Washington's Fiscal Deal A Bad Deal for Working Class?

The "Fiscal Cliff" deal brokered by the Obama administration and Congressional leaders passed the House and Senate, avoiding the over-hyped "fiscal cliff."  While the corporate mainstream media, and Wall Street cheered the deal, progressives have expressed concerns about where the deal leads the negotiations over the debt ceiling and federal budget.  Republicans are perceived as having lost this round, but they got 98% of the Bush Tax cuts made permanent, loosing over $200 billion in tax revenue, and they now insist the next round will be focused on cutting "entitlements," i.e., Social Security and Medicare.  Unless enough revenue can be made up in "tax reform" (closing loopholes, or new taxes on dividends and stocks (Financial Transaction Tax), most of the deficit reduction will come out of Medicare and Social Security.

Progressives did get some things we wanted, like extension of unemployment benefits and the Earned Income Tax Credit and Child Tax Credits.  And taxes on some of the rich did go up for the first time in 20 years, but more tax revenue is needed to avoid deeper cuts in social programs.

So now the progressive/left must prepare to fight the Austerity Bandwagon.  We must insist on NO CUTS to Social Security and Medicare BENEFITS.

Progressives: Washington's Fiscal Deal a Predictable, Terrible Mess | Common Dreams

Obama Brokers Lousy Fiscal Deal

Obama's Offer on Fiscal Talks is "Insanity"

Paul Krugman: Perspective on the Deal

Business Insider: Great News , Rich Americans! Congress Just Raised Taxes on Workers While Saving Investors Millions

Wall Street Gears Up for Austerity Battles in 2013

Here's a summary of the Deal from the Coalition for Human Needs

What Congress Enacted:

You've seen the press accounts.  First the Senate voted 89-8 in favor of The American Taxpayer Relief Act of 2012 in the wee small hours of New Year's Day.  Then, after a flurry of opposition by House Republicans, including Majority Leader Eric Cantor (R-VA), the House Republican caucus took stock to see if they would have the votes to add a package of more than $300 billion in spending cuts to the Senate bill, although with only hours left to this Congress, it was clear that making such a change would doom the bill.  The House Republicans decided not to go there, and voted late on January 1 on the Senate bill unamended.  The bill passed 257-167, with 85 Republicans joining 172 Democrats in favor, and 151 Republicans and 16 Democrats voting no.  The President will sign the bill.

The bill raises about $620 billion in new revenues over the next 10 years (maybe $750b counting interest savings), and provides few spending cuts.  President Obama, although preferring a bigger deal with more revenue and a comprehensive replacement of the across-the-board cuts, makes the point that we are making deficit reduction decisions in stages.  Stage 1:  the initial $1.5 trillion in spending cuts (to appropriations including education, housing, community services, energy, environment, etc., as well as the Pentagon).  Stage 2:  what just passed; almost all revenue, but the new revenues are only about half the size of the spending cuts in Stage 1.  Stage 3:  what comes next - which could be another $1 trillion or so.  We strongly agree with the President that whatever savings come next must have a very substantial new revenues component, beyond what was just passed.  House Republicans want more spending cuts, but ix-nay on the axes-tay.

What to think about all this:  

It is very welcome that the unemployed and low- and middle-income families were helped and that harmful service or benefits cuts were largely avoided.  But the new revenues are simply inadequate to the task of long-term deficit reduction.  Because the debt ceiling was not raised, and is expected to get to crunch time by the end of February, the next round of replacing the sequestration (across-the-board) appropriations cuts will be decided in the midst of House proposals to tie increases in the debt ceiling to spending cuts. 

Over the next two months, we must work hard to emphasize and re-emphasize the harmfulness of cuts to programs that would be subject to sequestration - Head Start, housing, WIC, education, training, community services, LIHEAP, so much more - as well as the harm from cuts to Medicaid, SNAP/food stamps, Medicare, or SSI, all of which are threatened.  We must also include in our messages that it would be the height of recklessness for some in Congress to tie the increase in the debt ceiling to damaging service cuts.  As the President has rightly pointed out, the debt ceiling must rise to pay for expenses Congress has already "racked up."  Threatening to take us over this new cliff is grossly irresponsible, and we must add to a loud clamor against such threats. 

Details about the new bill:

