Congress Prevents The Fiscal Cliff By Creating Another Cliff

Early in the morning on New Year's Day, Congress passed legislation to avert the ominous "fiscal cliff", a combination of spending cuts and tax increases that could have reverted the nation into a recession. The bill is now on its way to President Obama's desk to be signed.

In the Senate, the bill passed by a vote of 89-8 with 3 Democrats and 5 Republicans voting against the bill. The House passed the bill by a vote of 257-167 with 16 Democrats and 151 Republicans voting against the cliff deal.

The fiscal cliff deal, officially H.R. 8, The American Taxpayer Relief Act, includes the following provisions:

- Permanently extends Bush tax cuts for the majority of taxpayers. Taxes will increase on individuals making $400,000 or more and couples making $450,000 or more.

- Taxes on capital gains and dividends will remain the same for individuals making less than $400,000 and households with an income of less than $450,000. The top tax rate of capital gains will increase from 15% to 20%.

- Tax exceptions will be phased out for individuals making $250,000 or more and families earning more than $300,000.

- Delays sequestration cuts for 2 months. The delay will be paid for with savings from adjustments in federal pensions as well as cuts in discretionary and military spending.

- One year extension for unemployment insurance.

- One year "Doc Fix" that prevents 27% cut in physicians' reimbursement for Medicare.

- Estate tax will increase from 35% to 40% for the first $5 million in assets.

- Alternative Minimum Tax will permanently be tied to inflation.

- Five year extensions of the American Opportunity Tax Credit, Child Tax Credit, and the Earned Income Tax Credit.

- Business tax breaks.

- Nine month Farm Bill extension.

- Congressional pay freeze.

Although the nation did not fall off the cliff, the fiscal cliff deal may have setup a future crisis that the 113th Congress will need to tackle in the coming months. The crisis will be the simultaneous enactment of sequestration cuts and the debt limit expiration. Additionally, the FY13 budgeting CR will expire a few weeks after.  Prepare for the fiscal cliff 2.0.

Debt "Supercommittee" is hitting a deadlock dangerously close to their deadline.

Next week is the deadline for the Joint Select Committee on Deficit Reduction to come up with a plan to reduce the federal deficit by $1.2 trillion over the next ten years. After a week or two of hopeful momentum on reaching a deal, including proposals from the two parties that only differ by $100 billion on taxes, negotiations have stalled once again. Formal legislation must be introduced by November 21^st and voted on by November 23^rd.

The main points of contention between the Republicans and Democrats on the committee are changes to Medicare and tax revenue increases. Last week Democrats said they would be willing to go as low as $401 billion in new revenue, while Republicans indicated the highest they were willing to go up to is about $300 billion. They differ on the types of tax reform that would generate this revenue. This week we are hearing more bickering than negotiation, more blame game than end game.

While it is unclear whether the committee will be able to reach a deal in time, all hope is not lost. It certainly wouldn’t be the first deal struck at the last possible minute this year—the very Budget Control Act that created this “Supercommittee” and raised the deficit ceiling was passed just hours before the U.S. government would have defaulted on its borrowing authority. Congress also narrowly avoided a government shutdown back in April when they couldn’t agree on how to fund the remainder of Fiscal Year 2011. 

The Clock is Ticking: The Super Committee's Timeline

Between the Occupy Wall Street protests, Republican primary debates, and recent death of Muammar Gaddafi, many people seem to have lost sight of something very important: The 12 member bipartisan debt “Super Committee” that has been charged with finding $1.2 Trillion in cuts over the next ten years. In case you have not heard, The 12 members of the panel include:

Rep. Van Hollen (D-MD)
Rep. Clyburn (D-SC)
Rep. Becerra (D-CA)
Rep. Camp (R-MI)
Rep. Upton (R-MI)
Rep. Hensarling (R-TX, co-chair)
Sen. Baucus (D-MT)
Sen. Murray (D-WA, co-chair)
Sen. Kerry (D-MA)
Sen. Portman (R-OH)
Sen. Toomey (R-PA)
Sen. Kyl (R-AZ)

With extraordinarily secretive proceedings, there is only speculation about where the group is in terms of finding a consensus. There is a nice timeline at the Atlantic that outlines the urgency of the situation. Roughly five weeks from today, the committee will vote on its proposal. This will require a simple majority to pass. Assuming the proposal passes, a month later both chambers of Congress will vote on the proposal. That is right around the corner.

Whatever your advocacy issue is, I would HIGHLY suggest that you begin to reach out to your respective legislators and tell them how your issue should be treated in the Super Committee’s deliberations. You can also send your recommendations directly to the super committee on their website.

