Praise government! Just hours after the federal bureaucracy went over the "fiscal cliff" on New Year's Day, President Obama voiced approval for an emergency Congressional bill to save us all.
Yes, ailing American families and businesses will pay more in taxes. But that's what it takes for big government to avoid real budget cuts, for now.
As soon as the beltway bandits raise the federal debt ceiling above $16.4 trillion in February, runaway deficit spending can continue unabated. Hallelujah!
All sarcasm aside, American taxpayers are holding the short end of the stick again. The media wants us to believe this is a good deal because it cuts taxes for the middle class.
Ignore the propaganda.
Without action by Congress, the lower income tax rates from the Bush era automatically expired at the end of 2012. Congress and the president purposely waited until that occurred before acting. That way they could reinstate 2012 tax rates for certain income levels and call it a tax cut.
Income tax rates for "the rich" certainly aren't staying the same. Rates for individuals earning more than $400,000 and households with annual income above $450,000 will permanently increase from 35 percent to nearly 40 percent. Additionally, estate tax (i.e., the death tax) inflates from 35 percent to 40 percent on estates valued over $5 million.
The "wealthy" will finally feel the pain of the 99 percent, right? That depends on who you're calling wealthy. Many of the people penalized in the highest income tax brackets are entrepreneurs, business managers, doctors and attorneys.
Besides being typical working professionals, they are job creators. When government confiscates more of their money, the capital for investment, expansion and new hiring disappears.
Don't get fooled into thinking that the ultra wealthy are going to pay the full price for government financial irresponsibility. They don't typically pay income taxes on a salary. Their annual income largely stems from return on investments. Sure, those folks will see an increase in taxes on capital gains and dividends. But so will your retirement accounts.
Truth is, most American taxpayers will be punished. For instance, there are new limits on tax deductions for those earning over $250,000. Are these the wealthy individuals who haven't been paying their fair share?
The middle class doesn't escape either. The payroll tax holiday, in effect since December 2010, was not extended by Congress. That means the average family will see a $1,000 reduction in annual income. Couple that with six new Obamacare taxes and it's clear that a very bad deal was struck for America.
In total, the Congressional Budget Office calculates the fiscal cliff deal will raise taxes by about $600 billion over the next decade. Meanwhile, federal spending actually increases by $330 billion in 2013 alone. A big chunk of that results from another extension of unemployment benefits and a temporary patch for Medicare.
Overall, the Congressional deal comprises a 10 to 1 ratio of tax increases to government spending cuts. The resulting revenues are a drop in a huge bucket compared to projected budget deficits.
Despite political grandstanding by the president, the White House and Capitol Hill refuse to address the real reasons for the U.S. budget crisis. Currently, the entitlements of Social Security, Medicare, and Medicaid (including Obamacare), as well as net interest on the debt, constitute more than half of the entire federal budget. At current tax rates, these liabilities will consume all collected revenue by 2025.
Yet instead of entitlement reform, President Obama signaled more tax increases are still to come. Shortly after Congress passed the fiscal cliff bill, the president declared, "We can't simply cut our way to prosperity. Cutting spending has to go hand in hand with further reforms to our tax code."
The fact that the United States just hit the debt limit for the 14th time since 2001 is irrelevant to the big-spending politicians in Washington, D.C. On the contrary, President Obama shirks responsibility for the costs of his agenda. He asserted, "I will not have another debate with this Congress over whether they will pay the bills they've already racked up." He said that with a straight face.
A phony fiscal cliff deal won't put America back on sound financial ground. So we should probably feel sorry for Mr. Obama as he prepares to take the oath of office on Jan. 21. He's inheriting a real mess.