Tags: senate | deal | fiscal | cliff

The Fiscal Cliff Deal Is Acceptable, But Not Perfect

By    |   Tuesday, 01 January 2013 01:57 PM

The new Senate deal cobbled together by Vice President Joseph Biden and Senate Minority Leader Mitch McConnell is an acceptable one to me.

It is far from perfect, however.

The deal, as it is constructed, is very close to what I proposed in my Newsmax blog post — "Accept Tax Hike for the Rich, But…" — a few weeks ago.

In my column, I suggested that the Republicans accept Obama's tax increases for the highest income earners, and make it clear that they agreed to it under duress.

And, I wrote, Republicans should demand a revenue-neutral deal, that any tax increases be offset with additional tax cuts.

The political facts are that Obama won the election, he had made this a major issue during the election, and the Republicans only control one house in Congress.

The Republicans have leverage but not so much leverage that they can dictate the full terms of the deal.

I also suggested that the Republicans kick the can down the road on spending and not make that the focus of this deal. They are doing that here.

The real problem here is that many Republicans have bought into the idea that the deficit is our biggest national threat. It isn't.

As I've said over and over and over again, the threat to America is not the debt problem. It is a serious problem.

But the real threat is the failure to drive economic growth.

Growth is the answer to the debt problem, and many others that we now face as a result of the baby boomer crisis.

We need more economic growth. If the economy would continue to grow strong the deficit and debt would look less ominous.

In none of these discussions do I hear talk about economic growth and policies like ones dealing with energy, immigration, tax and trade that could help spur such growth.

Obama's plan for more taxes for the "rich" will be extremely dangerous for the economy.

At the new threshold of $400,000-plus for high income earners getting whacked, small business and consumer spending by the people for the biggest spenders will be curtailed!

The Republicans should have stood firm and argued for a full renewal of all the Bush tax cuts on the basis that the economy is simply too weak to accept any tax increase.

The Republicans could have used the same benchmark the Federal Reserve is using of 6.5 percent unemployment before they agree to any tax increases.

But there are some good things in this bill. First, most of the Bush tax cuts are not only renewed but are made permanent.

The increase in the threshold from $250,000 to $400,000 for tax increases is a step in the right direction, and will certainly cover most working Americans.

The Alternative Minimum Tax, or AMT, which is quite insidious, has now been indexed, cutting the legs off of its growing octopus of revenue accumulation.

But there are some very bad things in the Senate bill.

Two years ago, Congress cut the payroll tax from 6.2 percent to 4.2 percent. Under the Senate deal, that tax cut completely expires and reverts back to 6.2 percent on the first $113,700 in working income.

This is not a small tax increase but an almost 50 percent increase in the current payroll tax!

This tax increase, coupled with the increase on high income earners, will be harmful to the economy at this stage.

Then again, there is the other fiscal cliff hitting this year, the Obamacare tax increases, which everyone seems to be forgetting about.

The House should approve the Senate deal with some amendments. They should include a continuation of the payroll tax cut, and offer other tax cuts and credits to offset the tax increases that will hit high income earners.

The old proverb that "perfect is the enemy of the good" applies here.

House Republicans can vote for a compromise plan in good conscience, as long as they make clear the dangers inherent in the Democratic move to increase taxes on both workers and high income individuals.

Christopher Ruddy is CEO and editor of Newsmax Media Inc. Read more Christopher Ruddy Insider articles — Click Here Now.

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The new Senate deal cobbled together by Vice President Joseph Biden and Senate Minority Leader Mitch McConnell is an acceptable one to me. It is far from perfect, however.
Tuesday, 01 January 2013 01:57 PM
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