By JONATHAN GURWITZ
New York Times News Service
The problem with kicking the can down the road is that you eventually run out of pavement. The fiscal cliff was supposed to be the end of the road — a politically designed cul-de-sac that would force the nation’s leaders to change course and finally address the mounting debt crisis. The New Year’s Day deal negotiated by Vice President Joe Biden and Senate Minority Leader Mitch McConnell merely delayed the inevitable by a couple of months, while doing next to nothing to address the debt problem.
President Barack Obama wasn’t party to the negotiations on the final deal. He was, nevertheless, there to claim credit, issuing a statement touting an agreement that will “grow the economy and shrink our deficits in a balanced way — by investing in our middle class, and by asking the wealthy to pay a little more.”
So few words. So much malarkey. Let’s parse the president’s praise on his unearned victory lap.
“Grow the economy”: We are three and a half years into the weakest economic recovery since World War II. The Congressional Budget Office warned that even if all of the short-term effects of the fiscal cliff were avoided, “the economy would remain below its potential and the unemployment rate would remain higher than usual for some time.”
“Shrink our deficits”: The CBO says the fiscal cliff deal will add $4 trillion in deficit spending over the next decade. The agreement will, under optimistic assumptions, generate $620 billion in additional revenue over 10 years — not enough to cover the trillion-dollar-plus deficits in any one year Obama has been in office, and only a fraction of the deficits projected in the next 10 years.
“In a balanced way”: There were no real-world spending cuts in the fiscal cliff deal. None. In fact, the agreement increases federal spending by $332 billion.
“Investing in our middle class”: Perhaps the president never actually read the 154-page bill. If he had, he would have known that it extends all manner of special interest giveaways, including a $9 billion tax break for Wall Street banks and multinational corporations, special expensing rules for Hollywood studios valued at $75 million, and a tax benefit in the form of accelerated depreciation for race track investors.
“Asking the wealthy to pay a little more”: Here the president comes close to the truth, the key words being “a little.” The projected increase in revenue is based largely on raising marginal rates on high earners rather than closing loopholes. But any individual who makes $400,000 a year can pay accountants, lawyers and lobbyists to exploit those loopholes — see “Investing in our middle class” — or shelter earnings overseas. That’s why the CBO’s estimate of $620 billion in additional revenue, which doesn’t account for tax avoidance strategies, is farfetched.
President Obama alone isn’t responsible for a $16 trillion national debt. His predecessor in the White House and both Republicans and Democrats who controlled Congress for the first eight years of this century gave him a $10 trillion head start. But he is responsible for piling up more debt more quickly than any president in history and for a debt reduction plan that amounts to kicking the can.
The deal to avert the fiscal cliff paved a little more asphalt. But without spending, tax and entitlement reforms and a president engaged in the process to achieve them, we know where this road stops — in Greece, Spain and other economic dead-ends where, to paraphrase Margaret Thatcher, big government spenders finally run out of other people’s money.