Our nation’s fiscal house is held together with duct tape and Crazy Glue. The porch roof is teetering—left unrepaired, it may collapse onto our economy at the end of the year. And our home’s foundation has a crack in it. While this structural gap between revenue and spending—largely caused by Baby Boom retirements—won’t be dramatically worse next year, the crack will get larger and larger until we make major repairs.
A wide array of tax cuts are due to expire at the end of 2012. As the Bush White House couldn’t muster the 60 votes required for a permanent tax change, the 2001 tax cuts were passed using the Senate’s arcane “reconciliation” procedure, which forced a 10 year “sunset” provision. (The vote was 50-50 with Vice President Dick Cheney casting the tie-breaker.) Unable to reach consensus on much of anything in 2010, the President & Congress kicked the can down the road another 2 years. In February, the 2 percentage point reduction in the payroll tax rate originally passed in 2010 was extended to the end of the year.
So, what happens if Congress & the President don’t do a deal? Read more »