Now that the fiscal cliff that caused much concern last last year — a creature, by the way, created by Congress — has been averted, we’ll see just how serious Democrats are about getting the country’s fiscal house in order.
The stock markets certainly were happy that an agreement was reached as the Dow Jones, NASDAQ and S&P 500 all rebounded nicely to open the first day of trading in 2013. The prospect that an indiscriminate fiscal knife was going to cut through defense and social program spending alike had given investors little to be optimistic about as 2012 concluded, a mood that was reflected with sinking numbers.
But while this battle has been won — and Democrats have clearly come out on top here with their mantra to tax the wealthy at higher rates — the war to get the national debt under control is an entirely different theater of operations.
Predictions on economic growth this year are not encouraging. There are few expectations that the U.S. economy will even match its weak 2.2 percent growth rate of 2012. Unemployment is still at 7.7 percent, and it wouldn’t take a lot going wrong to push it back to 8 percent.
In acquiescing to Democrats’ demands in reaching the deal that prevented sequestration, Republicans were unable to push through even modest savings in spending. They did move the threshold of the higher tax rate up significantly, from those with $250,000 in income to those individual making $400,000, but that was about it.
The tax hikes, which affect households making at least $450,000, income from profits and dividends and the part of estates that exceed $5 million, will generate an extra $600 billion over the next decade, making up about half of what sequestration was expected to cut in spending over that period.
Meanwhile, the nation’s debt ceiling, now at a once unimaginable $16.4 trillion, won’t be high enough for the federal government to pay its bills, perhaps as early as next month. President Obama, whose attempt to get Congress to empower him to raise the federal debt ceiling when he saw fit was, thankfully, rebuffed, is already posturing that this issue is so critical that it dwarfs the impact that failing an agreement on the fiscal cliff would have had.
The fact is that there are hard decisions that have to be made, decisions that will be unpopular with the electorate. The United States is borrowing 40 cents of every dollar it spends, and that fiscal irresponsibility cannot continue indefinitely.
While higher revenues were necessary — and now those have been achieved to some extent — there also must be a curtailing in expenditures. And that is the truly hard decision. Few Americans will shed a tear over a wealthy person paying more taxes, but necessary spending cuts will affect many people — constituents of those serving in the Legislature and the White House.
Workers will get a first taste of that when they see a 2 percent reduction in their take-home pay as the Obama Social Security tax break ends and withholding rises from 4.2 percent to 6.2 percent.
Congress, known for its do-nothing attitude last year, has done something already in 2013. Now, let’s see if lawmakers and Obama are willing to address the spending side rather than continue to write checks that have to be paid by our children and grandchildren.