All this current deal does it kick the can down the road a little further while increasing the taxes on the wealthiest Americans. It does nothing to address our spending problems here in the US rather than some proposed revenue problem. Simply put, the US government has over promised and one day will have to under deliver on those promises. It is just a matter of time.
The fight and bipartisanship in Washington has only just begun. The Democrats likely see this as a huge win while the Republicans duck their heads between their legs once more after a dismal showing in the November elections. This collision between two ideologically different parties is what will provide even more drama within the next few weeks.
Even though the Republicans are now somewhat divided within their own ranks, those that remain firm against reducing spending have the majority within the party and don't look for them to back down when it comes to extending the debt limit. They are likely more stoic in their stance now that no cuts were part of this last deal.
The President is already on record as saying, "While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up." It is not about paying the bills, it is about reducing the bills by cutting spending.
Most Americans realize that they need to balance their own budget in order to have financial stability which usually leads to lifestyle stability. The US government has walked away from their responsibility to maintain proper fiscal controls in order to balance the nation's budget.
So while everyone celebrated yesterday with the huge rally on Wall Street we shook our heads. We know that eventually reductions will have to happen and the longer we put them off the more painful they will be.
The other concern that we have is that everyone's taxes are going up not just the wealthiest Americans. The expiration of the two year payroll tax holiday will largely affect every American. The reinstatement of the previous rates we believe will have a profound effect on consumer spending once people begin to see their first paychecks of the new year.
Retail sales over the Christmas holiday season were already coming in weaker than expected. Was this due to the uncertainty of the fiscal cliff, change in consumer sentiment, or maybe even people taken control over their personal finances and making prudent decisions when it comes to spending? We don't know but it will be interesting to see if this trend continues into the New Year and how people will feel about the new battle in Washington that lies ahead in the coming months.
This was an excellent article in Reuters that touches on this very topic here.
- "Our opportunity here is on the debt ceiling," Republican Senator Pat Toomey of Pennsylvania said on MSNBC. "We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean."
- Deteriorating relations between leaders in the two parties do not bode well for the more difficult fights ahead. Vice President Joe Biden and Republican Senate leader Mitch McConnell had to step in to work out the final deal as the relationship between House Speaker John Boehner and Obama unraveled.
- The debate over "entitlement" programs is also bound to be difficult. Republicans will be pushing for significant cuts in government healthcare programs like Medicare and Medicaid for retirees and the poor, which are the biggest drivers of federal debt. Democrats have opposed cuts in those popular programs.
- The vote underlined the precarious position of Boehner, who will ask his Republicans to re-elect him as speaker on Thursday when a new Congress is sworn in. Boehner backed the bill, but most House Republicans, including his top lieutenants, voted against it.
| Reuters/Joshua Roberts |
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