A Pro and Cons Debate of Extending the Bush Tax-Era Relief for the Middle Class: Why Congress must Act Now!


Keyword or Terms: Sequestration; $1.2 trillion Spending Cuts; Fiscal Cliff; Disparate Taxation; America’s taxation System; Defense Spending; State and Local Government Administration; Social Security and Medicare Programs; Health and Education Industries; 2012 national Election Results; Domestic Spending

Like most American Homes making below a quarter of a million dollar gross a year, the foot dragging by Congress regarding the extension of the Bush Era Tax relief for this particular group is an amazement. Many Congressional lawmakers fall in this category of income earners; that is, if we consider income earned as a lawmaker in the United States Congress as the sole source of income for these men and women. As we begin to hear the rumblings from the US House of Representatives, we are astonished that some of our lawmakers would rather not act in support of this initiative, because it puts earners beyond this household income threshold at a taxation disadvantage.  Those foot-dragging Congressional Lawmakers probably think all income earners must be on the same taxation plane; an argument that is readily debunked by the progressive taxation regime already in place in America’s Taxation System.  Today, the blog discusses what may be at stake in the long fight to address the issue of fiscal cliff default for the economy.

If Current Congress fails to meet the requirements initially discussed two years ago on the fiscal cliff resolution, it is very likely that the automatic $1.2 trillion spending cuts along with a tax hike, will default.  No alternative course to the Sequestration is readily available for failure to act; and some pressure groups are already taking out a stake, insisting that there is not going to be room or support for cutting social welfare programs like Social Security and Medicare. Others insist that if the fiscal cliff is defaulted to, or Sequestration commences, many minority groups in government jobs will suffer disproportionately; a situation that will not speak well for the economy and the welfare of these groups.

Sequestration, will not only cost millions in jobs; it will likely hurt the health and education industries, supplemental support programs in many other industries,  and, the State and Local Government Administrations in the next decade. The year-end fiscal cliff seems a douser for the President; he could either push a bipartisan position, giving in to some compromises, or he could remain fastidious, insisting that a bargain is a bargain; if the Congress is unable to put its house in order regarding the negotiation, then the automatic tax cuts must proceed. A few economists insist the consequence of Sequestration is not really bad for the economy, considering it is an austerity measure that could actually restructure spending in the hitherto sacred cow industry: the Defense Industry!

No millionaire that I know addresses the Sequestration or the disparate taxation issue impassively. Many in this category can hardly suppress the feeling of disgust for a taxation regime better associated; or, back to the Clinton Era Administration. Further, many in this group do not like Sequestration; neither are they in favor of disparate taxation.  If Sequestration is out of the question and disparate taxation is defaulted upon, millionaires are asking these questions: where are the opportunities for building wealth; an essential ingredient for expanding growth in the economy? How can investors and industrialists create employment when taxation eats up more than its share of their income? Is Sequestration necessarily that bad?

Obama’s Administration continues to argue that the continuation of the Bush Era Tax Cut for earners below a quarter of a million is critical to the successful recovery of economy; noting that an average middle-income household may end up with over $ 2,200.00 tax bill, if Congress fails to act. Contrarily, affording this same treatment for those in income group beyond a quarter of a million is an unnecessary burden on the nation’s purse. For the Obama’s Administration, to avert Sequestration, Americans with better incomes in higher threshold, must be ready and willing to sacrifice, because that is one step that could really make a difference in shoring up our economy.

Incidentally, with the most unrealistic argument in favor of allowing millionaires to continue to take advantage of the Bush-Tax Era relief, the current debate may cut into the Obama’s Administration signature domestic policy on the economy. The Bush Tax cuts had allowed for billions of dollars to be written-off as investment income; billions that could have helped reduce the nation’s deficit. Calibration of IRS tax take between the Clinton’s and Bush II Era administration would show that the US treasury lost more money to the richest segment of the American population, with some in this group, virtually, not paying taxes because their income are classified as investment income. For its part, Obama’s Administration is seeking to rectify this anomaly among others, in order to rectify the short-fall in the taxman intake since the advent of the Bush II era Tax cut.

