Does 'fiscal cliff' deal actually solve the problem?
Breaking down the Senate framework
- Duration 5:02
- Date Jan 1, 2013
Breaking down the Senate framework
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While the senate passed a bill on the fiscal cliff but does this actually solve the problem.
And if the house gives its stamp of approval what does this mean for the economy well let's ask the policy director.
Public notice -- Brooks.
A happy new year -- would.
Happy new year great to be with you today thank you -- so this temporary stopgap measure just designed to avert the spending cuts and tax hikes that were going to automatically take place today.
And much of it just has to be revisited in two months but.
Some parts of this bill would actually be permanent if the house passes it such as the tax rates.
That's right ever since 2001 we first pass the bush tax cuts are tax code has been temporary.
So that's what we have the same discussion two years ago as flower -- today.
And it's hard to get businesses to grow and vast when the tax code is so uncertain when you don't know what the income tax rates going to be.
You don't know what the death tax going to be so this is one positive thing in the bill on the spending side as a whole different story.
So it's a step in the right direction on tax policy.
But in terms of spending -- gets us nowhere in the rat right direction in fact.
We actually had our debt ceiling yesterday of sixteen point four trillion dollars so we'll be talking about this the next two months.
Yeah and as you say the bill it doesn't really have a lot of spending cuts in -- and on balance you say it actually increases.
Spending -- explain some of the areas where does that.
Well the big part of the billboard increases spending is on the emergency unemployment insurance so when the recession first -- Congress decided that for -- out -- weeks.
Emergency unemployment insurance would -- -- be covered by the federal government since the economy.
Is still struggling.
They're looking at renewing -- so this is new spending in the bill there's virtually no spending cuts but another big thing is.
The way they got rid of this a questioner was Bob bit basically raising taxes is in tweaking the tax code.
And that's something that a lot of the house Republicans probably won't like but at this point the game I think they.
Have to -- Yeah so some of those tax increases that you were talking about a one of them.
Is this a Social Security payroll tax increase we've -- -- cut for the past two years of 2% in that and -- President Obama this year was pushing to let that.
Cut laps and indeed the senate bill allows that cut to lapse which raises.
The income tax for people at all levels on the Social Security tax to six point 2%.
Which adds up to a a lot of money for a family making 50000 dollars it's a thousand dollars a year.
That's a pretty big tax increase and it hits all income levels.
There's no question the Social Security payroll tax holiday is gonna affect folks but you know this is a dedicated tax it goes to fund Social Security.
When they took the 2% out of Social Security were basically funding the program.
-- deficit spending so if we're concerned about making Social Security solvent you probably shouldn't be.
Continuing this temporary program for another year.
When Social Security has plenty of fiscal challenges of the zone all right so you support that move to let that lapse.
I think it's a good policy to let the let the Social Security payroll tax how they expire because Social Security doesn't need to have money being taking out of it right now.
And there are people who say look every time we raise that capital gains tax.
Total revenues from capital gains go down because people -- cut back on their investments which just hurts the entire economy what say you.
Well you know this is about legislating him legislating is about the art of compromise this is what happens.
When congress does wake the last minute to address to go here we are -- -- one.
And -- -- -- a deal that actually expired last night so.
No one wins -- you know not all sides when when you do this yet to meet somewhere in the medal and that's they did here.
Yup and you mentioned the debt ceiling though we did hit it yesterday we do have emergency measures that the Treasury Secretary Tim Geithner put in effect that -- -- that's gonna put it off.
For two months but to be right back here at the bargaining table.
You know our rating dropped the last time we had this debt ceiling debate are in trouble in terms of world opinion.
Well there's no question there will probably be back here two months having these same types of discussions.
But there's no question are credit ratings you know in trouble.
And congress really -- look at the spending stop to stop.
The -- that they agreed to just a few hours ago does not -- for spending were still on a trajectory.
Of hitting point two trillion dollars in deficit about 47 team.
That matters to Americans because this -- -- -- every single American by having higher interest rates so.
It's very important that all sides of congress work together -- parade.
And find a way to cut spending to make the hard choices and lead when -- Brooks public notice thank you so much.
Thank you happy new year same TO.