Fiscal cliff tax vote now shifts debate to deficit reduction

Congressman Paul Ryan (R-WI) says he voted for the fiscal cliff deal on New Year’s Day to protect as many taxpayers as possible (98%) from a permanent tax increase.

Instead, the fiscal cliff deal makes the Bush tax cuts permanent for the middle class – thereby shifting the debate to cuts in entitlement spending to achieve Obama’s promised “balanced approach” to deficit reduction.

I would have also supported this vote to get to phase two – spending cuts!

Good Points of Fiscal Deal

To the angst of some Obama supporters, Congress has now voted to make the often maligned Bush tax cuts for the middle class – permanent tax cuts. It will take a vote of both houses and the signature of the president to raise them again.

The temporary 2% Social Security tax cut needed to expire, because Social Security has for the last two years paid out more than it has received in payroll taxes – $45B in 2011, increasing to $165B in 2012.

This gap in Social Security funding is entirely filled by revenue the government borrows, despite Senator Dick Durbin’s statement that Social Security has not added one penny to the deficit – another financial genius from Illinois!

Estate Tax exemptions remain at $5M for individuals and $10M for families, but the vote increases the tax rate to 40% from 35% for estates above that amount. If the fiscal cliff bill had not been approved, however, the tax rate would have reverted to 55%.

Capital gains are increased from 15 to 20 percent, for singles over $400,000 or $450,000 for families, which is slightly more than half of the 39% for the highest federal income tax rate.

The vote permanently reduces the Alternative Minimum Tax, or AMT, for up to 25 million additional middle-income taxpayers and indexes that amount to inflation. This tax code change has been long overdue for taxpayers, who were not intended to be affected.

The vote extends for five years up to $2500 tax credit for college tuition – a credit, not a deduction. A tax credit allows the taxpayer to spend 100% of that money for the tuition and pays no tax on the expenditure.

Again, the 27% cut in Medicare reimbursement to doctors is blocked for one year. The law has been based on an obsolete 1997 budget formula. To prevent cuts in Medicare service, this portion of the bill should have been made permanent.

Finally, the Sequestration patch is there for only 60 days. After 60 days, the Sequestration law requires $109B across the board spending cuts and still could be used to cut the deficit spending if Obama and Congress lack the courage to come up with needed cuts to raise the debt ceiling limit.

Bad Points of Fiscal Deal

Despite Associated Press headlines “Congress avoids tax hikes,” most households (77%) will see an average tax increase of $1635 primarily due to the elimination of the temporary 2% Social Security payroll tax cut.

In addition, with the increases in taxes on the wealthy, including estate taxes, reducing the marriage tax deduction and the 2% payroll tax increase in Social Security, there will be $620B in tax hikes, with only $15B in spending cuts – a ratio of 41:1 in new tax dollars for each dollar in spending cuts.

The $62B received from taxing the wealthy will be applied to the $1089B annual deficit spending. That will decrease the annual deficit by 1.4%. So over the next 10 years, the tax increase is $620B while the deficit spending will increase over $4356B.

Originally, the fiscal cliff vote was supposed to be about deficit reduction, however, new spending actually increases the debt over next 10 years, with the tax cuts, subsidies to green energy, NASCAR, Hollywood supporters, electric motorcycles, one additional year in the unemployment extension, and that isn’t even half of the items hidden in the nooks and crannies of the 153 page fiscal cliff bill to rally congressional votes – really transparent process, right?

With the debt ceiling at $10.6T when Obama took office in January 2009, increasing to $16.4T in January 2012, phase two of the debate must now shift to Obama making good on his promised “balanced approach” to deficit reduction.

The leverage now shifts to the House Republicans because it’s the president’s turn to compromise through spending cuts despite his party saying there will be no entitlement cuts. The president’s ratings dropped during the last debt ceiling debate, when Americans saw that Obama wouldn’t negotiate the ceiling and kept overspending tax dollars.

The fiscal cliff tax deal postponed the tough decisions on government’s deficit spending, giving them a reprieve from budget cuts that were also scheduled to start taking effect automatically Jan. 1.

Those tough decisions could arrive as early as February, when Congress will need to raise the $16.4T federal borrowing limit (debt ceiling), so the government can keep paying its bills.

The debt ceiling has already been breached, but Treasury Secretary Geithner is starting to suspend the sale of some Treasury securities in an amount of $200B, manipulating the debt, to give Congress and the administration more time to find spending cuts.

