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Labor no admirer of fiscal cliff settlement

Date Posted: January 11 2013

WASHINGTON –The federal government’s brief dive with the “fiscal cliff” settlement hit with a resounding thud with the labor movement – and was just as unpopular with about everyone else.

A day after the Dec. 31 deadline, the U.S. House voted 257-167 to approve a deal to which President Obama and an overwhelming majority of the Senate had previously agreed.

The deal maintains G.W. Bush-era tax cuts for individuals earning less than $400,000 per year and couples earning less than $450,000. But tax rates will rise for the first time since 1993 – mostly on Americans earning more than $450,000, but also by 2 percent for nearly all workers because the payroll tax cut was allowed to expire.

Very importantly, the legislation extends jobless benefits. It also delays, for two months, the threat of sequestration, which amounts to a series of major, automatic cuts in federal spending. However, it also had no language that would force the raising of the federal debt ceiling, which Tea Party-backed Republican lawmakers have used, and will continue to use, as the ultimate bargaining chip.

“The agreement,” said a diplomatic AFL-CIO President Richard Trumka, “is a breakthrough in beginning to restore tax fairness and achieves some key goals of working families.  It does not cut Social Security, Medicare or Medicaid benefits. It raises more than $700 billion over 10 years, including interest savings, by ending the Bush income tax cuts for families making more than $450,000 a year.

“And in recognition of the continuing jobs crisis, it extends unemployment benefits for a year.  A strong message from voters and a relentless echo from grassroots activists over the last six weeks helped get us this far. But lawmakers should have listened even better.”

Trumka pointed out that a negotiating concession by Obama moved the threshold for raising taxes from $250,000 a year, which the president demanded during his campaign, to $450,000. Trumka panned that, as well as a deal exempting some estate taxes, amounted to concessions of about $200 billion for the top 2 percent wage earners.

There wasn’t much praise for the legislative package from anybody. Obama called it “one step in the broader effort to strengthen our economy for everybody.” Senate Minority Leader Mitch McConnell said the deal sets up the table for dealing with the federal deficit in the coming weeks. “That’s a debate the American people want. It’s the debate we’ll have next. And it’s a debate Republicans are ready for,” McConnell said.

Robert Reich, President Clinton’s secretary of labor and a major supporter of boosting the fortunes of working class families as a means to grow the economy, called the deal “lousy.”

  • He said Republicans were not forced to agree to raise the debt ceiling, so they’re likely to “do exactly what they did before” in the next two months, that is “to hold their votes on raising the ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security.”
  • He questioned the logic of permanently extending tax cuts for well-to-do couples making $450,000 per year, while simultaneously extending refundable tax credits for the poor (child tax credit, enlarged EITC and tuition tax credit) for only five years.
  • The deficit reduction portion of the package, he said, “doesn’t get nearly enough from the wealthiest 2 percent – only $600 billion (estimates vary between $600 billion and $700 billion) over the next decade. Previously, Obama had announced a goal of $4 trillion.”
  • The idle rich get to continue their “dynasties,” Reich said, since this package continues to exempt the first $5 million of inherited wealth from the estate tax.

Robert Borosage of the labor-backed Campaign for America’s Future called it “an ugly deal” and chastised Obama for not demanding more from the rich.

“The most ominous part of the deal is what was left out,” Borosage said. “The deal makes no provision for lifting the debt ceiling.  It postpones the sequester (automatic cuts in domestic and military spending) for only two months.  It is a smaller deficit reduction package than that originally sought by the president.  It therefore sets up the right-wing House zealots to hold the economy hostage once more, while demanding deep cuts in public services (known as cuts in domestic spending), backed by a media frenzy about deficits.

“And while Social Security, Medicare and Medicaid escaped unscathed in this deal, they will be the prime targets in the coming debate.”

  • He said Republicans were not forced to agree to raise the debt ceiling, so they’re likely to “do exactly what they did before” in the next two months, that is “to hold their votes on raising the ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security.”
  • He questioned the logic of permanently extending tax cuts for well-to-do couples making $450,000 per year, while simultaneously extending refundable tax credits for the poor (child tax credit, enlarged EITC and tuition tax credit) for only five years.
  • The deficit reduction portion of the package, he said, “doesn’t get nearly enough from the wealthiest 2 percent – only $600 billion (estimates vary between $600 billion and $700 billion) over the next decade. Previously, Obama had announced a goal of $4 trillion.”
  • The idle rich get to continue their “dynasties,” Reich said, since this package continues to exempt the first $5 million of inherited wealth from the estate tax.
Robert Borosage of the labor-backed Campaign for America’s Future called it “an ugly deal” and chastised Obama for not demanding more from the rich. “The most ominous part of the deal is what was left out,” Borosage said. “The deal makes no provision for lifting the debt ceiling.  It postpones the sequester (automatic cuts in domestic and military spending) for only two months.  It is a smaller deficit reduction package than that originally sought by the president.  It therefore sets up the right-wing House zealots to hold the economy hostage once more, while demanding deep cuts in public services (known as cuts in domestic spending), backed by a media frenzy about deficits. “And while Social Security, Medicare and Medicaid escaped unscathed in this deal, they will be the prime targets in the coming debate.”