Wednesday, January 2, 2013

Cliff Not Averted Though Chutes Handed Out

On New Year's Eve, the Senate pulled the House bill, HR8, off its "no vote" shelf, amended it, and passed it. HR8 was first proposed in July 2012. It was sent to the Senate in September.

After previous attempts by John Boehner failed to garner either support from fiscal conservatives in the House and threats of veto from Obama, the House passed the ball to the Senate to propose a plan.

In order to bypass the Constitutional provision that all tax legislation originate in the House, the Senate pulled HR8 off of the shelf and amended it.

The major amendments to HR8 were to change the expiration date on tax exemptions, credits, and subsidies to December 31, 2013. However, many of those exemptions as well as the so-called "Bush Tax Cuts" on individuals and households making over $450k a year would be allowed to expire. Basically, it renewed those cuts on middle and lower income earners. In essence, it handed out a few parachutes to a few people.

Perusing the bill, exemptions, credits, subsidies, loopholes, and tax breaks are still extended to so-called "green energy" companies and individuals regardless of income bracket. There are also special tax exemptions for "certain" film makers and the entertainment industry.

The bill does nothing to cut excess spending. It is mostly a tax bill. The one non-tax related item included in the bill is a one-year extension of unemployment handouts.

Both houses of Congress have kicked the other half of the problems over the cliff. They intend to address spending cuts as part of negotiations involving increasing the debt ceiling. The problem is that the federal government hit its credit limit, at $16.4 Trillion, on December 31, 2012. The debt ceiling issue is not scheduled to be addressed until February or March 2013. In the meantime, the federal government is still spending far more than it is accruing in taxes and regulatory fees.

The amended HR8 the Senate passed on New Year's Eve went before the House for a vote on January 1. 2013. At 11:01 PM EST, the House reported a vote to pass the bill. The final vote was 257 in favor to 167 opposed with 8 abstains. 85 Republicans voted in favor of the amended HR8 while 151 Republicans opposed it. The bill was largely supported by the socialists with 172 of them supporting the bill.

The bill does not avert the so-called "fiscal cliff". It will raise some revenue, though even less than Boehner's debacle called "Plan B" would have. It increases spending instead of offering any cuts. It provides special tax breaks to the socialists' pet groups in the film industry and the so-called "green energy" industry.

Meanwhile, the new taxes enacted by the PPACA start taking effect and punishing those who achieve, earn, prosper, and provide opportunities for others to do the same. These negate any breaks granted to those households earning less than $400k a year.

The bottom line is that little was done, though some of the looming pain was postponed for select segments of society. Welcome to class warfare.