December 19, 2012
Vol: 19 No: 51

Community & Editorial

Don’t be afraid of the fiscal cliff. It’s tax cuts for the wealthy that are terrifying

By Jeff Johnson / Washington State Labor Council, AFL-CIO

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The week after Thanksgiving I was in Washington, D.C., lobbying our congressional delegation on the so-called fiscal cliff. The atmosphere was frenzied. Mainstream media has fanned the flames so much you would think that if Congress and the president don’t reach an agreement by Jan. 1, 2013, our country will actually fall off the edge of a treacherous cliff, and we will all plummet to our deaths.

We’ve come to this point because when Congress passed the Budget Control Act in 2011, it included something called a sequestration agreement. It states that if Republicans and Democrats can’t reach an agreement on how to address our massive debt and growing deficit by the start of 2013, then $100 billion a year — $ 1.2 trillion over a decade — will be cut from social programs and the military. So what’s the real scoop?

Well, life will go on after Jan. 1, whether or not an agreement is reached. Payroll taxes will rise for the middle class and the wealthy. (But you can bank on the fact that payroll taxes on the middle class will come right back down once an agreement is reached in January.) Spending cuts will begin, but the truth is spending cuts take time and more likely than not, Congress will push back the timing on sequestration cuts as they negotiate.

So what are the various positions? The Republicans would like to keep all of the Bush tax cuts in place, roughly $2,000 a year for middle-class earners and $160,000 a year for the wealthy. But doing this would cause the deficit to skyrocket, so they have to seek cuts to Social Security, Medicare and Medicaid.

The president and congressional Democrats want to keep the tax cuts for middle class Americans and let tax cuts for the wealthiest 2 percent expire. What’s unclear is whether they’ll compromise on programs that make our safety net.

Labor and our community allies want those tax cuts for the 2 percent to end while avoiding cuts to Social Security, Medicare and Medicaid. Ending tax cuts for the rich will generate $1 trillion, which can be used to end the need for the sequestration agreement.

We believe that the voters spoke loud and clear against the Romney/Ryan plan of handouts to the rich and cuts to the safety net. Working people and the poor have already paid more than their fair share in higher unemployment, lower wages and benefits and $1.7 trillion in social service spending cuts in the 2011 debt ceiling agreement.

There is no good reason to cut benefits for these programs. Social Security has never added a penny to the debt and should be off the table, unless the government wants to charge Social Security taxes on all earned income, instead of taxing people who earn up to $110,100. We don’t have a Medicare or Medicaid crisis: Instead, we have a health care cost crisis. Medicare and Medicaid are more cost effective than private health insurance, and the expansion of Medicaid is a key component to the Affordable Care Act.

It’s health care costs we need to address. According to the Congressional Budget Office, if we allowed negotiations on the cost of prescription drugs covered by Medicare, we would save $500 billion over the next decade. If we created a real public option for health care, we’d create another $130 billion in savings. Finally we could save hundreds of billions more if we moved away from a “fee for service” health care system.

And we need to create jobs. Twelve million workers are unemployed in the U.S. Two million people nationwide and 60,000 in Washington state will lose federal benefits on December 31. This would be a tragedy. If we invested in full employment we would add $900 billion annually to our economy. That is the way to rebuild our communities and bring down deficits.

So let’s jump off the fiscal cliff and grow the economy through taxing the rich, controlling health care costs and creating jobs. I’ll see you when we land.



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