Friday, December 21, 2012

Plan B Up in Smoke, Sequester Halted (Again)

Last night, the Republican-controlled House of Representatives attempted to address two major issues: sequestration and the massive tax increases for all taxpayers set to go into effect at the start of 2013.

As a bit of background on the tax increases, what we are referring to are the expiration of the so-called “Bush Tax Cuts.”  These tax cuts cut taxes for all taxpayers whether they be lower, middle, or upper class.  They also dialed back the death tax, marriage penalty tax, and capital gains tax while increasing tax deductions like the child tax credit.

Despite the disingenuous media rhetoric, the Bush Tax Cuts helped all Americans that pay taxes – not just the rich.  During the presidential campaign, the Bush Tax Cuts were a familiar weapon used against Republicans.  Now, as evidenced by the fact that even President Obama now points to the majority of the Bush tax cuts as a positive for the middle class, the Republicans have been vindicated for supporting them.

Republicans have worked diligently to stop these tax increases, passing several bills that eliminate tax increases and maintain the current tax rates for all American taxpayers.  Democrats, including President Obama, have demanded a tax increase causing a stalemate in these negotiations.

Sequestration is the byproduct of failed Obama policies.  In 2010, President Obama created a Presidential Commission (via Executive Order 13531) called the National Commission on Fiscal Responsibility and Reform.  This commission is often referred to as the Simpson-Bowles Commission.  The purpose of President Obama’s commission was to develop a report that outlined a plan that President Obama could follow to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.  The commission produced its report but failed to develop enough consensus within itself to send the plan to Congress.

Still, the President could have adopted the recommendations of his committee, but failed to do so in any meaningful way.  That left the Republicans to fold some of the recommendations into the Budget Control Act of 2011, which eventually became law.

One of the mechanisms of the Budget Control Act to control spending and reduce debt (the U.S. is over $16 trillion in debt) was sequestration.  Sequestration put in place mandatory spending cuts that would go into effect unless Congress found other ways to reduce spending.  It was supposed to be a backup plan in the event that consensus could not be reached.  To force consensus, both Republican and Democratic favored spending was placed on the chopping block.  Nonetheless, an agreement could not be reached.

The expiration of the Bush Tax Cuts combined with the spending cuts of the sequester make up what is largely referred to as the “fiscal cliff” in the media.

With just days to go before careening off the fiscal cliff, Republicans again sought compromise with the Democrats.  Instead of fighting against tax increases, some Republicans were willing to allow taxes to go up for millionaires, while maintaining current tax rates for everyone else.  To pass, they would need some Democratic support – something that was impossible last night.  Without a single Democrat that would support raising taxes on millionaires only, as their campaign rhetoric suggested, the bill was doomed.  Ultimately, the ball is now in the court of President Obama and Senate Democrats to craft a deal that can gain Republican support.

Republicans called the Democrats bluff on taxes.  Democrats didn’t want to only raise taxes on millionaires, they wanted to raise taxes on upper-middle class and small business owners as well.

Republicans were successful however in again attempting to address the sequester.  Marking their fourth attempt to prevent the sequester (H.R. 5552, Rigell Amendment to NDAA 2013, and H.R. 6365 being the first three,)  Republicans last night passed H.R. 6684, the Spending Reduction Act. 

Democrats have refused to negotiate in good faith over the fiscal cliff.  They demand compromise, but only on their terms.  They continually move the goal posts in their negotiations.

Even offering to raise taxes on only millionaires and billionaires, as Republicans attempted last night and as Democrats demanded throughout the 2012 campaign season, isn’t enough now. 

The four different solutions the Republicans offered to put off the sequester give Congressional Democrats a framework to craft their own counter-offer around.  Instead of doing that, Senate Democrats left Washington for Christmas vacation.

It is time for President Obama and Senate Democrats to negotiate in good faith and, most importantly, lead.  If they fail to do that, it should be apparent to all that it was their intention to careen off the fiscal cliff all along.

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