At the time of writing it remains unclear whether the US House of Representatives will approve the deal passed overnight by the Senate to avert the so-called fiscal cliff. For a non-American observer, however, there can only be one response: after all the name calling and brinkmanship, the best they could come up with was THIS?? (I urge you to click on the link, as I bet you were not aware that Bride of Frankenstein was a member of Congress).
It was always likely that the tough decisions would get put off for another day, but this deal does that to an almost unthinkable degree. There are income tax hikes only for those earning over $400,000, which amounts to only about 1% of taxpayers. However, payroll tax reductions will expire, hitting even lower middle class Americans where it hurts, and thus very likely damaging consumer confidence and spending.
The worst failure, however, is on the spending side. The spending cuts that were "sequestered" during the 2011 debt ceiling debate, and which would have been the most damaging part of the entire cliff, have been delayed for another two months, to allow Congress to find alternatives. Given the abject failure of the two major parties to agree on any spending measure over the past eighteen months and more, what are the chances that two months are going to make any difference?
The net effect of all this, according to early estimates from the Congressional Budget Office, will be to add $4 trillion to Uncle Sam's debt over the next few years -- and this deal was done in the very week in which the existing debt ceiling was reached! How either party can claim victory in this debacle is quite beyond me.
Oh well, HAPPY NEW YEAR anyway!
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