Cliff averted, it's on to the next fiscal crisis

January 2, 2013 @ 9:34 pm


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Associated Press

WASHINGTON (AP) - Onward to the next fiscal crisis. Actually, several of them, potentially. The New Year's Day deal averting the "fiscal cliff" lays the groundwork for more combustible struggles in Washington over taxes, spending and debt in the next few months.

President Barack Obama's victory on taxes this week was the second, grudging round of piecemeal successes in as many years in chipping away at the nation's mountainous deficits. Despite the length and intensity of the debate, the deal to raise the top income tax rate on families earning over $450,000 a year _ about 1 percent of households _ and including only $12 billion in spending cuts turned out to be a relatively easy vote for many. This was particularly so because the alternative was to raise taxes on everyone.

But in banking $620 billion in higher taxes over the coming decade from wealthier earners, Obama and his Republican rivals have barely touched deficits still expected to be in the $650 billion range by the end of his second term. And those back-of-the-envelope calculations assume policymakers can find more than $1 trillion over 10 years to replace automatic across-the-board spending cuts known as a sequester.

"They didn't do any of the tough stuff," said Erskine Bowles, chairman of Obama's 2010 deficit commission. "We've taken two steps now, but those two steps combined aren't enough to put our fiscal house in order."

In 2011, the government adopted tighter caps on day-to-day operating budgets of the Pentagon and other cabinet agencies to save $1.1 trillion over 10 years.

The measure passed Tuesday and signed Wednesday by Obama prevents middle-class taxes from going up while raising rates on higher incomes. It also blocks severe across-the-board spending cuts for two months, extends unemployment benefits for the long-term jobless for a year, stops a 27 percent cut in Medicare fees paid to doctors and prevents a possible doubling of milk prices.

The alternative was going over the cliff, an economy-punching half-trillion-dollar combination of sweeping tax increases and spending cuts. Despite the deal, the government partially went over the brink anyway with the expiration of a two-year cut in Social Security payroll taxes of two percentage points.

Action inside a dysfunctional Washington now only comes with binding deadlines. So, naturally, this week's hard-fought bargain sets up another crisis in two months, when painful across-the-board spending cuts to the Pentagon and domestic programs are set to kick in and the government runs out of the ability to juggle its $16.4 trillion debt without having to borrow more money.

Unless Congress increases or allows Obama to increase that borrowing cap, the government risks a first-ever default on U.S. obligations. Republicans will use this as an opportunity to leverage more spending cuts from Obama, just like they did in the summer of 2011.

House Speaker John Boehner, R-Ohio, vows that any increase in the debt limit _ which needs to be enacted by Congress by the end of February or sometime in March _ must be accompanied by an equal amount in cuts to federal spending. That puts him on yet another collision course with Obama, who has vowed anew that he won't let haggling over spending cuts complicate the debate over the debt limit.

The cliff compromise represented the first time since 1990 that Republicans condoned a tax increase. That has whipped up a fury among tea party conservatives and increased the pressure on Boehner to adopt a hard line in coming confrontations over the borrowing cap and the spending cuts that won only a two-month reprieve in this weeks' deal.

Put simply, House Republicans are demanding new spending cuts _ possibly through changes in Social Security and Medicare benefit formulas _ as a scalp, and they're dead set against raising more revenues through anything less than an overhaul of the tax code now that Obama has won higher taxes on the wealthy.

"Now the focus turns to spending," Boehner said after Tuesday's vote, promising that future budget battles will center on "significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt."

Obama is just as adamant on the other side, saying higher revenues have to be part of any formula for further diverting the automatic spending cuts.

While conservative activist Grover Norquist gave Republicans a pass on violating his anti-tax pledge with this week's vote, he and other forces on the right won't be so forgiving on any future effort to increase revenues.

The refusal of Republicans to consider additional new taxes is sure to stir up resistance among Democrats when they're asked to consider politically painful cuts to so-called entitlement programs like Medicare. Democratic protests led Obama and Boehner to take a proposal to increase the Medicare eligibility age off the table in the recent round of talks.

The upshot? More scorched-earth politics on the budget will probably dominate the initial few months of Obama's second term, when the president would prefer to focus on legacy accomplishments like fixing the immigration problem and implementing his overhaul of health care.

The relationship between Boehner and Obama has never been especially close and seemed to have suffered a setback last month after the speaker withdrew from negotiations on a broader deficit deal. The two get along personally, but politically, a series of collapsed negotiations has bred mistrust. The White House has the view that Boehner cannot deliver while the speaker is frustrated that matters brought up in his talks with the president are not followed through by White House staff.

And on the debt limit, Boehner and Obama at this point are simply talking past each other.

"While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they passed," Obama said after the deal was approved.

Said Boehner spokesman Michael Steel: "The speaker's position is clear. Any increase in the debt limit must be matched by spending cuts or reforms that exceed the increase."


(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
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Comments (190)


  • Add A Comment

  • CH wrote...
    So you right wing whack jobs wanted King Obama to do nothing and let Us Americans go into a depression? . . . .
    January 1, 2013 5:28 pm
    and as for you Boo Hoo I smoked 3 bowls and still can't understand what you were talking about. Next time you post look down at the ground and see if your feet are on it. And to think this whack job has a gun.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Ron_Spins wrote...
    President Obama golfed through the whole process.
    January 1, 2013 6:06 pm
    .
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • longwayhome wrote...
    You read this, CH?
    January 1, 2013 7:11 pm
    It's me's sister or brother is on this site now, claiming I have taken over as the worst poster of the year! Goldfish has not been around the block many times OR Goldfish is hung over from New Year's. Keep posting, toots, I love to argue with idiots.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • rational wrote...
    longwayhome
    January 1, 2013 7:37 pm
    It's me's sister or brother is on this site now, claiming I have taken over as the worst poster of the year!

