The fiscal settlement passed last night did absolutely nothing to improve the deficit or the financial sanity of government. Its only purpose, as far as I can tell, was to let Democrats count coup on rich people as a reward for winning the last election. It's like telling your kids that on their birthday, you will take them to do absolutely anything they like, and Democrats chose to display their disdain for rich people as their one act of celebration. A few other observations:
- I had expected that they would gen up a bunch of fake savings and accounting tricks to pretend there were spending cuts in proportion to tax increases, but apparently they did not feel the need to bother. Essentially only trivial spending cuts were included.
- At what point can we officially declare that the reduction in doctor reimbursement rates that supposedly paid for much of Obamacare is a great lie and will never happen? Congress once again extended the "doc fix" another year, eliminating the single largest source of savings that was to fund Obamacare. Congress has been playing this same game -- using elimination of the doc fix to supposedly fund programs and then quietly renewing the doc fix later -- for over a decade
- The restoration of the FICA tax is probably a good thing. Though I think the reality is something else, people still think of these as premiums that pay for future benefits, so in the spirit of good pricing, the premiums should reflect the true costs. And FICA premiums have always been set about at the right level (it is only the fact that past Congresses spent all the money supposedly banked for future generations that Social Security has a financial problem). In fact, we should raise Medicare premiums as well.
- Apparently, though I have not seen the list, this last minute deal was chock full of corporate cronyism, with a raft of special interst tax preferences thrown into the mix.
And so ends, I suppose, the 12-year saga of the Bush tax cuts, with tax cuts for the rich revoked and the rest made permanent. The establishment media decided early on that it was going to run with the story line that these cuts were "for the rich." The irony, that will never get any play, is that now, at the end, it is all too clear that this was far from the case. Reversing the tax cuts to the rich only reversed a small percentage of the original tax cuts. In fact, if the Bush tax cuts had been mainly for the rich, then the Democrats would not have even bothered addressing the fiscal cliff.