Obama, Biden help end congressional paralysis on fiscal cliff


by Kim Anderson

The New Year on Capitol Hill began with the Senate’s overwhelmingly bipartisan support (89-8) of the fiscal deal negotiated in large part by Vice President Biden, Majority Leader Harry Reid and Minority Leader Mitch McConnell. Vice President Biden briefed the Democratic members of the Senate late in the evening on New Year’s Eve. In a letter to Members of the Senate, NEA argued:

It is long past time to put people ahead of politics. Congress must step up and do the right thing to help middle class families before it is too late…We are very pleased that the deal would generate significant revenue by asking the wealthiest individuals to pay their fair share.

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At approximately 2am on New Year’s Day, the Senate approved by a vote of 89-8 a bill that makes no cuts to Social Security, Medicare, or Medicaid, and will:

  • Provide $620 billion in revenue over the next ten years (the first vote to raise new revenue in 20 years);
  • Permanently extend middle class tax cuts for 114 million households;
  • Permanently raise tax rates for individuals making over $400,000 per year and for those married couples making over $450,000 per year;
  • Permanently extend a number of tax benefits to help families and student pay for college, such as the student loan interest deduction, the tax exclusion on employer-provided educational assistance, and extend for five years the Earned Income Tax Credit and the American Opportunity Tax Credit;
  • Extend for 2012 and 2013 the $250 tax deduction for educators who spend money out of their own pockets to pay for school supplies (educators spend over $400 on average per year on school supplies for students);
  • Extend for 2 more years school construction bonds equal to $400 million per year in bond volume;
  • Extend unemployment insurance for a year for 2 million struggling Americans;
  • Extend the farm bill for another year, averting massive increases in milk prices; and
  • Expire the payroll tax holiday that Americans had been enjoying for the last two years.

This bill averts the draconian across the board cuts (“sequestration”) to education that would have kicked in had Congress not taken action. However, for public education advocates, this reprieve will only last for two months, setting up another major clash between the President and the GOP Leadership in both the House and Senate about spending cuts and whether or not to raise the debt ceiling in order to keep the country from defaulting on its obligations. NEA’s Government Relations Director Mary Kusler warned:

We are very disappointed that the deal delays the impending across the board cuts, rather than eliminating them completely. We strongly urge Congress to reassess this issue in early 2013…These cuts, even if delayed, will mean fewer educators, students crammed into already overcrowded classrooms, shorter school weeks, 4-year-olds cheated out of early childhood education, and dreams dashed for aspiring college students.

Members of the House of Representatives then convened in their caucuses to discuss the contents of the Senate-passed bill. Finally, Republican Majority Leader Eric Cantor emerged in the late afternoon on New Year’s Day to tell the press that members of the Republican caucus were opposed to the deal and were planning to amend the Senate-passed package by insisting on additional spending cuts beyond the $1.2 trillion already made in the last debt ceiling crisis. But within a few more hours, it became clear there were insufficient votes in the GOP Caucus to pass such an amendment. Shortly after 11pm, the House finally passed the Senate’s fiscal cliff legislation by a vote of 257-167.

Tjaden RallyThe fiscal cliff negotiations of 2012 will therefore usher in Round Two of contentious budget battles, but this time with the new 113th Congress. There will be enormous pressure on lawmakers to find a way to dig the country out of long-term deficits, something that threatens not only the country’s future prosperity, but also threatens the stability of world financial markets. Education advocates will yet again be called upon to raise their voices and explain the impact on our nation’s students if lawmakers make further cuts in education and other critical services, explaining that education spending (which accounts for only 2 percent of the federal budget) is not to blame for the country’s deficit.

In a statement issued just after the House vote, NEA President Dennis Van Roekel said, “While we applaud the progress that has been made, we strongly encourage Congress to finish the job and protect Americans from across the board cuts facing the nation in February.”

Reader Comments

  1. Further, when you kill the goose that laid the golden egg, namely, a middle class consumer market with abundant discretionary spending capacity that will clear the retail shelves and crank up demand, you remove the need for increased production.

