Fiscal Cliff Shenanigans

One could argue that the fiscal cliff ploy worked out quite well for those most interested in ensuring that the election results did not change the general discourse and direction of the country. While conservatives would have been happier having their man in the White House and a majority in the Senate, the "great compromiser" Obama gave them more than they really wanted anyway. In the end, there were not the dramatic cuts to Medicare, Social Security and social services that the right might have dreamed of. But they did make the tax increases much more manageable and they just pushed the battle to come back a couple of months. So who are the winners and losers in the agreement? Here are some ...

Winners
1. The wealthy: pushing the threshold from 250k to 450k means that substantially less people will be paying the higher rate than otherwise, and the extension of other Bush era tax cuts means a lot of lost income to the government. The idea that this group is "job creators" is one of the great myths of our modern era and this compromise was yet another example of Obama relented to the whims of the wealthy. 

2. Corporations: a number of loopholes in the current bill allowed corporations and particularly bankers to continue to profit at the expense of everyone else. The idea that any new financial regulation is on the way seems unlikely and instead banks can presume that any time they lose on risky bets, the government will again bail them out. 

3. Doctors/Hospitals/Pharmaceutical Companies: the medical establishment was braced for cuts in Medicare reimbursements, but that is not happening and they are thus still in a position to reap the benefits of the most expensive healthcare in the entire world. Hooray!

4. Moderates/Conservatives: while some conservatives in the House and Senate did vote for the bill, it's tame measures mean that moderate democrats and conservatives will not risk too much in the outcome. Obama won with a clear mandate to push for more progressive economic policy but he again showed a willingness to sell out his core constituents, even right after a historic victory.
 
5. Unemployed: the extension of unemployment benefits is good news for those having trouble finding jobs and for the economy in general. Few sane people would complain about this component of the bargain; though there are plenty of insane folks making and influencing policy in DC.
 
Losers 

1. Progressives: anyone who has been paying attention and cares about the future of the country will be upset by Obama's continued penchant to cowtow before conservative intransigence.  Most progressives would probably agree that it would have been better to go over the fiscal cliff rather than settle for this stop gap approach that doesn't really address the underlying issues. Anyone who thought Obama might actually stand up for his principles with no more elections to win, as I hoped, will have to be disappointed.

2. The economy (and most Americans): this weekend I will explore the reality of the new economy in more detail, but suffice it to say that in a country where 70 percent of the economy is consumption, the continued growth in income inequality actually hurts all of us (except Wall Street and corporate execs). By failing to extend the payroll tax cut that most people have been receiving for over a year, the take home income of the middle class will decline. This seems like an absurd time to do this, particularly as we only raise taxes minimally on those at the top. The cost, according to many economists, will be slower economic growth and probably continued (and maybe increasing) unemployment. One could argue we are moving perilously close to becoming a plutocracy where policy has very little to do with the interests of the people, even on a macro level.

3. Grover Norquist: can it be that the king of "no new taxes" has finally seen the grand revolt many have been hoping for for two decades? One has to believe that his power is waning as many GOP representatives did in fact vote for raising taxes at the top of the scale (and really for a tax increase for most working Americans as outlined above). As I have often argued in the this blog, fundamentalism of any form is a great danger to progress and the anti-tax fundamentalism has been particularly detrimental to the economy and our collective futures. Let's hope this is but the first step in moving away from this foolish consistency on the right.