New Castle News
NEW CASTLE —
So are you relieved that the United States avoided the fiscal cliff last week?
For a variety of reasons, you shouldn’t be. Not the least of these is the fact that much of the cliff is still lurking in the near future.
Yes, Congress approved and President Obama signed a measure that cancels scheduled income tax hikes for most Americans. So long as your family’s earnings are below $450,00 a year, you’re safe on that point.
But payroll taxes for working Americans are going up. Essentially, they will return to the 6.2 percent rate that was cut as an economic stimulus measure during the recession.
The logic of this particular tax cut didn’t impress us, because the money involved goes into the Social Security Trust Fund. And that program needs all the money it can get.
Anyway, Washington’s politicians also pushed through a measure that doled out assorted tax breaks to special interests — the sorts of deals that look more like special-interest favoritism than sound public policy. But one thing missing from the package was anything resembling a plan to reduce federal spending and bring the budget under control.
Instead, Congress delayed planned automatic, across-the-board cuts for two months. So we can look forward to another fiscal cliff fight in February.
But wait! There’s more! In addition, a battle is looming in regard to raising the nation’s debt limit. This is the cap placed on the amount of borrowing permitted by the United States government.
Because much of this borrowing serves to cover the debt already owed by Washington, the failure to raise the debt ceiling would effectively put the United States in default of its bonds and related obligations. If this happened, the results to the international economic system are predicted to be catastrophic.
So the debt ceiling becomes a pawn in Washington’s budgetary battles. While many Republicans acknowledge the need to hike the debt ceiling, they argue it’s irresponsible to do so without tackling the deficit spending that makes it necessary.
Conversely, Democrats argue that the debt is money the federal government already has spent, and Washington has a duty to pay its bills.
Both sides make valid points. But every side has a valid point on matters of spending and taxes in Washington. What’s missing is a coherent plan to resolve differences. Not only is there no agreement in place for achieving that goal, Democrats and Republicans aren’t even talking about how to get there.
Instead, there is endless posturing and finger pointing. It’s a system that promises nothing more than to lurch from one fiscal crisis to the next. And as we’ll discuss tomorrow, that’s a sure way to stifle any economic recovery.