Here it is, New Year’s Eve, and if you’re a betting person and put money on the fact that we’d go into 2013 with no solution to the fiscal cliff, odds are, your bets are about to pay off. So before we ring out 2012 in one last hoorah, and since it looks as though the fiscal cliff is knocking at the door, we thought we’d take one last look at the debacle that’s brought us here today, complete with higher interest rates, fewer tax breaks and entirely too many new headaches. Here’s how it all began –
The Early Days
In 2001 and 2003, President Bush sent a series of tax cuts to Congress. Congress compromised since there weren’t enough votes to put them permanently in place. That compromise amounted to an expiration date set for 2010.
Remember, we were on the cusp of invading Iraq and Congress had added new drug benefits to the Medicare program; instead of raising taxes to do this, it borrowed money. In 2008, President Bush bid goodbye in his role as president and by the end of 2008, the mortgage meltdown, the bank crises and the recession dropped a heavy burden on the shoulders of the American people. President Obama’s solution included creating the National Commission on Fiscal Responsibility and Reform, ultimately to become known as Simpson-Bowles Commission, named for the leaders that authored the legislation. The purpose was simple: find a way to ensure fiscal sustainability from a long term perspective.
By March, President Obama signed into law his version of new health care reform known as the Affordable Care Act. This law drastically affects the national economy and cuts payments to health care providers while also puts into place tax increases beginning in 2012. This was one significant contribution to the current fiscal cliff brouhaha.
Later on in that same year (2010), our brilliant elected officials were unable to incorporate their math skills in such a way that would allow them to pass a budget. The election is quickly approaching by the time they spend months and months going back and forth.
Time Marches On
In February, 2011, after the president realized he was required by law to submit a budget, he does so and Congress freezes non-military, non-entitlement spending at 2010 levels. Meanwhile, it addresses none of the entitlement reform or tax reform ideas. The bickering began and at the very last minute, a plan was passed which, really, served no purpose and simply extended the problems out until where we are today. A few months later, Obama gives a speech and provides the American people an outline for his new budget with the goal of cutting $4 trillion over 10 years.
The Congressional Budget Office would later say that they “don’t score speeches,” and the lack of details makes it impossible to determine how much, if anything, could be saved. Meanwhile, the House passes a 2011 budget that would reform both Medicare and Medicaid while cutting spending by $4.4 trillion over the next decade. However, the Senate digs its heels in and refuses to take it up and pushes forward to avoid its own efforts of passing a budget.
The Election
By the time the election arrives earlier this year, many were convinced Republican hopeful Mitt Romney would be a shoe in. It could be that his support of abolishing new financial laws, including the 2009 CARD Act played a role in his loss. It’s not surprising that that financial sector and its leaders, including bank CEOs, lobbied for a Republican White House. After President Obama secured his second term, finally, these politicians began turning their attention to the rapidly approaching fiscal cliff.
In May, 2011 Speaker of the House John Boehner says the Republicans in the House refuse to support a debt limit increase unless it’s also accompanied by an equal amount of spending cuts. Sure enough, days later, the U.S. hits its debt limit. Folks, including Treasury Secretary Timothy Geithner, begin looking for ways that would allow different government branches to continue operating. The bickering is well under way even if realistic solutions are not.
Later in the summer of 2011, Boehner and Obama meet privately. Boehner encourages what is now infamously known as the “grand bargain”, to which Obama latched onto and ran. Soon, though, the two part ways yet again. Talks become quite heated with Eric Cantor repeatedly insisting a small debt limit increase is the answer. Obama tells Cantor,
Eric, don’t call my bluff. Would Ronald Reagan be sitting here? This may bring my presidency down, but I will not yield on this.
Obama then bails on the talks.
Throughout the rest of the year, the bickering continues. Here are a few of the events and quotes from that time period that should make it perfectly clear the level Americans were being forced to lower themselves to in order to understand the politicians’ mindsets:
In late July, 2011 Obama meets with Boehner and Cantor and demands an additional $400 billion in revenue increases.
Word leaks about the private negotiations between the three and Democrats get upset with the White House for leaving them out of the negotiations. Obama reassures Democrats that there was never a deal.
Public Displays
Then – the pressers began.
Still in July, Obama holds a news conference where he does little to hide his anger at Republicans and especially John Boehner. He says Boehner did not return his phone calls and that he has been “left at the altar two times now.”
Finally, at the end of July, an agreement is made. The Budget Control Act of 2011 increased the debt limit just enough to get through 2012, $1 trillion will be cut over 10 years. There’s one ultimatum: the super committee to finish its work and if it doesn’t, automatic spending cuts, or “sequestration,” will start going into effect in 2013.
And here we are. Americans are now hours away from having far less in their paychecks, paying more in interest on their mortgages and credit cards and facing big tax hits in the process. Make no mistake: those in charge of this important decision continue to bicker and argue. There have been accusations back and forth that one side refuses to work with the other, there have been “whine pressers” where the politicians whine about how hard they’re trying but getting nowhere and of course, the rest of us are left with nothing to do is except wait.
Not exactly the way you wanted to ring in 2013, yes? Look at this way – you can go into the new year with a few more dollars in your wallet if you opt to watch the political fireworks instead of creating your own fireworks show on your front lawn. Looks like you’ll need those few extra dollars if we’re judging by the behavior of these national leaders.
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