    But what did our “smartest men in the room” do to take care of this impending cash flow problem? They financed it with easy credit and loaned a dwindling middle class the money for which they are now in a double bind. That our spoiled middle class was slow to catch on to what was taking place, and expected the USA to bounce back like it always did, you could call them stupid, or you could say they were exploited, depending on your perspective. But either way, America the Beautiful, land of opportunity, is being turned into a mere Plutocracy right before our eyes, no matter which way you choose to view it. Sad, if it weren’t so damned infuriating.

  2. Another illustration of how life in America, during the glory years, thrived before the trend of slashing tax rates:

    The Military Industrial Complex that helped win WWII, converted easily into the manufacturing dynamo that employed our retrurning GIs and a growing population that benefitted from their fore-fathers’ fight (labor Unions) during the Guilded Age against the Robber Barons for a decent working wage that ushered in the most dynamic consumer market this world has ever seen. That, coupled with a rebuilding world that desired/needed the goods that our industries were pumping out, and the race propelled by the cold war, helped bring the USA to the top as the worlds largest economy.

    But Big Bad Government was on the side of the commoner back then in ways you don’t see today. For instance; The Employment Act of 1946 recognized the vital role of a prosperous middle class. The three stated goals of that bill were maximized employment, production, and purchase power through a decent middle class wage. Another example was during the Korean War, when the Military Industrial Complex was cranking up again, and CEOs in that Industrial sector, found themselves awash in profits, and would have claimed the lion’s share in pay hikes and bonuses until the Big Bad Govt. stepped in and deemed that the increase was due to national events (a War), and had nothing to do with the sagacity of their executive team, so it decreed that the CEOs spread the wealth to their workers, against their will.

    Another Plutocratic trend that I find alarming is marginal tax rates and the lack of tax policies with built-in incentives to steer USA capital toward investments that actually benefit the nation. For example: in the 50s and 60s when marginal rates on our wealthy were over 90% (yes, it’s true- look it up!), to get a tax break, our wealthy INVESTED their fabulous wealth in the USA; namely, USA stocks, USA bonds, USA corporations, USA Parks, USA Research & Development, NASA, philanthropy, etc. In other words, they invested in their nation.

    Then in 1980, Reagan reduced marginal rates from 71% to 28% (who knows better how to create wealth than the wealthy? Give ‘em a break up front, watch ”em go, and call it “Supply Side” economics). By that time the offshoring model begun in the 60s, which was the precursor to the FTAs of the 90s saw our jobs leave for Mexico. But in 2001, when Red China joined the WTO, even our jobs in Mexico left for China (today their avg. wage is $1.36/hr.) and in just 18 years our “Industrial Belt” of the Mid-west has become the “Rust Belt” and China has drawn even with the mighty USA, thanks to yankee ingenuity and technical know-how that we either gave them or they have hacked in and stolen. Either way, these cheap products roll up on our shores in Maersk freighters capable of a payload of 2.2 million train car sized “containers” full of this cheap crap to fleece the declining middle class and line the pockets of our “multinationals.”

    And after 18 years, the best game on the street is no longer USA investments, but the China derivatives realized by banking on the returns of the sweatshops abroad. To compete with these large short-term returns enjoyed by CEOs and “multinational corporations’ stock holders, our businesses that remain in the USA are cutting costs to the bone, exerting downward pressure on wages on workers here to compete, and/or spinning off whole departments, or liquidating them to the highest bidder to maximize their stocks returns with no concern for long term solvency and longevity. Our very pensions, 401Ks, and Insurance investments brokered by our Hedge Fund Managers on the market, are now dependent of these returns that keep our financial house of cards from building a stronger foundation. So our only real hope for a sustainable return to the days of glory, namely a prosperous middle class with a decent pay, becomes the casualty in the pursuit of protecting the wealthy and the continuation of zero variance from the course that is sending us into insolvency.