• Unemployment Insurance:  The federal Emergency Unemployment Compensation program for long-term unemployed was extended for 1 year, sparing 2 million jobless people from going without benefits starting at the beginning of January, and 5 million people by the end of the year.  Very good news.
• New Revenues:  $620 billion over 10 years, far less than the President's previous proposals of as much as $1.6 trillion.
  • Income tax rates go up permanently for individuals with incomes above $400,000 and joint filers with incomes above $450,000.
  • Restoration of Clinton era limits on income tax personal exemptions (start phasing out on income over $250,000) and on itemized deductions (start phasing out on income over $300,000).
  • Capital gains and dividends taxed at 20 percent rate, up from 15 percent.
  • Payroll tax cut is allowed to expire (will rise from 4.2 percent to 6.2 percent starting this month).  This cost $120 billion a year; so ending it will take that out of people's incomes, costing a $50,000 earner about $83 a month.
• Estate Tax:  Although the rate rises from the current 35 percent to 40 percent, the exemption level for estates stays at $5 million for individuals/$10 million for couples, and is indexed for inflation, so will rise to $15 million in 2020.  Estimated to maintain most of the current extremely generous estate tax break.  The President had sought to reduce the exemption levels and rate to its 2009 level ($3.5 million/$7 million, 45 percent).  Big disappointment.
• Tax Reductions:
  • Below income levels listed above, everyone retains current law tax rates permanently.
  • Low-Income Tax Credits:  the improvements in the Child Tax Credit, Earned Income Tax Credit, and college American Opportunity Tax Credit that were enacted in 2009 are extended for 5 years.  Excellent that they are continued; distressing that they were not made permanent like the other income tax provisions.
  • Business and individual tax breaks extended for 1 year:  These, nicknamed the "extenders," are generally renewed each year, including Research and Development credits, housing credits, low-income worker hiring credit, investment credits, etc.; also deductions for individual taxes for state and local sales tax, tuition, teacher expenses, etc.  Includes energy tax credits.
  • Permanent fix for Alternate Minimum Tax (AMT), to prevent middle class households from being subject to the higher AMT.
• Sequestration (across-the-board) cuts delayed two months.  Costs $24 billion, with $12 billion from new revenues (higher taxes in the short-run from transfers by individuals from regular IRA's to Roth IRA's, but which would lose revenues in the long term), and $12 billion evenly split between Pentagon and domestic appropriations cuts, not yet specified, but spread over FYs 2013 and 2014.
• Medicare Physician Payments:  The "doc fix" is extended for a year (preventing the Sustainable Growth Rate, or SGR, from being reduced, saving physicians a 26.5 percent reduction in their Medicare payments.  Costs $30 billion, paid for by reducing payments to hospitals, including Disproportionate Share hospitals that serve uninsured patients.
• Tax Refunds Disregarded in Calculating Eligibility or Benefits for Means-Tested Programs:  existing provision made permanent.  (Disregarded as income; also disregarded as resources for one year.)
• Transitional Medical Assistance extended for a year.
• Farm Bill extended through September.  SNAP mostly untouched, except for nutrition education program cut in 2013.

Want more detail?  See Congressional Budget Office analysis; Joint Committee on Taxation analysis.

Class War: Republicans Go After "Entitlements" (Working Class, Poor & Elderly Benefits)

Sen. Corker: Debt ceiling is Republican ‘leverage’ to cut ‘entitlements’ | The Raw Story
 "Moderate" Republican Sen. Bob Corker is willing to go along with raising taxes on the top ONLY to get what he and the Republicans really want, "entitlement reform," i.e. CUTS to Medicare and Social Security BENEFITS.  This is the "Grand Bargain" that the GOP will try to get President Obama to agree to again, and if progressives don't push harder from the left to oppose ANY CUTS to SS or Medicare BENEFITS, Obama will probably cave.

 Monday is a national day of action to call Congress and ask representatives in the House and Senate to OPPOSE any cuts to Medicare and Social Security benefits, and let the "Bush Tax Cuts" on the top 2% expire.

  GOP Offers to Throw Middle Class, Elderly Over the "Fiscal Cliff"
 The Obscenely Rich Men Bent on Shredding the Safety Net
 Debt and Deficit Delusions
 4 Ways to Leap the "Fiscal Cliff" to a Better U.S.A.
 Robert Reich: Understanding the Fiscal Cliff
 10 Things Republicans Don't Want You To Know About the "Fiscal Cliff"

The Faces of Class Warfare

Sen. Bernie Sanders: Lloyd Blankfein is the Face of Class Warfare - YouTube



Sen. Sanders: Wall Street CEOs are the 'Faces of Class Warfare' | Common Dreams

Reject the Fiscal Cliff, Tax the Rich

Reject the Fiscal Cliff, Tax the Rich « Talking Union

A statement of the National Political Committee of the Democratic Socialists of America

November 20, 2012

 DSA rejects the “fiscal cliff” hysteria of the corporate establishment and the pressure for a “Grand Bargain” that would cut Social Security, Medicare and Medicaid. While unemployment remains high and economic growth slow, the government should not impose austerity measures that reduce essential programs that benefit the middle and working classes and that further shred the safety net for the most vulnerable. Rather, government policy should prioritize investments in job creation, public education and healthcare reform, while raising essential revenues by taxing the large corporations and wealthiest citizens who can afford to pay.

Immediately after the election, Wall Street-backed foundations such as Third Way and the Concord Coalition organized a “Campaign to Fix the Debt” to spin the election results as a mandate for a “bi-partisan” focus on reducing the deficit as the highest national priority. For decades the billionaire Pete Peterson has funded groups that claim that the universal entitlement programs Social Security and Medicare are bankrupting the nation and that their future growth must thus be drastically trimmed.  These neoliberals scored an initial success in 2011 when the Simpson-Bowles Congressional Commission put to a vote a long-term “budget compromise” that would have instituted three times as much in budget cuts than in tax increases. But despite President Obama’s evident willingness to reach such a one-sided compromise, Tea Party insistence on no tax increases, even on the wealthiest, scuttled the deal. The “resolution” of this manufactured, alleged “budget crisis” was to postpone a decision on further deficit reduction until the end of 2012, hence the contrived “fiscal cliff.”

