In other words, even as economists and lawmakers aligned with both parties decry the negative impact of uncertainty around taxing and spending on the nation’s economy, the issue of what the vast majority of Americans should pay to Uncle Sam will be upon us again in (at best) 12 months.
A look at the year-end fiscal cliff – or an accumulation of expiring taxing and spending provisions expected to take $560 billion out of the US economy – shows the extent to which Washington can’t put its financial demons to rest.
There’s some $400 billion in higher taxes, including the expiration of the Bush tax rates (extended by Obama in 2010), a temporary reduction in the Social Security payroll tax (passed in the lame duck session of Congress in 2011), and a host of other measures requiring annual congressional action, such as the need to patch the Alternative Minimum Tax (which saves middle-class taxpayers from a stinging tax increase) and to implement the “doc fix,” which prevents doctors from seeing their Medicare reimbursement rates slashed.
There’s $26 billion in expiring emergency unemployment benefits (extended several times since 2009). Finally, there’s $76 billion in cuts from the Budget Control Act, a deficit-capping deal struck in the heat of last summer’s negotiations to raise the national debt ceiling. Those cuts are coming into effect because Congress, recognizing its zombie problem, put automatic cuts into law in case Congress couldn’t determine an alternative path to reducing the deficit.
Congress couldn’t figure it out, so here come the cuts.