Washington kicks the can

The Capitol stayed lit intothe night on New Year's Day as Congress worked to avoid the fiscal cliff.
The Capitol stayed lit intothe night on New Year's Day as Congress worked to avoid the fiscal cliff. (JACQUELYN MARTIN / AP)
Posted: January 03, 2013

No one should be applauding Congress' bipartisan deal to avoid the fiscal cliff. True, it does fix a few problems that Congress itself created, including a scheduled unemployment-insurance cutoff, a reduction of Medicare payments to doctors, the Alternative Minimum Tax, and a threatened increase in milk prices. But it's mostly bad news for Americans.

Congress did not deal with the approaching debt ceiling or automatic spending cuts, ensuring further standoffs within a few months. That means more opportunities for hostage-taking and media hysterics.

President Obama is claiming that tax increases for the wealthy under the deal will yield $600 billion in new revenue over the next 10 years. But that's compared with what would have happened if all the Bush tax cuts had been extended - which was never going to happen, as the president himself guaranteed. Meanwhile, the rich will see the tax rate on corporate dividends permanently reduced to 20 percent, down from 39.6 percent under Bill Clinton.

Compared with what would have happened without the deal, the Congressional Budget Office found, federal deficits over the next 10 years will actually increase by $3.9 trillion. So much for deficit reduction.

While everyone claims to favor simplification of the tax system, this deal promotes mind-boggling complexity in the form of phaseouts of the personal exemption and itemized deductions for certain taxpayers. There is no constituency for these measures; no lobbyists are pushing for them. Their only supporters are politicians trying to find tax revenue without increasing tax rates. These phaseouts would be a top target of any true tax reform.

But the fundamental unaddressed problem is that no Democrats or Republicans are willing to tell the American people the truth they don't want to hear: We simply can't fund the most powerful military in the world, Social Security, Medicare, and more with historically and comparatively low rates of taxation.

Yet, given a choice, that is what many Americans will vote for: high levels of spending and low levels of taxation.

Someone needs to deliver the message that services have to be paid for. Ideally, that person should be our nation's leader, the president. Obama is ideally situated to deliver that truth, since he will not face voters again. And I still hope he will rise to the occasion.

But the fiscal deal Obama is championing is a discouraging sign of his willingness to bargain away a strong position. Allowing all the Bush tax cuts to expire, and all the sequestration spending cuts to begin at least temporarily, would have strengthened the president's hand for seriously addressing our core fiscal problem. Instead, we got a temporary compromise that solves nothing.

Jan C. Ting is a professor of law

at Temple University's Beasley School of Law. He can be reached at janting@temple.edu.