What is the fiscal cliff? If Congress makes no changes to the Budget Control Act of 2011, the Bush tax cuts will expire on January 1, 2013. In addition, automatic cuts of $55 billion each in annual defense and “discretionary domestic” spending will begin. These tax increases and spending cuts, combined with the expiration of the FICA payroll tax cut and the end of extended unemployment benefits, will create a significant fiscal drag on the economy. The annual budget deficit will fall from over $1 trillion in 2012 to $500 billion dollars in 2013; and the resulting drop in aggregate demand from this combination of spending cuts and increases in taxes would almost definitely cause a double-dip recession.

Like other progressive groups, DSA rejects the notion that some “unified” fiscal cliff must be addressed in the lame-duck session of Congress. It is in fact a “fiscal obstacle course” that Congress should address without panic early in 2013, while heeding the election results. A progressive solution would include restoring all automatic domestic cuts, while making more strategic and deeper cuts in defense procurement spending. The revenue for expanding domestic social welfare spending can be raised by ending the Bush tax cuts for the top 2% and corporate tax-giveaways, while instituting a modest financial transaction tax on stock and bond transactions. In addition, Congress should restore the tradition of not requiring a separate authorization vote every time the current debt ceiling is crossed. Requiring such a vote provides the right with endless opportunities to blackmail the Congress into counter-productive budget slashing.

Specifically, DSA advocates that Congress pass legislation to:

1. Restore all the automatic cuts to the domestic discretionary budget. These cuts would deny WIC nutrition to 750,000 mothers and children, eliminate Title I funding for 1.8 million low-income school children and would deny 734,000 households home heating assistance. In addition, it would cut financing of all federal regulatory agencies by 10%.

2. Reauthorize federal funding of extended unemployment insurance. Otherwise, on January 1, 1.5 million unemployed workers and their dependents will lose their unemployment benefits.

3. Restore the improvements to the Earned Income Tax Credit and the Child Care Credit that have reduced the tax burden on the middle and working classes. To preserve the purchasing power that would be lost by an end to the 2% FICA payroll tax cut, reintroduce the 2009 Recovery Act refundable tax credit of $500 for individuals and $1,000 for families earning under $110,000.

4. Abolish the Bush tax cuts on the top 2% and tax capital gains and stock dividends at the same rate as earned income. Increase effective corporate taxation through the elimination of corporate tax loopholes and corporate “tax expenditures.”  These reforms would yield $275 billion in additional annual revenue. In addition, instituting a “Robin Hood Tax” could net another $300 billion in annual revenues. (This financial transaction tax is a small sales   for example a 0.25 % tax on all stock sales).

5. Make major cuts in our bloated defense budget, while creating a public jobs program that trains the unemployed to rebuild infrastructure, creates an alternative energy grid and expands mass transit.

6. Extend and strengthen Social Security for future generations, funding enhancements by progressively lifting the cap on earned income subject to the FICA tax and extending it to income derived from capital.

7. Progressively extend and strengthen Medicare/Medicaid, until it covers U.S. residents of all ages, while installing effective cost controls.

DSA welcomes and will work with broad national and local coalitions that are forming to fight cuts in Social Security, Medicare and Medicaid; to preserve programs that benefit the working poor and most vulnerable; to promote greater investment in public education and healthcare and to raise revenues by taxing the rich and corporations.  We also support Tavis Smiley’s and DSA National Honorary Chair Cornel West’s call for President Obama to convene a White House conference on poverty.

DSA will bring to these coalitions the educational perspective of our GET UP (Grassroots Economics Training for Understanding and Power) and The Other America is Our America (TOA) projects. GET UP analyzes the neoliberal capitalist roots of the Great Recession and advances social market economic alternatives. TOA demystifies the history of anti-poverty policy and argues for a new, true war on poverty. We can only stop the corporate drive for austerity if we educate, agitate and organize. DSA will join those in the streets resisting the bi-partisan effort to thwart the needs of the very constituencies that just re-elected our president.

Why Not Socialism?

Article by DSA's National Director Maria Svart in In These Times
Why Not Socialism? - In These Times

Bernie Sanders in a Fiery Speech: Do Not Cut Social Security, Medicare or Medicaid

Bernie Sanders in a Fiery Speech: Do Not Cut Social Security, Medicare or Medicaid 

After the 2012 Election: the Neglected Issue of US Poverty

Now that the election is over, it's time for the progressive/left to push Obama to support a real progressive agenda, starting with the War on Poverty, which was neglected in the 2012 Campaign, and Obama's first term.

Tavis Smiley, Cornel West on the 2012 Election and the Neglected Issue of US Poverty | Common Dreams



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Coalition on Human Needs

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Economic Hardship Reporting Project