It’s been a couple of weeks since the so-called “fiscal cliff” was averted. Or was it? Republicans raised income tax rates on those making $400,000 a year and up. All other rates remained the same. Fake spending cuts were averted. Everyone patted themselves on the back and happy new year!
Well, something happened when people got their first paychecks of the year. It was noticeably smaller. What happened? This funny little thing called the payroll tax went up 2%. This tax is supposed to fund Social Security. In reality, it doesn’t, but that’s another issue.
The payroll tax was cut 2% back in 2009 as a stimulus to boost the economy. People’s paychecks were higher! During the all the fiscal cliff talks and arguments, no one mentioned the payroll tax. All they talked about was income tax rates. They were hoping you’d forget all about it, and most people did. The Republicans caved, Obama got what he wanted, fiscal cliff averted.
People aren’t so happy right now. They see their paychecks and wondered what the hell happened? How come nobody told us about this? We felt betrayed! Hardcore Obama supporters are unhappy with him because of this. If people had paid attention to the payroll tax, they would have seen it coming. It didn’t matter who you voted for, both sides agreed to let it expire without saying a word to anyone.
Because of this, we did go over the fiscal cliff. A consumer driven economy cannot grow if consumers have less money to spend. That additional 2% adds up. People will spend less and those banking on an economic recovery will be disappointed.
Now the next cliff is the debt ceiling. Republicans and Democrats have dug their heels in. Obama refuses to negotiate. All of this is meaningless as government spending remains out of control. No one on either side will cut spending. Republicans will refuse to cut military spending and Democrats will refuse to cut social spending. Therefore, no spending cuts. Get ready for even higher taxes.
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