President Barack Obama and Vice President Joe Biden make a statement regarding the passage of the fiscal cliff bill in the Brady Press Briefing Room at the White House in Washington, Tuesday, January 1, 2013. (AP Photo/Charles Dharapak)
Many liberals are bashing the deal passed last night by Congress, and not without reason. Even Senate Majority Leader Harry Reid reportedly thought this was a bad deal, though he did buck up and support it.
There are some key ways this deal falls short. But let’s first credit what’s good about it:
Raising rates on top earners. If you’re a member of the top 1 percent, you don’t like this deal. For the first time in over a decade, people making over $450,000 in household income will pay a 39.6 percent income tax rate, up from 35 percent—thus achieving a long-held liberal goal of reducing the inequity of the Bush tax cuts. True, the threshold was raised from $250,000, but that only sacrifices $100–$200 billion in revenue over ten years. Meanwhile it’s broken the iron anti-tax ideology of the GOP. This shouldn’t be overlooked. Also, rates on capital gains and dividends rose to 23.8 percent from 15 percent on households earning over $450,000 per year.
Extended unemployment insurance. Two million long-term unemployed Americans would have lost benefits if no deal was reached, and another 1 million in the first quarter of 2013. Now they won’t, which provides a critical boost to the economy and a helping hand to the victims of an awful economic crisis.
No Medicare, Medicaid and Social Security cuts. This is also a big win. For months, well-funded Wall Street and corporate interests flooded the airwaves with ads demanding that Washington “Fix the Debt,” and sent a steady stream of lobbyists and advocates through offices across the capital. One of the overriding goals of this effort—particularly the stuff funded by Peter G. Peterson—was to cut the social safety net. They failed miserably, and this is a significant victory not only on the policy merits, but because these Very Serious People were exposed as having no real public constituency and accordingly not nearly as much clout as everyone feared.
Sequesters delayed. This isn’t over—more on this in the bad news section—but the non-defense domestic cuts could have been devastating, and now won’t happen. It’s true this will come up again in two months, but the Democrats haven’t given anything away until they have. Republicans are seeing a disturbing trend of being promised spending cuts and then not getting them—this is the third time they’ve been put off.
Some good tax breaks. Obviously not the desired stimulus of most liberals, but it’s important that the Opportunity, Child and Earned Income tax breaks were extended for five years, which aids many middle- and lower-class Americans. The wind power industry also received significant tax help, so there’s something for environmentalists to like too. (They were also encouraged that the non-defense sequester didn’t ravage the EPA and other important federal environmental initiatives).