Words: Charles Regnante
Washington, D.C. – On January 2nd, three hours shy of the midnight deadline, the White house and congressional leaders reached a deal to fend off the so-called fiscal cliff. But did Congress reach a deal or delay the problem once more?
Under the agreement brokered by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, Congress would permanently prolong the Bush income tax cuts at $400,000 and below, keep the estate tax threshold at $5 million and extend unemployment aid for one year. It would also briefly delay the sequester of billions of dollars in across-the board spending cuts for another two months. The cost of continuing current-spending levels will be compensated for through an even mix of tax revenue increases and subsequent spending cuts. Half of those cuts will be in defense spending; half will be in non-defense spending.
The deal involves other tax provisions as well: It extends the child tax credit and the college tuition credit for five years, individual and business tax extenders for two years, and Medicare for one year.
In my opinion, Congress has partially delayed the fiscal cliff and partially cleaned it up. The Fiscal Package does nothing to address the debt ceiling, which the government just hit on December 31st. Thus, prolonging another major political fiscal fistfight in the future. All in all, Congress has partially averted a crisis through bipartisan compromise.
Photo used with permission from Andy Withers