In the controversy surrounding the “fiscal cliff” issue, it is easy to forget that the origin of the entire debate was a professed desire to reduce swollen federal deficits.
Whether the target was US$4 trillion over 10 years, as proposed by the Bowles-Simpson deficit reduction commission, or in the US$2 trillion range, as tossed around by US House of Representatives Speaker John Boehner and US President Barack Obama, the idea was to rein in total debt that now tops US$16 trillion.
By those standards, the bill passed by Congress on Tuesday to avoid the cliff’s automatic steep tax hikes and across-the-board spending cuts looks paltry indeed.
The legislation, which won final approval in the House late on Tuesday after passing the US Senate early in the day, adds nearly US$4 trillion to federal deficits over a decade compared with the debt reduction envisioned in the extreme scenario of the cliff, according to the non-partisan Congressional Budget Office.
This is largely because it extends low income tax rates for nearly every American except the relative handful above the US$400,000 threshold.
It is also because it put off for at least two months the automatic budget cuts that were part of the cliff and would have saved about US$109 billion in federal spending on defense and non-defense programs alike. The legislation, which ultimately came down to a fight about tax equity rather than federal spending, did to deficit reduction what Obama and congressional leaders always promise to resist: It “kicked the can down the road” to a later date.
In explaining the measure to the news media, the White House, which helped broker it, gave no particular figure for how much it would bring down the deficit, stating only that, somehow, “with a strengthening economy,” it would.
Whether it ultimately succeeds will depend in part on what happens to the now-delayed “automatic” spending cuts, including whether Obama follows through on reductions in outlays.
The legislation also sets up what is likely to be an even more heated fight late next month, when the Treasury Department must come to Congress to seek an increase in the government’s borrowing limit.
That will bring everything full circle to where the cliff originated during a struggle between Obama and Republicans over raising the federal debt ceiling above US$14.5 trillion.
That struggle ended in August 2011, with a bipartisan deal designed to scare Congress into legislating significant long-term cuts in federal spending.
The idea was that by setting a strict deadline of Jan. 2 this year, and dire consequences in the form of draconian spending cuts for failing to meet it, the White House and Congress would be forced into action.
Republican US Representative Paul Ryan, a self-described deficit hawk who served as the Republican US vice presidential candidate in November’s election, declared the moment a “huge cultural change.”
Coincidentally, low tax rates that originated during the administration of former US president George W. Bush were also set to expire at the end of last year, making the prospect of inaction so threatening that the Congressional Budget Office determined that failure to intervene could cause a new recession.
However, the controversy over taxes, coming on the heels of a presidential campaign built around Obama’s demand for middle-class tax justice, ultimately consumed the argument over the cliff, leaving deficit reduction as the forgotten issue.
Among those disappointed by the process was Alice Rivlin, a Brookings Institution academic, former US budget director and co-author of another widely discussed deficit reduction plan named for herself and former US Senator Pete Domenici, a Republican from New Mexico.
“I’d been optimistic,” Rivlin said. “I thought that we might get might get it done” and that Boehner and Obama “might get to a grand bargain.”
Maya MacGuineas, a budget hawk who has led a group of corporate chieftains in a group called “Fix the Debt,” was also unenthusiastic about the bill.
“This is one of the lowest common denominator deals,” MacGuineas said. “I wish I had something nice to say, but not so much.”
Republican US lawmakers on Friday criticized US President Joe Biden’s administration after sanctioned Chinese telecoms equipment giant Huawei unveiled a laptop this week powered by an Intel artificial intelligence (AI) chip. The US placed Huawei on a trade restriction list in 2019 for contravening Iran sanctions, part of a broader effort to hobble Beijing’s technological advances. Placement on the list means the company’s suppliers have to seek a special, difficult-to-obtain license before shipping to it. One such license, issued by then-US president Donald Trump’s administration, has allowed Intel to ship central processors to Huawei for use in laptops since 2020. China hardliners
A top Vietnamese property tycoon was on Thursday sentenced to death in one of the biggest corruption cases in history, with an estimated US$27 billion in damages. A panel of three hand-picked jurors and two judges rejected all defense arguments by Truong My Lan, chair of major developer Van Thinh Phat, who was found guilty of swindling cash from Saigon Commercial Bank (SCB) over a decade. “The defendant’s actions ... eroded people’s trust in the leadership of the [Communist] Party and state,” read the verdict at the trial in Ho Chi Minh City. After the five-week trial, 85 others were also sentenced on
Conjoined twins Lori and George Schappell, who pursued separate careers, interests and relationships during lives that defied medical expectations, died this month in Pennsylvania, funeral home officials said. They were 62. The twins, listed by Guinness World Records as the oldest living conjoined twins, died on April 7 at the Hospital of the University of Pennsylvania, obituaries posted by Leibensperger Funeral Homes of Hamburg said. The cause of death was not detailed. “When we were born, the doctors didn’t think we’d make 30, but we proved them wrong,” Lori said in an interview when they turned 50, the Philadelphia Inquirer reported. The
RAMPAGE: A Palestinian man was left dead after dozens of Israeli settlers searching for a missing 14-year-old boy stormed a village in the Israeli-occupied West Bank US President Joe Biden on Friday said he expected Iran to attack Israel “sooner, rather than later” and warned Tehran not to proceed. Asked by reporters about his message to Iran, Biden simply said: “Don’t,” underscoring Washington’s commitment to defend Israel. “We are devoted to the defense of Israel. We will support Israel. We will help defend Israel and Iran will not succeed,” he said. Biden said he would not divulge secure information, but said his expectation was that an attack could come “sooner, rather than later.” Israel braced on Friday for an attack by Iran or its proxies as warnings grew of