If Congress hadn't reached a deal on the "fiscal cliff" three days ago, where would we be today?
First, tax rates for all Americans would have increased dramatically. Second, the stock market would have plunged at least 500 points on Wednesday and probably continued to dive for the balance of the week.
Perhaps most importantly, at least in my opinion, Republicans in Congress would be in an even weaker position to try to force a deal.
In other words, you have to know when to hold 'em and know when to fold 'em!
The biggest lesson to be learned from the last two months is that elections matter. When Obama was elected President in 2008 and Democrats took control of both the Senate and House of Representatives, we got Obamacare. Republicans complained - but elections matter.
Partly in response to what I believe was over-reaching, voters gave the House back to the GOP in 2010.
Obamacare also impacted Wisconsin in 2010 when Scott Walker was elected Governor, Ron Johnson was elected to the US Senate and Republicans took control of both the State Senate and State Assembly. As a result, Wisconsin got Act 10, Voter ID and redrawn voting districts which pretty much guarantee Republican control of the Legislature (and 5 seats in Congress) for at least the next decade. Democrats whined - but elections matter.
In November of 2012, voters gave us a divided government. We have a Democrat as President, a majority of Democrats in the US Senate and a Republican majority in the House. The point is that Republicans don't control the government and have to cut deals if they want to get anything done.
The "fiscal cliff" deal is admittedly far from perfect. It doesn't cut spending. It doesn't tackle entitlement reform. It does however set us up for another battle 60 days from now when the country again nears the debt ceiling. None of these things are good.
On the other hand, the legislation makes Bush era tax cuts permanent for almost everybody. If Obama had succeeded in raising tax rates for all taxpayers earning more than $200,000 (or families with income over $250,000), about 6.2 million taxpayers would have been impacted. Since only 1.2 million taxpayers earn over $500,000, setting the limit for higher rates at $400,000/$450,000 results in most taxpayers having their tax rates permanently reduced.
This certainly isn't perfect - but it's better than taxes raising on everyone.
In addition, the fiscal cliff deal implements a permanent AMT patch to avoid middle-class tax increases; sets the estate tax at 40% with a $5 million exemption for those at the $400,000/$450,000 threshold; and sets the capital gains and dividend tax rate at 15% for most taxpayers.
For what it's worth, many on the Left are upset with Obama for "caving"!
Again, the law doesn't address the spending problem we have in this country - and that's too bad. Still, I view this bill not as a defeat for conservatives but simply a decision to live to fight another day (when they might be in an even stronger position).
When you don't have all the cards, you have to be smart. And I think Republicans in Congress - including Senator Ron Johnson and Congressman Paul Ryan - were very smart this week.
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