Last year, after a threat by Republicans in the U.S. House of Representatives to default on the nation’s debt if cuts to spending weren’t made, lawmakers crafted a legislative package that became known as the “fiscal cliff:” If Congress couldn’t find a way to reduce debt by Jan. 1, 2013, a huge series of automatic tax increases and spending cuts would kick in, all but eliminating the medium-term debt problem, but at the cost of economic growth (and possibly a new recession).
It took two months, but Congress – led by leaders in the Senate – came to an agreement on New Year’s Eve, which was then passed this week (over the objections of House Republicans) and signed by President Barack Obama. The details are straightforward: marginal tax rates will rise to Clinton-era levels for families with income over $450,000, and individuals above $400,000. Taxes on capital gains will rise to 20 per cent for people at that threshold as well.
Taxes on estates worth more than $5-million will rise to 40 per cent, and personal exemptions will be phased out for those making more than $250,000. All automatic spending cuts will be delayed for several months. On the spending side, the deal preserves low-income tax credits for five years, extends unemployment insurance, and retains temporary tax breaks for small businesses.
If there’s a critical omission from this agreement – one that guarantees another crisis – it’s the lack of any deal on the debt ceiling. As was the case in 2011, Republicans will be free to use this routine administrative function as leverage for large cuts to programs like Medicare, Social Security, and Medicaid. And with a demonstrated willingness to crash the global economy, odds are good that they will succeed.
Which is a reminder that, if there’s a single thing wrong with American government at the moment, it’s the Republican Party. For a variety of reasons it has become captured by an extreme right-wing element that has little regard for the health of the economy and a monomaniacal focus on spending cuts, even when – among programs for the poor and working-class – there just isn’t much to cut anymore.
Yes, there are changes to be made to the basic institutions of Congress, but in the short-term, the GOP’s penchant for legislative hostage taking and brinkmanship –its willingness to shut down government and induce an economic slowdown – has made governance a form of crisis management. Either Democrats agree to dismantle the social safety net, or Republicans crash the global economy.
So far, we’ve been able to avoid the latter. But everyone outside of the GOP can see that this is unsustainable, and will lead to disaster for the United States, in one way or another. But since the debt ceiling is on the horizon, it’s safe to say there’s no reason for Republicans to stop this dangerous game.
Jamelle Bouie is a writer at The American Prospect magazine. This post is adapted from a longer article on the fiscal-cliff aftermath.