The last minute (literally) approval of the compromise tax plan to avoid the fiscal cliff had to be done.
The Republican-led House, which wanted to see deeper cuts in spending, did the right thing and voted to approve the Senate plan. It keeps tax rates the same for 98 percent of Americans (except for returning the payroll tax to its previous level), but raises them for those making $400,000 or more. Congress also delayed for two months a decision on how to deal with the deep cuts set to go into effect Jan. 1,
It was critical for the Republicans and Democrats in Congress to compromise before the stock markets opened today. It was predicted that higher taxes and deep cuts to military and other federal spending would trigger a collapse of the markets and plunge the nation into a recession. The markets reacted with joy today as the Dow Jones Industrial average opened with a 2 percent gain.
The agreement made late Tuesday night brings some stability to tax policy and ensures that middle-class Americans aren’t going to be hit with a bigger income tax bill this year. Most families, after battling through this recession for about four years (many seeing their wages stay the same or decrease) cannot afford a big tax bump right now. And neither could the nation’s economy.
U.S. Rep. Cathy McMorris Rodgers, a conservative Republican who represents Walla Walla and Eastern Washington, has balked at legislation that doesn’t include cuts in federal spending. But she saw the clear danger facing the nation and agreed to the compromise.
“The House tonight showed divided government can work together to help American families by passing the largest permanent tax cut in our history. It is not a perfect solution, but it keeps taxes low for middle class families and provides economic certainty, which will put Americans back to work. Yet there is still tremendous work ahead of us because the federal government has a spending problem. The American people expect real spending cuts and comprehensive tax reform to turn our economy around,” McMorris Rodgers wrote on her Facebook page Tuesday night.
She is also on the mark in her assessment of the country’s spending problem. The nation is $16 trillion in debt and continues to borrow billions of dollars to pay the bills. America can’t continue to spend more than it collects in taxes and fees.
The U.S. must reduce spending slowly over time until it is under control. Then steps should be taken — a constitutional amendment or a law — to ensure the country does not again drown itself in red ink.
This has to start in two months when Congress considers dealing with the automatic cuts that had been put in place. Shortly after Congress will, once again, be faced with raising the debt ceiling.
A reasoned approach is needed. A bipartisan compromise is critical in making careful spending cuts that put the nation on the right course.
The action taken Tuesday night is a good sign that can occur.