At midnight, not only did the ball drop in Times Square, ushering in a New Year, but Congress dropped the ball on delivering the country meaningful deficit reduction.
Late on New Year’s Eve, the Senate voted on a deal that imposed the highest Clinton era tax rates on incomes over $400,000 and married couples making $450,000 per year. It also preserved the child tax credit and the deductibility of student loan interest payments. The deal also protects unemployment insurance for another year.
What the deal doesn’t address are the biggest economic problems and uncertainties.
We have hit the debt ceiling and Republicans are once again toying with default and the U.S. credit rating. They are once again courting economic catastrophe for the fun of it.
The deal does not address needed spending cuts, especially defense cuts that will go a long way toward reducing our deficit. Over the last ten years defense spending has doubled. With the end of the Iraq war and Afghanistan winding down there is a lot of unneeded spending that will help our economy when it is eliminated.
There is also a strategic element to spending cuts that has not been addressed. According to a Bloomberg survey of top economist, we can expect a modest two percent growth in U.S. GDP in 2013.
Aggressive cuts to domestic spending may, in the end, be more costly because they slow the economy.
The bottom line is that we do not want our economy to look like Europe, who is suffering from self imposed economic stagnation due to austerity measures.
For over a century it has been proven and accepted economic fact that austerity cripples economies. Even Republicans like former Vice Presidential nominee Paul Ryan were arguing for government stimulus to prime the economic pump during the first term of George W. Bush. Republicans like Ryan were even trying to get Obama stimulus dollars for their districts to create jobs.
But economic growth is not the goal of the GOP. Their primary concern is with tax cuts for the wealthy and appeasing radical right wing interest groups. Consequences be damned.
President Obama and Vice President Biden are working with the hand that they have been dealt and trying to avert the economic disaster that the GOP is determined to achieve.
But the worst news is this: We do not know if the House will manage to pass this stop gap measure that deals with taxes.
What a mess.
About Bill Buck
Bill Buck is a Democratic strategist, President of the Buck Communications Group, a media relations and new media strategies consulting business based in Washington, DC, and Managing Director of the online ad firm Influence DSP. He has over twenty years of international and national communications experience. The views and opinions expressed in this post are those of the author and do not necessarily reflect the official policy or position of CBS Local.