Final 3 Members of Debt "Super Committee" Announced

Today, Minority Leader Nancy Pelosi appointed Rep. Van Hollen (D-MD), Rep. Clyburn (D-SC), and Rep. Becerra (D-CA) to serve on the “super committee” created under the debt ceiling agreement. This rounds out the 12-member bipartisan panel tasked with developing a plan to cut $1.5 trillion from the federal deficit over the next decade. Part of the debt ceiling agreement dictates that automatic cuts across the board on domestic and defense spending will be “triggered” if this committee cannot agree to a plan by Thanksgiving and get it approved by Congress before Christmas (happy holidays to all!)

If this special committee is any reflection of Congress at large then it goes without saying that they have a bumpy road ahead of them. With six republicans who have all gone on the record against any revenue increases and democrats that have strongly resisted cuts to entitlements, this group could easily fall into the same political stalemate we have all been losing sleep over for months (or is that just me?).  Here’s hoping they can turn over a new leaf and actually work together on a compromise. Goodness knows I could use the extra beauty sleep.

Here’s the full list of Members on the bipartisan panel:

Rep. Van Hollen (D-MD)

Rep. Clyburn (D-SC)

Rep. Becerra (D-CA)

Rep. Camp (R-MI)

Rep. Upton (R-MI)

Rep. Hensarling (R-TX, co-chair)

Sen. Baucus (D-MT)

Sen. Murray (D-WA, co-chair)

Sen. Kerry (D-MA)

Sen. Portman (R-OH)

Sen. Toomey (R-PA)

Sen. Kyl (R-AZ)

Are We Going to Hand Over the Pink Slip on the United States?

People sometimes see me as an apologist for Congressional inaction. I tend to go on and on about how the founding fathers actually WANTED to structure a government that can't really get anything done except in times of great distress (think Roosevelt's New Deal, for example.)

I've asked people to recognize that the vehement differences between members of Congress who represent very rural Alabama versus those who represent urban New York, as examples, will sometimes put the U.S. Congress in a giant game of "chicken" as legislators do their best to represent their constituents' views.

The responsible way out of this game is through compromise. After a variety of shenanigans we usually get out of it, but I'm not so sure about that this time.

It seems to me we have two options:

• Option One: Refuse to compromise, let the government default, see our credit rating decline and, eventually, be unable to pay our bills because no one will give us any money. Umm, not optimal. If we're worried about spending cuts and/or revenue increases now, we're sure not going to like the depth and breadth of them when we go bankrupt.
• Option Two: Agree to compromise on spending cuts that are less dramatic and revenue increases that are manageable, see our credit rating decline slightly (probably can't avoid it now) and recognize that in taking these steps now we'll have more control over what happens to us in the future.

Yes, I know that some members of Congress ran on a commitment to balance the budget immediately if not sooner. Frankly, this was never possible. Governing is very different from campaigning and it is folly for citizens and elected officials to think differently.

Next time a politician tells you "I won't raise taxes and I'll balance the budget" I suggest you point out that those responsible for protecting the long term interests of the United States may need to compromise -- and ask them what their plan is for building bridges, not burning them.

In fact, I encourage you to deliver this message now which, given the state of the Capitol switchboards, it appears thousands are already doing. You can figure out who your legislators are at www.congress.org, e-mail them through that site or call the Capitol at (202) 224-3121.

Unless we want to give someone the pink slip on the United States, we've got to tell the leadership on both sides of the aisle to stop letting their fringe hold the rest of us hostage in this debate.

If we think government is broken, It's time for the American public to fix it by being the grown ups in this situation. Call or write your legislator today and let them know compromise is OK and even expected. Apparently, only we can solve this problem.

Nero Fiddles While Rome Burns: Or, What the HECK is Going on in DC?

Doesn't it seem like the heat wave here in Washington, DC may be seeping into the brains of our elected officials? I'm guessing that the real problem here is that people are suffering from heat exhaustion. I know I'm exhausted just hearing about it!

While Washington literally burns in 110 degree heat, you've probably heard that we have a little debt ceiling situation here in Washington, DC and that Republicans and Democrats are in just a bit of a stand-off. Some want dramatic cuts in discretionary programs. Some want tax increases. Some don't. No one wants to make significant changes to Social Security or Medicare. Every wants their specific perspective to be the ONLY one adopted.

For example, earlier today we learned that the Senate rejected the House proposal for "cut, cap, balance" and then left for the weekend. For the uninitiated, "cut, cap, balance" is a proposal to require Congress to dramatically cut and cap spending and then proposed an amendment to the Constitution that would require a balanced budget.

