Hallelujah! The game of fiscal chicken that might have sent the U.S. economy spiraling into the abyss ended in overtime Tuesday. And while there may have been no decisive victor, at least the game ended without calamity, as the spirit of compromise the Senate adopted on New Year’s Eve finally took hold in the House a day later.
As evidenced by yesterday’s stunning stock market gains overseas and on Wall Street, the deal, such as it was, certainly beat no deal. But as virtually everyone in government and the media acknowledges, it represents little more than half a loaf: Plenty of work remains, and there are still myriad opportunities for political brinkmanship to sabotage the government and the U.S. economy.
Senate Republicans recognized the perils that would have occurred if most of the Bush tax cuts weren’t renewed. So after getting President Obama to raise his threshold for tax hikes on “rich” families, from $250,000 to $450,000, they held their noses and went along, rather persuasively. Bravo to Sen. Mitch McConnell for finally considering the nation’s best interests ahead of the rich people his party represents.
On the other hand, House Republicans, including Majority Leader Eric Cantor, seemed far less inclined to go along. But after realizing that an 11th-hour attempt to attach hundreds of billions worth of additional spending cuts to the Senate bill might backfire and that they would get blamed, they wisely decided to put off the fight for another day. At least some of them did, anyway. But there were still enough naysayers — 167 of the 424 total who voted — that future confrontations over the issue’s unfinished business seem a certainty.
That business includes the $110 billion in automatic, indiscriminate spending cuts that were supposed to have occurred in the absence of an equivalent amount of targeted cuts. The Democrats are understandably concerned about cuts of that magnitude given the economy’s relative weakness, but they’re going to have to agree to more cutting sooner than later.
Also, the debt ceiling: By refusing to authorize the government to borrow to pay outstanding bills — bills for previously approved spending — Congress could seriously gum up the economy. The last time it did this, in the summer of 2011, the government’s credit rating got cut and the stock markets plummeted. There’s no rationale for doing it again except to be obstructionist.
The continuing budget resolution offers a similar opportunity for Republicans to throw a monkey wrench into the works. Let’s hope they start serious negotiations a little earlier this time.
Other notable achievements and failings in the compromise: Most significantly, it allowed the 2 percentage-point payroll tax holiday in effect the past two years to die. That will cost workers earning $50,000 a year roughly $80 per month — a middle-class tax hike if ever there was one. Granted, this tax holiday was depriving the Social Security trust fund of badly needed revenue, but it would have been less painful on 160 million workers (and the economy) to phase in the effective tax hike over two years. Social Security needs to be addressed, but a larger-scale fix is surely necessary.
Positive elements in the bill included the extension of unemployment benefits for an estimated 2 million jobless and a nine-month extension of a farm bill that staved off ruinous milk price hikes.
But House leaders failed to bring a $60.4 billion aid package for victims of Superstorm Sandy to a vote Monday, as they’d promised to do, and that leaves thousands of New Yorkers and New Jerseyites in the lurch. Inexcusable.