House Republicans, who objected strongly to the fiscal cliff deal passed Tuesday, probably will not agree to raise the debt limit without offsetting spending cuts this time. Let’s see if Obama does his balanced approach for deficit reduction.



  1. JRM_CommonSense

    Good concise presentation of the legislation, Ted. I think it is pretty close to what we all expected from this government at the very last minute. The follow on will be interesting because spending reductions are seriously needed. There is the sequestration if all else fails, and that is once again a definite possibility since it has now happened 3 times in the last couple years. After all, the sequestration came from the 2nd failure. That poor can must be really sore from getting kicked down the road so often.

    Let’s hope these people that have been elected and will be sworn in today finally understand what their jobs are and get it done. But I think we should all look forward to the same last minute semi-effective results that have happened the last 3 times. After all, how can we believe these people are serious when they see more importance in pork projects (at the last minute) than in changing this country’s spending habits. And I am talking about all factions of the government. The are all equal opportunity offenders in this fiasco.

  2. I don’t see Obama making any serious attempts to cut any spending, and Democrat history supports that conclusion. Pres. Reagan allowed tax increases, with the promise of Democrat spending cuts later. The spending cuts never came.The same “bait and switch” tactics were used on Pres. Bush #41.
    You just can’t trust the Democrats to hold up their end of the bargain, without some form of leverage, as an incentive.

    • Ted Biondo

      snuss, the leverage is the debt ceiling and to be willing to use it. It’s Obama’s turn to put up or shutup.

  3. I got a question, did Obama just raise taxes or lower taxes on Americans?

    “The leverage now shifts to the House Republicans because it’s the president’s turn to compromise through spending cuts despite his party saying there will be no entitlement cuts” – Let me know when that happens, I’ll look for the flying pigs. Spending cuts never happen in the long-term since appropriations are on an annual basis. Tax rates are set, but spending changes annually. The spending cuts have to a provision that if the spending targets are not met, then the tax rate increases become void. Obama has to have something of value to give up for multiple years in order for this to work.

    • Ted Biondo

      Terry good points. Net – Obama raised taxes $62B a year with an annual deficit of $1089B. Really fixes the problem doesn’t it? I’ll keep looking out for those flying pigs. Hopefully, some Repub’s get a backbone and cut off the revenue supply to this overwhelming government for those of us who pay taxes!

  4. Ted, that hasn’t worked, so far. With the re-election of the “Weeper of the House”, and conservatives being kicked out of leadership positions, I don’t see much chance of anything more than a wishy-washy response to the Obama Regime.

  5. JRM_CommonSense

    If one believes Boehner’s “acceptance” speech, all things will change now. Congress is ready to work hard to address the issues of this country. I wonder if he is going to play less golf, lose his tan, and spend more time at his job? Or maybe he is going to convince Mitch, Harry, and Nancy to have a regular morning foursome.

    • Ted Biondo

      Don’t forget to include Obama Mr. 100 plus rounds on the golf course, JRM.

  6. Will Obama also play less golf? (Current number of golf outings: 110, as President) Including travel time to and from the course, that is equivalent to a couple months spent golfing.
    Of course, as the head of the Leftist Democrats, THAT isn’t an issue.

  7. JRM_CommonSense

    Boehner’s number of golf rounds far exceed Mr. Obama’s 100.

    I did not include Mr. Obama because Mr. Boehner said that “Congress” is ready to work on the hard to address issues of the country. It is the leaders in Congress and the House who need to finally work out something that the two houses can pass. Then it is up to the President to approve it or veto it. If the two entities of the Legislature think that their job is to sit around and wait for the President to negotiate/present an acceptable legislation, what do we need them for?

    They have been elected to represent the people and be leaders. If they cannot be leaders, then they should get the hell out of the way. If they expect us to “respect” them as leaders and our representatives, then they need to be leaders and represent us. Get the job done. Stop waiting for some Presidential solution, and then do nothing but laugh at it. If they want the President to give them a proposal, then at least use that as a starting point and let the leaders and members of the Legislature tear it apart, amend it, and reach a consensus of what they want to do (that is their job). Then they can pass it, and let the President sign it or veto it, and then they have the chance to override his veto. That is the way it is supposed to work and it is time that this Congress gets back to doing its job.

    If they don’t we will once again see a massive shift in the mid-term elections. Maybe this time we will see people elected who want to do their jobs rather than be obstructionists. I would hate to hear that the Republicans feel that their most important priority is to keep Obama from being elected to a third term.

