Fiscal cliff deal passes -- crisis averted?
McCarthy says plan does not address underlying deficit; reports indicate taxes will still increase for most Americans
News Review Staff Writer
Congress called a rare New Year’s Day session to vote on the American Taxpayer Relief Act — a plan aimed at averting the financial crisis when massive spending cuts and tax increases were scheduled to hit an already depressed economy.
Although the act passed the Senate on Jan. 1 and the House of Representatives on Jan. 2, leaders have given mixed interpretations on how the average American will be impacted by implementation.
Starting last fall, politicians and economists began to warn of the impending “Fiscal Cliff” that threatened to hamper economic recovery when Americans were concurrently hit by higher taxes and the loss of revenues (and jobs) when federal spending cuts kicked in.
The plan that was finally approved reportedly raises taxes for the wealthiest 1 percent of Americans, provides an extension of unemployment benefits for an estimated 2 million Americans and postpones some $109 billion in spending cuts.
Many homeowners will qualify for what amounts to a tax break by being able to deduct a portion of their mortgage debt, and the extension of certain farm subsidies will prevent what some had anticipated as a doubling in the price of milk.
But critics say that a frenzy of last-minute pushes by lobbyists resulted in many additions being tacked onto the bill that will continue to protect some special interests, ultimately increasing the burden for the majority of taxpayers.
Support for the bill also divided House Republicans — including the leadership. While Speaker John Boehner and Budget Chair Paul Ryan voted for the bill, Majority Leader Eric Cantor and Majority Whip Kevin McCarthy — who represents Ridgecrest and Kern County — voted against it.
McCarthy released to the News Review a brief statement regarding his “no” vote, saying, “I believed that any legislation considered by the House had to seriously address the root of our debt crisis: Washington’s out-of-control spending.”
In an earlier interview with the News Review, he said that current federal revenue pays only for obligations in MediCal, Social Security and other similar programs. Meanwhile, money for defense, infrastructure and other services is borrowed.
He said that temporary relief is not enough; the government needs to take a hard look at long-term solutions.
Among the components of last week’s act that have raised concern is an expiring Social Security tax reduction that was not extended. The 6.2-percent tax (which has been increased from 4.2 percent) will be shared by employees and their employers — and will cost each an average of $1,000 per year (per employee, for the employers).
The Tax Policy Center, a nonpartisan research group based in Washington, D.C., estimated that 77 percent of American households would face higher federal taxes under the act.
“I think one of the ways we can improve our economy is providing predictability. If we can close loopholes in tax law and reform regulation to make sense and offer consistency, we can get people investing in our economy to create new jobs and industry.”
If making those changes on a national scale will take time, he noted that local solutions were within reach.
“With our unique resources in everything energy to aerospace, we are primed to lead the state and the nation in recovery,” said McCarthy. “We just need to harness those assets and get all of us working toward the same direction.”Story First Published: 2013-01-09