So … what happened? With regular coverage of the US “Fiscal Cliff” running up to the new year, PowerBlog readers may be wondering where the discussion has gone. While I am by no means the most qualified to comment on the matter, I thought a basic summary and critique would be in order:
- With six minutes to read this 157 page bill, the US House of Representatives passed it. (Note: either I’m an exceptionally slow reader or none of them could possibly have read it.)
- According to Matt Mitchell at Neighborhood Effects, the bill itself, comically titled “The American Taxpayer Relief Act,” has three strikes against it:
- “It ignored the evidence that tax increases are more economically harmful than spending cuts.” The bill puts the Cliff’s spending cuts off for two more months. (I see a sequel in the works: Fiscal Cliff 2: The Reckoning, perhaps?)
- “It opted to raise revenue through rate increases rather than loophole closings.” Why is this bad? “Put simply, a rate increase has deleterious demand and supply-side effects, whereas a loophole closing only has deleterious demand-side effects.”
- “It actually expanded corporate tax loopholes!” He continues by adding some valuable substantiation to this claim: “On the last point, don’t miss Vero’s pieces here and here, Tim Carney’s pieces here and here, Matt Stoller’s piece here, and Brad Plumer’s piece here.” The point: the primary (and likely the only) taxpayers who will see any relief from “The American Taxpayer Relief Act” are crony capitalists.
- Small businesses, on the other hand, will be hit the hardest by the bill. As Eileen Norcross writes at The Spectacle Blog,
With tax rates raised on those earning over $400,000 some may imagine that only a rarified tier of high earners will be forced to fork over more income to the federal government. However, tax increases in this category also includes [sic] small businesses. These hikes will affect decisions over hiring, expansion, and wages. The outcome — slower economic growth for all.
In summary, the bill—which the House had only six minutes to read—does almost nothing to address our debt and deficits, and what it does do is mostly negative and/or sub-optimal (unless you’re a crony capitalist, that is). Not only does this bill negatively affect most Americans today, it puts off, yet again, any hard decisions of reigning in our unsustainable spending addiction. We now have two more months before we careen over that cliff, but with how much time Congress had to negotiate an alternative deal before settling for a poorly designed, 157 page bill they only had six minutes to read, I’m not holding my breath. (more…)