I'm not a fan of cut, cap, balance for a variety of reasons (many of which are outlined in this CNN Money report), but the main thing that bugs me is that all the votes on it are a complete waste of time. The House shouldn't have passed it and the Senate shouldn't have taken it up (hey, if they did nothing it wouldn't have become law anyway!) It was obviously a non-starter for a variety of reasons, one of which is the balanced budget amendment.

Last time I checked, it takes a two-thirds vote in both the House and the Senate (which would have been totally impossible, I might note) to even PROPOSE a constitutional amendment to the states and then three-fourths of the states must agree. People have been trying to do that on the budget issue since the Constitution was ratified. Absolutely nothing immediately substantive would come out of a balanced budget vote, so clearly the idea here wasn't to get something done. It was to make a statement. I don't think we have time for "statements" now. I think we need to get this thing taken care of.

One of the main problems, though, behind why members of Congress have no stomach for reducing spending is that the American people don't have the stomach for reducing spending, particularly on the big ticket items. There's a lot of talk about eliminating funding for a variety of programs that will have absolutely NO impact on the overall budget (public broadcasting, planned parenthood and the like). Taken all together, the two items mentioned here represent less than one one-hundredth of one percent of the budget.

We should be focusing on things that can really get us out of this situation even if, yes, that means raising taxes or messing with Social Security and Medicare. There, I said it. Citizens should tell their members of Congress that we should stop fiddling while Rome burns and get on with it!

Work on FY 12 Spending Bills Moves Slowly as Congress Tackles Debt Limit before Deadline

The federal government is on track to reach the $14.3 trillion debt ceiling two weeks from today. The looming August 2 deadline means that most other issues on Capitol Hill are taking a backseat. Even the Fiscal Year 2012 appropriations process is partly on hold as everyone waits to see what deal congressional leaders will make to avoid the projected fallout of defaulting on federal debt. The current fiscal year will end September 30th, but this deadline is not always met by Congress. (Remember the near shutdown before a budget deal was reached in April for the current fiscal year? That was more than 6 months late.)

To date, only five of the twelve annual appropriations bills have been approved by the House and only one has been formally taken up by the Senate. Three bills—dealing with transportation and housing; the State Department and foreign aid; and labor, health and education spending—have not been introduced at all. What these three bills have in common is the likelihood of being targets for major reductions in funding if spending cuts are part of the debt deal.

Negotiations on a variety of proposals for handling our nation’s debt and future budgets are expected to continue right up until the August 2 deadline. Only after a short- or long-term compromise is reached, will we see final agreements on spending for FY 12. In the meantime, if you are confused about the deficit and what it means in terms of national spending, check out Five truths about the deficit and national debt.

Leadership and Congress (or Lack Thereof)

On June 27, the Post published a piece from former Senator Tom Daschle regarding the dirty leadership of Congress. You can read more about it at:

http://www.washingtonpost.com/national/on-leadership/washingtons-leadership-failure-on-the-debt-ceiling/2011/06/27/AGciIsnH_story.html?hpid=z5

As we watch the talks on the debt ceiling and deficit reduction slowly and painfully start to fall apart, I think this question of leadership is paramount. For those who, thankfully, don't follow the day-to-day drama in Washington, DC, here's the scoop: First of all, there's a group of Senators (or is it a gaggle of Senators? I'm not sure) working on a cadre of proposed cuts designed to keep everyone equally satisfied enough to vote increase the so-called debt ceiling before the U.S. defaults on its loans. The group used to be called the gang of six, but, since one gave up and left, are now the fabulous five and, no doubt, will become the fearsome four soon.

Meanwhile in the House, a bi-partisan group has been trying to come up with a bazillion dollars in cuts in the federal budget, but everyone git cranky with each other over the question of taxes, so people their ball and went home. If it sounds like a schoolyard (or a soap opera) it kind of is.

So in my opinion here's the real problem: while our system of government is designed to encourage all the infighting and arguing, the Founding Fathers had some hope that someone would step-up and bring all these factions together. Unfortunately, right now everyone is sticking like glue to their side, with little thought of compromise.

For advocates, this means that maybe we'll have to be grown-ups. Maybe it means that we should let our legislators know "Hey, compromise is OK, it's how it's supposed to work." Too many people spend too much time telling elected officials that it's "my way or the highway." The only way we're to get out of this mess is if we we work together and maybe we as citizens need to set the example. If you'd like to do so, go to www.congress.org, look up your legislators and let them know what you think!