  8. JRM,

    Does the two houses passing something include a budget? That is something that only one of the Houses has been able to pass in the last three years.

    The houses aren’t waiting for a presidential solution (Harry Reid is because he has never had an original thought in his life), but they do need to know what Obama will sign. From what I read on negotiating with Obama is that just an agreement is getting close, he moves the goalposts. That is why Biden took the lead in these last negiotiations and why Boehner has said he is done negotiating with Obama – he can’t be trusted. If you have no trust in the person you are negotiating with, things will not get done. That is a sign of a lack of leadership. If Obama was in the military, he would get the “Needermeyer” treatment (see the end of Animal House if you don’t remember what happened to him after college)

    If I was Boehner over these next two months, I would start passing appropriation bills with some cuts and let them sit in Harry Reid’s inbox. Make it clear that the debt ceiling is not extended until these bills move to the president for signature or veto. If vetoed, Obama gets a short-term debt extension. If signed, I would give Obama his debt extension.

    • Ted Biondo

      Hey, without a budget from Reid, Terry, how can the Senate ever be accused of going over something that doesn’t exist – the budget? This debt ceiling battle is the last battle where spending is the culprit not class envy taxes. I worry that the media will figure out a way to blame the Republicans for no wanting to raise the debt ceiling because they hate the poor and want to keep even more tax money from them. What do you think?

  9. JRM_CommonSense


    So you are saying that we should have more of the same old, same old. That approach has not worked three times now over the last year. We have watched these morons work their way to the “fiscal cliff” over and over again, and in the end, we have gotten short term, “kick the can down the road” legislation – no where near what we need. So let’s try it again, and watch the same thing happen? Playing the game of “mine is bigger than yours” has failed and will fail again.

    Why didn’t they just let it go over the “fiscal cliff” and get it over with this past week? Why waste time and pretend that they are willing to do anything?

  10. Agreeing to fiscal suicide because Obama wants to turn this Country into a socialist/Marxist hell-hole is not an acceptable option for true conservatives, and I would hope that centrist Democrats feel the same way.

    Spending cuts MUST be enacted, to reduce spending, and slow the debt until it starts decreasing, and we begin to balance the budget. Otherwise, all those “entitlements” won’t be worth any more than the paper their IOUs are written upon.

    • Ted Biondo

      Government spending must be cut by an amount based on last year’s spending to reduce the deficit, not on the amount the government plans to grow the spending each year. The annual deficit has to be reduced by 10 to 25% each year from the deficit spent the previous year, and that spending reduced again the next year, or obtain more revenue through growth, not tax increases is the way to do it.

      If Congress just had the guts to do it, and tell Obama that Ameircans want America, not some version of a European Democratic Socialists government. Also, make everyone contribute to our country’s treasury, not just the half that work their butts off for the half that makes little contributions, but only take from the rest of us!

  11. JRM_CommonSense

    Here are some real statistics.

    1. About 21% of that 50% are retired people who do not make enough additional income to have to pay Income taxes.

    2. Another 40 to 50% of that 50% fall into the category of low income coupled with standard deductions and personal exemptions. Here is the basic example: A couple earns less than $26,400 and they have 2 children. They pay their social security and medicare taxes. Then they take their standard deduction of $11,600 and four exemptions of $3,700 each which reduces their taxable income to zero. The basic structure of the income tax simply exempts subsistence levels of income from tax. That does not mean they are on the take.

    3. America uses the tax code to provide benefits to low-income families, particularly those with children. Adding up the number of people who take the earned income tax credit, the child credit, and the childcare credit accounts for about 15% of the people who pay no federal income tax.

    So, roughly 85% of that 50% you are trying to make out to be freeloaders, are filing Income Tax forms that meet all of the current tax code requirements.

    • Ted Biondo

      Regardles of how many people are getting money from the government, JRM, a finite amount has to be distributed, not an infinite amount, so the country doesn’t go bankrupt, and then none of the 85% of the 50% will get a thing or the rest of us for that matter!

  12. JRM_CommonSense

    So what is your proposal to make this statement happen?

    “Also, make everyone contribute to our country’s treasury, not just the half that work their butts off for the half that makes little contributions, but only take from the rest of us!”

  13. How about a “minimum” Federal income tax on everyone, down to the poverty level. Say $25.00 to-$50.00, just so they have some “skin in the game”.

  14. JRM_CommonSense

    So all of the 50% supposed “freeloaders” will pay $25 to $50 and still get all of the “handouts that they’re currently getting. How does that make things better? All of that “skin in the game” tax revenue would probably be able to fund the government for about 13.638795 minutes. And all the things those “freeloaders” get will still run up the deficit. Sounds like a good plan to me.

