The fiscal cliff looms ever larger as the intransigent Republican leadership in Congress steers America directly for it at highway speed. As in all earlier negotiations, Obama's agreement to any demand was met not quid pro quo, but with more demands.
Republican leadership floated the idea that if the President would accept, say $400,000 to $450,000 as a floor for releasing the tax cuts, they would accept the idea of the wealthiest of Americans not retaining the Bush tax cuts. The President said he thought that would be possible if there was a corresponding offer of ways other than Social Security cuts to make up the revenue loss. Big mistake. On talk shows this past weekend, America learned what was really going on. One Representative said that he could not vote "in good conscience" for a deal that included dropping the tax cuts for Americans with incomes of $450,000. Why? Because it was obvious to him that if the President agreed to $450,000, he would agree to an even higher number. He also saw no reason to offer anything in return for Obama's concession, since agreeing to any tax "increase" was a concession in its own right.
In fact, as a demand to go along with their agreement to allow the tax cuts to expire on the very wealthy, the Republicans insisted agreed on a "chained CPI," a way of calculating the consumer price index that resulted in rates of inflation lower than real world rates. Although the President agreed to consider it, Democratic leadership would not, since it essentially paid for the lost revenue between incomes of $250,000 and $450,000. In other words, the GOP would agree to tax wealthy Americans if the Democrats would agree to indirectly tax the elderly. Eventually they were persuaded that such a scheme would be a really hard sell in everybody's home district, and the GOP abandoned the idea.
Now, GOP Representatives and Senators are touting the idea that cliff diving at this particular cliff might not be so bad "in the long run." How so? Well, proposals are being floated for attacking the whole fiscal cliff thing incrementally, leaving some of it in place and fixing some of it. First to go, of course, would be the rescissions of the Bush tax cuts, and the ending of the Social Security "tax holiday." The "what" holiday? At some point in the past four years, Congress removed two percentage points from the amount each wage earner pays into Social Security. That holiday expires at the end of 2012. Some Republicans have said it will allow them to claim they are responsible for "cutting" everybody's taxes in early 2013. But other items in the legislation that caused this mess might stay. For instance, some agencies might not see their ten-percent budget reductions rescinded, and extended unemployment compensation might not be renewed.
The problem with all that is that all Americans would feel the pinch of as much as several hundred dollars suddenly disappearing from their paychecks while the absurd negotiations that have produced nothing in more than a year continue for weeks, if not months. During all this, Wall Street would likely tank again, a process already begun in the Asian markets in response to the lack of agreement today. 401k plans would lose huge chunks again, along with all the compounding that should be happening, and household budgets would, in many cases, suddenly be unable to cover mortgages, insurances, and daily expenses. This nonsense needs to stop, and this cliff needs to be walled of by Monday night, New Year's Eve. And those self-involved, hyper important folks in Congress need to remember that American citizens, all of them, not just the rich ones, do matter.