Don’t Get Fooled by Fiscal Cliff Talk

Welcome back, Congress! Now that the election is over, there are just a few things to take care of during the brief few weeks you’re in session between now and the end of the year—little details like the future of tax rates and unemployment benefits.

You might hear the phrase “fiscal cliff” thrown around a lot to describe the set of policy choices we’re coming up against. A set of large policy changes are all set to kick in starting in 2013 unless Congress alters them:

  • The expiration of all of the tax changes passed by the Bush administration in 2001 and 2003—both the changes that affect middle-class families that both parties have expressed support for extending, and the changes for the top 2 percent.
  • The expiration of the payroll tax cut passed at the end of 2010 and extended in February of this year.
  • The expiration of a number of smaller tax changes.
  • The expiration of extended unemployment insurance benefits for some long-term unemployed.
  • The “sequester”: A package of big cuts to domestic and defense programs that will go into effect as a result of the debt-ceiling deal of 2011 and the subsequent failure of the “Supercommittee” established in that deal.
  • Changes to the way Medicare reimburses doctors.

If all of these changes go through exactly as current law says they will, it will represent a pretty strong shock of austerity to the economy.

It’s important to note that if all of these changes occur over 2013, it will represent a dramatic decrease in the budget deficit—quite the opposite of what’s implied by the phrase “fiscal cliff.” So hand-flapping around debt and deficits is sort of beside the point as we discuss what to do about these changes. You may also notice that Medicare, Medicaid and Social Security benefits are not really part of the set of changes that may hit. So don’t believe anyone who tells you that the “fiscal cliff” means we need to strike a deal to cut benefits in those programs.

Then why do you hear so much about the need for a so-called “grand bargain” among pundits and politicians in Washington? It’s because, as usual, these folks are using the perception of a crisis to implement changes that they would want to push through anyway—cuts to the social safety net, low tax rates on corporations and the wealthy and less investment in domestic programs middle class people rely on. They’re spreading confusion and misinformation quite intentionally.

Here’s what the real story is: the election is over. Austerity lost. A government and an economy focused on the demands of the very richest lost. Candidates like Tommy Thompson, who bragged about “getting rid of” Medicare, lost to candidates like Tammy Baldwin who pledged to protect health care and retirement programs. Mitt Romney’s billionaire-friendly tax plan lost and President Obama’s tax plan, which asks the wealthiest to pay a little more, won.

In short, we don’t want a “grand bargain” dictated to us by Wall Street, by CEOs and by the austerity advocates who just lost the election. There’s no chorus of demand across the nation for cuts to Social Security and Medicare. We need to do the things we all agree on, like extending today’s tax rates for middle class families, and we need to take the overwhelmingly popular step of ending the Bush tax cuts for the top 2 percent.

We just worked hard to win the election—but now, as AFL-CIO President Richard Trumka notes, we’re going to have to work just as hard to make sure our elected leaders listen to the message they just got sent.