Over the course of about 24 hours, while most people were celebrating the New Year, Congress passed a bill to hold off some of the tax and spending changes set to kick in this year. Here are the major components:
- Current income tax rates were extended for income under $450,000, while the top 1 percent of earners will see taxes return to 1990s levels on income over $450,000. These rates don’t have a set expiration date.
- The “sequester,” a set of blunt-instrument spending cuts, was delayed for two months.
- Extended unemployment insurance was renewed.
- Several tax credits for middle-class families and businesses were extended, including tax credits for parents and for college tuition.
- A tax provision relating to mortgages will be extended so that people who benefit from the mortgage-fraud settlement won’t get a huge tax hit as a result.
- The estate tax will go from 35% to 40%, but with a much higher exemption, and one that will rise along with inflation.
There are good and bad things about this deal. The failure to extend or replace the payroll tax cut is a pretty big problem, and the estate tax cut is a huge giveaway to a few thousand very, very rich folks. Congress gave up the $250,000 tax threshold that President Obama and other victorious candidates ran and won on, another big concession to the top 2 percent. And, of course, it comes as the silly end to a silly fake crisis—rushed through on New Year’s Day with many major questions just postponed instead of settled.
At the same time, it’s important to note what this deal doesn’t do. It’s not the “grand bargain” of the dreams of CEOs and Washington pundits—there are no cuts to Social Security, Medicare or Medicaid benefits. The Republicans who control the House and have a fanatical devotion to not raising taxes on the very wealthiest nevertheless allowed this bill to come to the floor and pass.
So what happens next? Two big outstanding issues are what happens with the sequester and what happens with the debt ceiling, both of which will have to be re-considered by the end of February. That’ll be another opportunity for austerity-obsessed politicians and pundits to posture and spread falsehoods. But as Joe Weisenthal correctly argues here, the austerity shills have it backwards: focusing on the deficit is silly when what we need to do is invest in jobs and put more people back to work.
It will be very, very important over the next two months to assure Senators and Representatives that cuts to Medicare, Medicaid and Social Security benefits aren’t necessary, aren’t acceptable and shouldn’t be on the table. And there should be no tolerance for politicians who try to hold the economy hostage with debt-ceiling threats.
It would be nice to say that the fiscal fights are over, but we need to keep up the effort to push our members of Congress to reject bad deals.