‘Fiscal cliff’ deal leaves everyone bruised, but some more so than others

Chris Moody
·Political Reporter

The bill to avoid the "fiscal cliff" is finally passed and signed by President Barack Obama, and the culmination of intense negotiations between Republicans and Democrats seems to have left nearly everyone unhappy—or, at most, begrudgingly grateful that some kind of deal was reached.

Unlike elections, the legislative process doesn't always offer a clear winner and loser, and the battle over how to avoid nearly $600 billion in painful spending cuts and tax increases was no exception. But some escaped with fewer cuts and bruises than others. Here are the "winners" and "losers"—terms we use loosely.


President Barack Obama: The president took a beating from his own party two years ago when he cut a deal with Republicans that temporarily extended income tax rates for all income earners set by former President George W. Bush. This time, Obama refused to budge on one of his main campaign promises to increase taxes on wealthy taxpayers. As part of this deal, the income tax rate for individual earners above $400,000 and families earning above $450,000 will increase.

The president, however, failed to hold together a "grand bargain" with Republicans in what could have been a major opportunity to address ballooning entitlement spending and tax reform. But in the grand scheme of things, Democrats seemed to have come out on top.

Former President George W. Bush: The final language of the bill left many of Bush's tax rates in place. The passage suggests that there is bipartisan agreement that income tax rates on the middle-income earners should not increase. Also, taxes on capital gains and dividends will remain at 15 percent for income earners below the $400,000 threshold.

While the bill that Bush championed during his presidency had an expiration date, the tax rates set under the fiscal cliff deal are permanent.

Senate Minority Leader Mitch McConnell and Vice President Joe Biden: While Obama, House Speaker John Boehner and Senate Majority Leader Harry Reid found it difficult to play nice during the negotiations, Biden and McConnell may have saved the day with their long working relationship. (Before joining the Obama administration, Biden served with McConnell in the upper chamber from 1985-2009.) Known as "the McConnell whisperer" because of his ability to work with the minority leader, Biden was able to communicate the president's message in a way Obama could not.

Indeed, it was not until Biden stepped in during the final days of negotiations that it looked as though an agreement would be reached.

Unemployed Americans reliant on federal programs: Federal benefits for Americans who have been without work for more than 26 weeks will be extended for one year, although the provision is not offset by spending decreases elsewhere.

Hollywood: The bill extended a tax break to the film and television entertainment industry for one more year. The tax incentive is meant to encourage production companies to film in the U.S. The provision costs federal coffers $430 million in potential revenue—which is something to remember when you spend $15 on a movie ticket.


House Speaker John Boehner: Although Boehner's efforts helped avoid the potential disaster of going over the fiscal cliff, much was conceded. Obama was able to increase federal spending and raise taxes, outcomes that many Republicans worked tirelessly to avoid. The process showed that Boehner still lacks control over his caucus, which largely rejected his own proposal. This includes his own deputies, House Majority Leader Eric Cantor of Virginia and House Whip Kevin McCarthy of California, who voted against the final deal that Boehner helped negotiate.

The federal deficit: Compared with what would have happened had the federal government gone completely over the fiscal cliff—including the millions in tax increases and spending cuts that would have reduced the deficit but possibly plunged the nation into another recession—the new deal increases the deficit about $4.6 trillion over 10 years. "Washington missed this magic moment to do something big to reduce the deficit, reform our tax code and fix our entitlement programs," said Campaign to Fix the Debt co-founders Erskine Bowles and Alan Simpson in a joint statement.

Grover Norquist: The founder and president of Americans for Tax Reform says the fiscal cliff deal is not a violation of his group's anti-tax pledge. (Almost every Republican member of Congress signed a pledge never to raise tax rates.) But compared with tax rates in 2012, the final deal increases federal revenue by about $600 billion over 10 years and most Americans will receive less take-home pay in the new year.

While Norquist isn't technically calling the vote for the deal a vote for a tax increase, it is the first time since the George H.W. Bush administration that so many Republicans have approved such a broad tax hike.

Workers who will pay more into the payroll tax: The deal does not extend the payroll tax holiday, which means the federal government will take 6.2 percent from paychecks, as opposed to the 4.2 percent rate in 2012.