Traverse City Record-Eagle

Our Views

January 2, 2013

Hopefully, compromise deal is better than the 'Fiscal Cliff'

Fake or not, contrived or not, the "fiscal cliff" had some potentially painful realities for a lot of Americans, rich and poor.

But before we celebrate the apparent deal struck at the last possible minute Monday — and until we hear all the gory details — we should ask if maybe some of the predicted consequences wouldn't have been good for the nation in the long run.

If an agreement isn't approved by Congress, more than $500 billion in 2013 tax increases will take effect immediately and $109 billion in cuts will be carved from defense and domestic programs.

Economists warned the tax hikes could have driven the country back into the recession we're still fighting to shake off; but cutting a few tens of billions from bloated defense and domestic programs — particularly defense — would probably not be a bad thing.

The sides were reportedly still at an impasse over whether to put off the automatic, across-the-board spending cuts set to take effect at the beginning of the year and how to pay for that.

Talks were reportedly focused on a two-month delay, but negotiators had yet to agree on about $24 billion in savings from elsewhere in the budget. Democrats had asked for the cuts to be put off for one year but that sounds like more kick-the-can-down-the-road budgeting.

According to the Associated Press, insiders said the proposal would raise the tax rates on family income over $450,000 and individual income over $400,000 from 35 percent to 39.6 percent, the same level as under former President Bill Clinton. Estates would be taxed at 40 percent after the first $5 million for an individual and $10 million for a couple, up from 35 percent to 40 percent.

Unemployment benefits would be extended for a year; benefits were set to expire for 2 million people in early January.

If the devil in any deal is in the details, this last-minute hash could be positively satanic. Issues yet to be worked out included shielding Medicare doctors from a 27 percent cut in fees, the alternative minimum tax and extending for five years tax credits for poorer and middle-class families, including a credit that helps pay for college.

One official said the deal would achieve about $600 billion in new revenue.

We may not know for weeks what's what. But President Obama warned he would not accept any debt-reduction deals that rely on slashing spending without raising taxes. We'll see.

Washington has long forgotten the art of compromise for the national good; we can only hope they've remembered what that's all about.

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