Fiscal zombie apocalypse in Washington? Obama and Congress on taxes. (+video)
Lawmakers and the White House keep putting off tough fiscal and political decisions until after the elections, prompting criticism that this is a 'Zombie Congress.'
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GOP presidential aspirant Mitt Romney whacks President Obama for presiding over a “zombie economy.” Rep. Jim Cooper (D) of Tennesee says Congress is remiss in its duties by putting off tough financial decisions until after the election, a season he calls the “zombie Congress” for the number of lawmakers who won’t be back in the new year.
And even more ghoulish, the last two years of economic policymaking in Washington show a White House and Congress beset by a recurring set of fiscal issues. If Washington deals with these problems at all, it's only temporarily, thus setting the nation on a course of constant fiscal crisis and brinksmanship, until Congress musters the political will to resolve them.
The White House had its own brush with the living dead Monday as President Obama reanimated perhaps the most gruesome of all the nation’s undead issues by arguing for a one-year extension of the Bush tax cuts for households making less than $250,000.
What Mr. Obama largely skipped over in his speech from the White House’s East Room? What happens in one year.
In other words, even as economists and lawmakers aligned with both parties decry the negative impact of uncertainty around taxing and spending on the nation’s economy, the issue of what the vast majority of Americans should pay to Uncle Sam will be upon us again in (at best) 12 months.
A look at the year-end fiscal cliff – or an accumulation of expiring taxing and spending provisions expected to take $560 billion out of the US economy – shows the extent to which Washington can’t put its financial demons to rest.
There’s some $400 billion in higher taxes, including the expiration of the Bush tax rates (extended by Obama in 2010), a temporary reduction in the Social Security payroll tax (passed in the lame duck session of Congress in 2011), and a host of other measures requiring annual congressional action, such as the need to patch the Alternative Minimum Tax (which saves middle-class taxpayers from a stinging tax increase) and to implement the “doc fix,” which prevents doctors from seeing their Medicare reimbursement rates slashed.
There’s $26 billion in expiring emergency unemployment benefits (extended several times since 2009). Finally, there’s $76 billion in cuts from the Budget Control Act, a deficit-capping deal struck in the heat of last summer’s negotiations to raise the national debt ceiling. Those cuts are coming into effect because Congress, recognizing its zombie problem, put automatic cuts into law in case Congress couldn’t determine an alternative path to reducing the deficit.
Congress couldn’t figure it out, so here come the cuts.
Without a solution to a swarm of problems Washington has dealt with on a temporary basis for the last two years, America risks a further downgrade of its credit rating (by postponing any budget-balancing measures) or toppling back into a recession (by allowing all of the spending cuts and tax increases that would hit Jan. 1 to take effect.)
"We can't keep kicking the can down the road," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, in a statement after Obama’s speech Monday. "No question, the fiscal cliff is bad economic policy and going over it will put us back into recession. But enlarging the mountain of debt we face would be disastrous as well – we have to rely on a more responsible approach. These problems only get harder to solve the longer we delay."