As 2012 draws to an end and 2013 is about to dawn, it might be worth your while to give a shout out to your local congressman and thank him for the tax increase you’re about to get, and the resulting spanking that will deliver to our economy. Because despite the best efforts of many Democrats in government to spare the poor and middle class from tax increases that will take effect Jan. 1, the Republican Party has made sure that EVERYONE’s gonna get hit by the taxman.
A bit of a recap here: Back in 2001, we had a projected budget surplus that amounted to trillions of dollars over a 10-year period. Basically, that meant the government was going to take in way more in revenue than it would spend on government programs.
We should have used that excess money to pay down the federal debt (the accumulated sum of all prior deficits). But President George W. Bush had a better idea that he sold to the Republicans who controlled both chambers of Congress at the time: Tax cuts for EVERYONE!
The Bush tax cuts, enacted in 2001 and 2003 by Republicans in Congress, were ALWAYS specifically designed to be a temporary 10-year deal. There was no way the GOP could have gotten them passed without that provision.
They cut income taxes on most people, although the wealthiest taxpayers were the ones who saved the most by far after they went into effect. Not coincidentally, these were some of the same people who contributed the most money to George W. Bush’s presidential campaign. (Yes, they got back far more than what they invested in his campaign).
Anyway, President Obama ran for election in 2008 in the midst of a severe recession. He promised to extend those cuts only for families making $250,000 or less and single individuals earning $200,000 or less. His theory: we were in a recession, and he didn’t want to discourage consumer spending, which could worsen the economy. The middle class and poor spend all most all of their money in the economy, after all. This is eminently sensible economics.
But in 2010, Republicans in Congress balked about extending the tax cuts only for those individuals. And Democrats in Congress, who at that time had a majority, were too chicken to force them through. So Congress cut a deal with the President to kick the can down the road for 2 years by extending the tax cuts for everyone. Which is where we are now.
Obama, meanwhile, vowed to veto any bill future Congress sent him that extended tax cuts again for earners above $250,000.
Republicans in Congress, such as the three fellows above, are still balking. They are more or less united that they’d extend the tax cuts for the poor ONLY if those cuts could be extended on their rich patrons, too. GOP members of the House even balked when their own leader, House Speaker John Boehner, tried to slip in a small income tax increase on people who earned more than $1 million a year. “No way!” his own party cried. Boehner’s own plan fell apart because of opposition from the GOP members of the house.
So now the taxes will go up on everyone, apparently. That, combined with automatic spending cuts, is the “fiscal cliff” everyone is talking about.
Unless Congress comes to its senses, the fiscal cliff carries with it a great possibility that we’ll head into recession next year.
That’s why you should email or call in your thanks — or perhaps some other sentiment — to the three gentlemen above. As much as anyone else in Congress, they’ve helped drive this nation over the fiscal cliff.