The two opposing positions in the debate have torched some new nerves; and a wave of activists are working the phones to Congressional Lawmakers, insisting on their relative positions. Efforts on behalf of the extension of Bush-era Tax cut for the middle income group, have led to a late release statement from the White House, insisting that the Obama’s Administration is very concerned that, if Congress fails to act quickly and the nation experiences a fall off the cliff, more Americans will lose so much in income that will readily torpedo the hard fought recovery effort since the great collapse of the last quarter of 2008 and early 2009. Critics of Obama’s position however maintain that the administration is more concerned with preserving the plight of the middle income earners at the expense of many job creators.  Critics are arguing for greater flexibility, adding that the Bush era tax cut does not need a total overhaul or partial overhaul, depending on what end of the fence of the argument you are sitting, to be able to take care of our economic deficit issues.

The fiscal cliff issue has become entangled with the dynamics of 2012 National elections result: Obama’s Administration is protecting its political capital, insisting that its argument won over many American voters and this is why a second term is achieved for the current White House. To protect its legacy and political capital, it seems the administration is not tolerating any misgivings from Congressional Republicans, who would like to negotiate the condition over which the Bush Tax Era cut is going to be extended for income earners at or lower than $250,000. The results of the 2012 elections notwithstanding, the Republican Lawmakers are prepared to test the patience of the current Administration or put to question, why the Bush Tax Cut is not extended for everyone in America. To shed light on what Republican lawmakers are not considering, the extension of the Bush Tax Cut for earners beyond a quarter of a million is too expensive for an economy running at three trillion deficit This argument is better articulated with the dictum: Election Results Have implications!

As this issue is resolved in the House of Representatives, it is probably safe to assume that many lawmakers, especially, the Democrats, will do all in their power to ensure that the position of the White House is upheld. With the most recalcitrant Congressional Republican Group ever known in the history of US Congress, there are going to be some unmet requirements from this group, which may actually delay the actualization of the Obama’s Administration on the rapid resolution of the nation’s fiscal cliff issue. However, if this ever becomes the case, no one must be surprised, if a larger progeny from the supporters of President Obama second term springs up to defend the administration promise during the election debate.

But there are other worries if the whole process becomes too long drawn out and we default to a Sequestration. For the first time in a decade, the nation would be looking at a slowdown recovery that may make the unemployment problem a double whammy. Despite the slight improvement in the unemployment problem, there is a likelihood that we may go back to double recession, as slow government spending will exacerbate the already confusing growth in the labor market. Recovery of the world market may be daunted, since when America sneezes, the world gets phenomena.  Unemployment problem in countries of Europe that is already causing some national strife may spread into America as more people get back to the unemployment line. The issue of Sequestration is not only unhealthy for the America’s labor market; it is very unwholesome for the global markets.

Further, the idea of having a further cut to local and state government administrations, in situations where many are already running at a deficit, may spell greater doom for some states in the long run. Who would be responsible for public safety, or who would take the slacks, when first responders, police, fire-fighters, and nurses are cut in state and local government public health centers? Some people currently believe that government pay roll is necessarily high because of the employment of first responders. However many local government currently clinging to lie, will readily tell you, that without first responders, public safety and quality of life is toast. Even if those who believe we can do without the number of current level of first responders prevail, the likely consequence of loss of life, because there were not enough people in this capacity to act quickly during emergency, is another food for thoughts.

Finally, party politics in a long drawn out debate over the fiscal cliff may look worthy to some lawmakers. Playing to the gallery may still look as an option to some hardliners. However, the Obama’s Administration seems to be resolute, if a deal is not agreed by the end of December, 2012, then Sequestration. Whatever comes behind Sequestration is anyone’s guesses; however, many people will like to remind Congress that Americans are tired of recalcitrance and non-compromising stance from any quarter; we do not want another crisis that would put public safety in jeopardy.
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