  3. Robert Baldwin, in his post below, cites his grievances against the NEA, identifying what he considers their “bias” against Republicans. His main thrust is the curtailment of the SS tax holiday where SS taxes went from 4.2% to 6.2%.
    As a teacher of 25 years, I will see my SS taxes go up $110/month, or $1320/yr. Because of some unexpected expenses incurred during the latter part of 2012, including expenses from Hurricane Sandy, I’m pretty strapped now, and will be for a few years. The tax hike was not a welcome New Year’s present. But I say this:
    The USA is in terrible trouble. We have seen tax rates slashed for over 30 years now, slashing revenue for our treasury, a Republican credo that gained popularity during the Reagan administration. For 30 years reduced taxation “Supply Side Economics” to “boost the economy” has been the law of the land, citing the rationale of low taxes for the “job creators” is the way to prosperity for our nation. There are two problems with this Republican creed:
    1. The term “job creators” (how disingenuous!) is an overused, deceptive phrase. Middle class jobs have been shipped offshore for over 30 years now (garment, shoe, and textile industries left in the 60s, toy industry, audio and TV industries as well as steel left in the 70s), but this lucrative offshoring model that has been shared in board rooms across the USA was perfected by the time the FTAs beginning with NAFTA and GATT, (1994) were introduced. And by the time China joined the WTO in 2001, even our jobs in Mexico left for China ($1.36/hr. avg. wage). The USA worker was kicked to the curb for a larger profit share for the top via sweat shop labor offshore, yet these corporate magnates fully expect this same middle class they’ve betrayed to purchase this cheap shit flooding our shores daily in Maersk freighters with a load capacity of 2.2 million train car sized “containers” to soak our nation and fleece an increasingly underemployed/unemployed USA consumer that ultimately only serves to line the pockets of these same “job creators.” The middle class with a high wage afforded disposable income that they in turn used to pump back into the greatest consumer economy the world has ever seen. However, now, with any uptick in consumer spending, the increase goes directly to the “multinationals” and Red China, et.al. This downward pressure on wages here to compete with sweatshops for these manufacturing jobs has our GOP and BIG $$$ they take their marching orders from, eying the Labor Unions as their next target, while they ask their middle class constituents to lay down their only defense against a growing Plutocracy.
    2. The great wage disparity that has occurred over the past 30 years has consolidated wealth at the top like we haven’t seen since the days of the Robber Barons of the Gilded Age a century ago. Maybe you think that there’s something wrong with a USA that promotes all of its citizens’ prosperity, but I don’t; it’s smart business. A middle class with disposable income will bolster retail sales and crank up the economy (that is if this increased production actually increased demand for production done in the USA factories and thus, places paychecks into the hands of USA workers like it used to do.)
    Even so, during the past 30 years real output in the business sector grew by 140% (admittedly, some of this increase was due to automation, etc.). Real compensation per hour, however (includes wages, benefits, pensions, and health insurance), increased by only 38% for the middle class worker.
    Post WWII, 1947-1979 America shared equally in the increase in output. During those years the increase that the bottom 20% received was 116%, the top 20% got an increase of 99%, and the middle quintiles increased somewhere within that range.
    Then the world flipped! From 1980 to 2007 the rich took practically all the increase in income. Over those decades, the poor received only a 15% increase and the middle three quintiles got a 25% increase, while the top 20% got a 95% increase and the top 1% received a raise of close to 300%, and they were compensated fabulously before that (Paul Heise, Ph.D. Economics).
    Tax policies that favor the wealthy is another matter that has consolidated wealth at the top and has elevated investment capital to the realm of “untouchable” (see marginal rates of the Eisenhower and Kennedy era). That combined with trade policies have put us in a real bind. To me the key is for the USA to enact policies that return vitality to the middle class consumer market, “demand side” economics, because “supply side,” trickle-down hasn’t worked.
    Plus, the middle class contributes to the national treasury (revenue) right off of their paycheck through a payroll tax. By gutting the middle class and depriving it from decent paying jobs by employing a cheap labor force on foreign soil, I hypothesize, you kill the goose that laid the golden egg. The wealthy that have remained super solvent in this 30 year trend of wealth consolidation at the top, have too many methods of hiding their wealth and keep it from being taxed (research “Top Ten Ways the Rich Escape Taxation), including parking it in offshore accounts. Is it any wonder why the debt is snowballing? The combination of a decimated, underemployed/unemployed middle class, and a privileged upper class that has been provided a myriad of means to hide their fabulous wealth, makes no sense anymore. To ask the privileged to put their shoulder to the wheel and chip in with this national crisis has been propagandized by some, including this author, as “class warfare.” Disgusting!
    Republicans complain about the 35% corporate tax being the highest in the world, but have you looked into all the “corporate welfare” available to our “multinationals” that have taken tax subsidies to offset the cost of setting up shop offshore ($Hundreds of BILLIONS/yr. by some estimates. Examples: GE’s profits exceed $14 BILLION, but submit 24,000 pages of exemptions written by a team of ex-IRS employees, and pay zero taxes, then there’s Exxon/Mobile, etc.) then park their vast profits in offshore accounts with impunity to escape contributing anything in taxation to their nation of origin. See the fate Bill S3816, it speaks volumes.
    Click on the following USA treasury record of national debt. It shows the accumulation of debt in the national treasury. http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm
    During the last half of the 20th Century (1950s-2000) debt accelerated a in the $Billions (a few years in the 1950s there were actually surpluses). Then after the 60s it grew by the $tens of Billions. But after 1980, the advent of supply side economics, it grew by $100s of Billions/yr. Then during the Clinton years, when he raised taxes, it slowed to the $10s of Billions again.
    But once the FTA’s were introduced (actually it took a few years after their introduction), deficits reached the $100s of Billions from then on. Here’s my point: The increases in debt from 2001, when China joined the WTO, reached over $500 Billion/yr. from then on out and have not diminished.
    Google trade deficits: The USA has gone from steady trade surpluses before 1975 to trade deficits that have averaged at least $600 Billion/yr. over the last 10 years.

