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Monday, March 2, 2015 |  Madison, WI: 15.0° F  Fair
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Fiscal cliff deal favors Republican ideology
The deck is still stacked against the middle class

Thanks to some last-minute deal-making by Joe Biden and Mitch McConnell, we narrowly avoided falling off the fiscal cliff on New Year's Day. So where does that leave us?

Hurtling toward another cliff, as it turns out.

The deal merely delays by two months the $110 billion in automatic spending cuts we have heard so much about. These will come up just as Congress and the president begin a showdown over the debt ceiling, with Republicans demanding spending cuts to avert a massive default on the nation's debt. The stakes then will be just as high.

Although the current fiscal cliff deal looks like a win for Democrats and the president, we'll have to wait for round two to know how this fundamental fight about taxes and spending comes out. Based on round one, progressives have plenty of reason to be nervous.

True, the Republicans were forced to vote for a historic tax increase on the rich. That caused a major tantrum among tea partiers and House Majority Leader Eric Cantor, who were outraged by their party's abandonment of its no-tax-increases-ever position, and by the fact that no spending cuts came into the deal. They failed to force some truly terrible proposals on the country, including reducing Social Security benefits by tying them to the consumer price index, and other deep cuts to critical programs that help the poor and unemployed.

But as Tom Harkin - one of only three Democrats in the Senate to vote against the New Year's deal - points out, this is still a lopsided agreement that fundamentally favors Republican ideology. For starters, the deal permanently codifies the Bush-era tax breaks for people who make up to $400,000, or $450,000 for couples. Those tax cuts had been temporary until now.

Relief for people of more modest means, on the other hand, is still tenuous, Harkin says. "It should be the other way around."

Rhetorically, we have now moved the bar on the "middle class" from the top 2% who make $250,000 to the top 1% who make $400,000.

More fundamentally, the debate ignored the importance of getting people back to work, even as unemployment remains above 7%, and left aside the critical role of investment in infrastructure and education in getting the economy back on track. Instead, it favored the Republicans' model: austerity for the poor and middle class, protection for the wealthy.

Yes, the very rich will pay more in taxes. Those earning between $500,000 and $1 million will pony up an extra $15,000. Capital gains taxes go up from 15% to 20%. Estate taxes go from 35% to 40%.

But like the "panic button" votes on TARP and other bailouts, Harkin argues, the rush to pass a deal, coupled with the threat that the whole economy would unravel if it wasn't passed in a hurry, led to a flawed agreement.

Although the Republicans did not get what they wanted, a lengthy piece in the National Journal on the sidelining of Harry Reid and the sudden ascent of Joe Biden during the negotiations reports that Reid was holding out for a better result. He knew that the Republicans were under more pressure, since the public blamed them for obstructing a reasonable outcome.

Reid was prepared to hold out for Obama's original demand that the Bush-era tax cuts for people making more than $250,000 expire. McConnell, upset at Reid's stubbornness, turned to Biden, and the "middle class" was redefined to include people who make $400,000.

Possibly worst of all, Harkin points out, in going soft in the negotiations, the Democrats ultimately "gave away all our bargaining chips."

Now that the deal on taxes is done, the only issue on the table, as we approach round two, is spending. And given how quickly Obama backed away from his initial demands in round one, you have to worry that the worst ideas for undoing the basic New Deal programs of social insurance and protections for the poor and unemployed will come up again.

Biden, the hero of this first round of negotiations, will have to hold the line against a Republican Party that is convinced it has already given away too much, and now demands the undoing of Medicare and Social Security as its reward - forget about spurring economic growth through public investment.

If that's the direction the country goes in, in the midst of a recession, it won't just be a loss for Democrats and progressives. It will be a terrible blow to the future of the real middle class and everyone who aspires to join it.

Ruth Conniff is the political editor of The Progressive.

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