Seems to me that Congress and the President performed about as expected as the fiscal cliff deadline approached. I was not surprised that Obama had to retreat from his $250,000 threshold for preserving the income tax rate cut, or that several important but deferrable decisions were kicked down the road. What disappointed me was that the 2% reduction in the payroll tax was allowed to expire, in effect subjecting everyone making less than $113,000 or so to an across-the-board (not marginal) effective tax increase of that amount. I’m not sure if this increased revenue goes into the treasury (in which case it at least will keep the deficit from increasing) or if it is sequestered to be used solely to pay social security and medicare benefits. In either case, though, it’s taking a lot of potentially stimulating spending power out of the economy, perhaps more than will be generated by the restoration of higher marginal rates on the 1.5%. Looks to me like a real defeat for Obama and for the middle class, again to the benefit of the rich, though it doesn’t seem like the mainstream media are reporting it that way.
Fiscal cliff retreat