Yes, the financial cliff was avoided, not in the last hour before midnight on December 31, but on overtime. Still, that was good. America, and the world, avoided the likely scenario of economic recession, a deep plunge of the markets and higher unemployment.
But at what price?
President Obama and the Democrats can take joy in that this doomsday scenario was avoided, and they can take joy in the fact that they forced the Republicans in Congress to break their pledge and—for the first time since 1993—vote for higher taxes. But the deal did nothing to resolve the country’s major economic problems: the debt, budget deficit and unemployment. And the settlement contained no new stimulus money to invest in the woefully neglected infrastructure or to create new jobs.
To reach a deal, President Obama also had to give up on his campaign pledge to raise taxes for everyone earning more than $250,000 per year. Instead, the limit was set at $400,000 for single filers and $450,000 for married couples, meaning that less than one percent of American tax payers will see their taxes increase. All others will now be exempt from paying their fair share when more revenues are needed and when Americans are paying less in income tax than the populations of other developed countries.
“In all the other countries that come to mind, protecting such levels of income is the sole preserve of conservative parties. In the United States, it is a matter of bipartisan consensus,” wrote Stephan Richter in The Globalist.
Yes, America is different from Europe. Here, taxes are toxic in a way they don’t seem to be in Europe, maybe because Europeans feel that they get something for their taxes, like universal health care, good public transportation and affordable education all the way through college?
But the fact that Washington failed to reach a broader deal—the balanced deal that Obama was seeking to come to grips with America’s debt and deficit problems—also makes it similar to Brussels, if you believe The Economist, which wrote that “Washington’s pattern of dysfunction is disturbingly similar to the euro zone’s.”
This “dysfunction” is likely to come to a head in only a couple months, in connection with the deadlines for the debt ceiling and the automatic spending cuts. The Republicans seem intent on revenge after the cliff deal, so the upcoming negotiations will likely seem like child’s play in comparison to what we just went through.
Was the price worth it? I am not sure.