevating the stature of these two foes of social security and Medicare.

Given his track record, there is little doubt that President Obama can be trusted to make further concessions, possibly involving social security and Medicare, in negotiations on the debt ceiling. Oh well, at least we can laugh at the experts being wrong about the fiscal cliff “Mayan apocalypse”.”

Jeffrey Sachs, “Reject the Deal”:

“The White House and Senate have agreed to make the Bush tax cuts permanent for 99 percent of households, starving the federal government of funds. Even Mitt Romney could never have accomplished for the Republicans what Obama has just done for them. The Democrats in the Senate would have soundly rejected the plan if the Republicans had put it forward.”

“We have been subjected to a White House negotiating process that violates every standard of rationality and transparency. The public never once saw an integrated budget proposal that showed the quantitative and qualitative implications of various policy options. The public has not been told that yesterday’s agreement threatens the financing of crucial programs for education, job training, infrastructure, environment, energy, science and technology, health care, nutrition, and the poor for years to come.”

Sachs’s blog post contains relevant details on the present and future (after the deal) percents, in relation to the GDP, of taxes and expenditures, as well as an attempt to explain why Obama and the Democrats conceded to such a bill.

Robert Reich, Senate ‘fiscal cliff’ deal is lousy makes several relevant points (LSW in no way means to imply that LSW is in any position to judge if Robert Reich’s points are relevant. Merely a figure of speech.):
Republicans conceded nothing on the debt ceiling and are likely to refuse to vote for increasing the debt ceiling without securing cuts to Medicare and/or Social Security.

The deal makes tax cuts for the rich, those making up to 4-450000 a year permanent while the tax credits for those in the more Dickensian milieus valid for only six years.

The deal does not get enough in taxes from the rich to prevent tax hikes and spending cuts, necessary to reach the White House goals of deficit reduction, which will fall on the poor and the middle class.