    Hate to break it to you but the drooling loon SeattleD has that award wrapped up for 2012...better luck in 2013!

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • John E wrote...
    This cliff was created by themselves to force them to solve the problem...
    January 1, 2013 7:22 pm
    And they failed at it. This crisis is completely created by Congress because they can't ever compromise. This "crisis" cost the S&P 500 to drop 15%. We Americans lost millions of dollars in our 401Ks thanks to hard line Tea Partiers willingness to shut down our Gov to get their political victory. And from what it seems, focused on protecting a tax cut for the richest and cutting help to the needy. So this fight actually cost the rich they were trying to protect more than if they had left this a simple procedural vote as it had been for most of our history. The real job they should be doing is working together to make a budget. Hard line stance with no compromises is failed government. Obama conceded to some of the GOP's wishes and was still rejected by those who's ideas Obama gave in to. This posturing is merely voting against the POTUS they hate instead of their own, and the nations interest. We will see the results of this in 2 years when the Tea Party loses what power they have left.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • rational wrote...
    John E
    January 1, 2013 7:41 pm
    More mindless drivel. You progressives have yet to explain what you have against the US government remaing solvent and sustainable...well, other than your excessive greed and hatred for our children.

    But hey, they do make a convienent scapegoat for the failed progressive agenda. Here's a predication for you...if/when the tea party no longer has any influence whatsoever you'll find another scapegoat...you will never, ever take responsiblity for the damage you cause.

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Ron_Spins wrote...
    rational (a explanation)
    January 1, 2013 11:15 pm
    The progressives has capitalism and the constitution in their crosshairs. (pardon me I was never good at english lol) The idea for them is to bankrupt the country "hunger""riots""martial law"remove the second amendment then go after the first , this is what President Obama meant when he said "fundamentally transform"America.It is change.Declare capitalism a failure , you see it in the attacks on Wall street and "big oil". Replace the constitution altogether you can find articles NOW calling for that. President Obama acts like a dictator now.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Ron_Spins wrote...
    http://pjmedia.com/victordavishanson/very-scary-times/
    January 2, 2013 1:27 am
    .
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • longwayhome wrote...
    2014 Will be like Christmas for Democrats!
    January 1, 2013 7:41 pm
    By the way goldcarp, watch your spelling and punctuation very carefully so you don't live up to the republican reputation as being a HYPOCRITE. As I was about to post, the mid-term elections will be very interesting for the republicans, they will lose quite a few of their dunderheads, hopefully all of them. Hope to hear from you soon, goldcarp, you rank quite high on my list of people to piss off.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • rational wrote...
    Senate-Passed Deal Means Higher Tax on 77% of Households
    January 1, 2013 7:49 pm
    The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.

    More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of yesterday.

    http://www.bloomberg.com/news/2013-01-01/senate-passed-deal-means-higher-tax-on-77-of-households.html

    You didn't really think you could trust the progressives now did you?

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    YES PARROTS! Your Dear Leader got his tax increases.
    January 2, 2013 2:58 am
    You people, the shameless, the UN American 47 percenters, who made all this possible? YES that is correct Parrots, YOU DID! All you Useful Idiots who did exactly what you were programmed to do and gave your Dear Leader 4 more years. How does it feel to be such a mind numbed robot with ZERO independent thought? MSNBC constantly on and blaring in your Parrot brains 24/7/365 in your domiciles? Does it even cancel out the sounds of America on the 4th? Do you Parrots even know what day this is?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • hpygolkyone wrote...
    Dude......You're Sounding Crazier And Crazier........
    January 2, 2013 5:31 am
    I'm trying to read your post and make any sense out of it and I simply can't! Who knows, maybe it's me?

    I think you are somehow mixing the 4th of July (the celebration of our nations independence) with New Years Day (which is something entirely different). Yes, fireworks are generally shot into the air and people get all boozed up and make drunken phone calls and post's on blogs and a lot of people just shoot each other during these celebrations, just because they can.

    Please tell me you don't own a gun?!?

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    Yes, DUDE! I own a number of guns now called "Assault Weapons"!
    January 2, 2013 5:37 am
    But you are just as safe as you were when they were simply Semi auto's. I am a law abiding American. I will only use them if my families life or mine are in danger.

    Just for your edification, I was referring to the MyNW article of how 4th of July makes Patriotic Americans.

    My post are the truth of this regime and it's Dear Leader. I would hope that you have the ability to see past the Liberal propaganda and begin to understand that Obama is "Fundamentally Changing" my America. You do remember that Obama quote?

    What you somehow construe as "Crazy" and/or hate and bigotry is simply passion and my desire to stop this regime and it's attacks on my way of life.

    Seriously, dude, you should take the time to educate yourself and understand the differences!

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • wsualumn wrote...
    HPYGO
    January 2, 2013 7:04 am
    HA HA doesn't even own a brain.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • sambra27 wrote...
    The more I look...
    January 2, 2013 6:19 am
    The more I am convinced that CH and It's Me, Ha ha are the same person. Those two writing styles are eerily similar...
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    One BIG difference.
    January 2, 2013 9:36 am
    I did not vote for Obama!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Concerned US Citizen wrote...
    Mirror
    January 2, 2013 6:39 am
    I don't see how any of our elected officials in Washington can look themselves in the mirror this morning knowing what they have done to our children and grandchildren. Tax increases sure but nothing in spending cuts and just more defict spending. They should be ashamed of themselves for just putting more on the credit card. This goes for anyone who voted for this travesty to our kids!!!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    Boehner rumored to resign as soon as tonight?
    January 2, 2013 11:56 am
    Wish he would have resigned yesterday before he coward to the Dear Leader!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • { "Thumbs Up":"1","Thumbs Down":"-1" }