  15. It still adds more revenue than the status quo.

    BTW, the OBAMA TAX INCREASE on those evil rich people only equaled an increase of $620 billion over a decade, or $62 billion a year. Our deficit is about $1.4 TRILLION, annually, and our debt is $16.4 Trillion-plus. So, that increase is equal to about 1/22nd of the deficit, before Obama’s additional spending demands are added in. Hardly much of a change, is it?

  16. JRM_CommonSense

    I think I said the same thing above. What has been happening isn’t much of a change, and these morons have tried it 4 times now, with a 5th coming in the next couple of months. And it will never happen as long as the two sides start with their ultimatums and don’t move from there. We have a completely disfunctional government – all sides of the political spectrum. They are operating in an environment where their main goal is to do whatever they can to make the other side look bad. We are in a “boogieman/chickenlittle” sound-bite form of governing rather than discussing and deciding things of substance and meaning.

    The result is that nothing of substance gets done. And I do not see this changing. This has become the way those in Washington (and elsewhere) have decided to operate. Remember, the legislative side of this government has barely a double digit approval rating. What makes them think that they are doing their job or being effective? What makes people think that those of their particular political leanings or biases are even the least bit effective or getting the work of the people done? This Congress has no where to go but up, but I bet that it doesn’t improve. Fasten your seat belts, the ride is gonna get rougher.

  17. And yet, the only group that has promoted REAL fiscal sanity, the TEA party, is reviled and denigrated as violent, hate-filled racists (which is a FAR more accurate description of their accusers, than of them). The Lamestream media treats the Obama regime with kid gloves, while attacking anyone who disputes “The Messiah’s” reasoning.

  18. JRM_CommonSense

    So, “REAL” fiscal sanity means grabbing your share of the pork just like all the others?


    • Ted Biondo

      Nice, mnoderately conservative site there JRM – the alternet, NPR, activism, etc. I’m sure these people aren’t biased in the least, Yuck. At least Fox news brings some liberals to the party and with Hannity and O’ Reilly you at least know they are coming from the right, but this – OMG!

  19. If they aren’t living up to what they ran on, they need to be defeated in the next primary election. However, there seems to be plenty of corruption on both sides. It is just that the Lamestream media doesn’t spend as much time covering their Leftist buddies.

    You might find this interesting:


  20. JRM,

    “So you are saying that we should have more of the same old, same old. That approach has not worked three times now over the last year.” – I believe three years is teh same amount of time that the Senate hasn’t passed a budget nor has the president presented a budget that a rec’d a SINGLE vote. Budgets are a financial blueprint used by every decent business in thsi country. Our gov’t should have one also.

    As for getting rid of the bums, I’m all for putting in fiscally conservative bums. Good place to start is the TEA Party not the Democratic/Occupy Wall Street party that wants everything for free.

  21. Actually, the Federal government is REQUIRED to pass a budget, annually. Why hasn’t a legal mandate been obtained, to FORCE a budget to be passed?

  22. JRM_CommonSense

    Ted, I just answered Mr. SNuss’ idiocy with a similar type of idiocy.

    Why can’t I use highly biased references just like lots of other people use in these posts?

    You guys complain when people use “moderately conservative” sites by going on the RINO rants. You guys complain when people use “liberal” sites by going on the liberal/leftist rants. When someone takes exception to your use of “extreme conservative” sites, you guys go on the rant about the liberals and/or moderates inability to understand your unquestionable positions.

    OMG, have you guys reached the point where you cannot even recognize sarcasm any more without the writer telling you with the classic (sarc/on) designation. The link I listed is no worse that lots of the other crap links that are listed here from other ultra conservative sites and the wonderfully accurate and straightforward youtube post used so often.

    AND, if the government has not passed a budget in the last three years, it is because all sides have decided they can better accomplish what they want without one. Right or wrong, the government has changed the way it wants to operates. Everything is done this way now, not just the budget processes (or lack there of. AND NO ONE HAS CHALLENGED THIS APPROACH! But they sure complain about it a lot!

  23. The law has been violated. The fact that an inept and/or corrupt government fails to follow the law should not be ignored, or, at what point will it stop? Silence implies consent. Our media is supposed to be a “watchdog” for the public in these kind of matters, but they act more like Obama’s toothless lapdog. For example, how much coverage did THIS get?




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