  4. As a long teacher, administrator, and member of the NEA I say this:

    I have grown weary and disgusted by the absolute bias this organization has for the democratic party. Please pay careful attention to your take home pay as Obama’s plan takes effect. Your take-home pay WILL DECREASE. He is a charlatan and the blind faith given to him and his party by unions and their members are responsible for his re-election.

    FACT: Regarding the American Taxpayer Relief Act of 2012, recently signed into law, the Act does not extend the payroll tax holiday during 2012, so the employee Social Security tax rate went from 4.2 percent back to 6.2 percent, up to the 2013 taxable wage limit of $113,700. As a result, a worker earning $50,000 per year will now see $1,000 less in their net take-home pay as compared to 2012. Paychecks will reflect the higher Social Security tax rate with the first payrolls of the new year on January 4, 2013.

    He says he is for the middle class…but watch what happens to your check
    . You’ve been fooled and the NEA is one of his minions. I want teachers supported, but at what expense. According to the NEA if a politician is a republican he/she is anti-education and evil; if the candidate is a democrat, he/she is pro-education and can do no wrong.

    Personally, I’m fed up with the NEA’s pro-democratic propaganda and in-your-face bias.
    Do they believe we’re all so unintelligent as to buy what they’re
    without seeing through the obvious bias.

    Fed Up in VA!

  5. Mental health is a frighteningly huge issue in our society and we can thank our lawmakers for adding to this dilemma. Depression and anxiety disorders are rampant and easily triggered by the D.C. game playing. Our politicians should be ashamed and alarmed by the worry and anguish they are submitting to their citizens. Inflate our illness = inflate your expenses.

  6. Why not make Congresspeople pay for their own healthcare and pensions? Also, since they all make 6-digit salaries, let them take a 40% cut in their salaries. They will still make 6-digit salaries but it would seriously relieve the stress on our economy. What they get in benefits ARE entitlements whereas our SS and Medicare are paid for by every working American and our employer. Congress people do not deserve a $6000 raise for causing all of this stress to the American people who are just trying to survive…We only want fairness not all of this fraud and greed!!!!!

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