With a major debt ceiling violation hot off the presses, what does this mean for America's taxpayers?
Earlier this week, mere days before the deadline, the Republicans struck a deal with the Democrats in Congress and President Barack Obama to raise the statutory ceiling on federal debt and avoid a default that would have been lethal to our economy.
In the aftermath a great tidal wave of rhetorical has swept the nation's media and the consensus seems to be a universal sense of dismay. Conservative and liberal commentators alike seem to be in agreement that the deal reached did everything short of actually helping the country. Permanent months of promises from both sides that the bargain would include combine cuts with revenue-raising tax reforms and contractual benefits such as Medicare and Social Security, no such compromises seems to have emerged.
Rather, the result seems to be a major stop-gap measure, which will be followed by more months of politicizing, debts, and paralysis.
What Does This Mean for Taxpayers?
Ignoring for a moment Speaker Boehner's declaration that a tax hike would now be "impossible," it would seem that higher taxes could soon appear on the horizon. The bill actually lacks any kind of tax reform whateversoever. Specifically, the compromise failed to extend the payroll tax cut passed in 2010. This means that workers could expect to see their pay checks shrink by approximately two percent in January when the additional tax is deducted from their earnings.
At the very least we can expect to see some serious debts over the next few months on a wide range of tax issues as the Democrats continue their efforts to close loopholes in the tax code that benefit the rich and the Republicans remain steadfast in their opposition to any kind of tax increases.
For many Americans, especially retirees and those who rely on Social Security benefits, the cuts are serious cause for concern. Any decrease in federal spending will mean less aid for state and local government, thus making already weak areas even more vulnerable to budget cuts, deficiency, and layoffs.
Perhaps of most direct importance for many Americans is the bill's effect on the dollar. While the resolution of the crisis brought an immediate rally in the dollar, with the US dollar index rising 0.49 percent on Monday, it is not expected to last. Given the continued work necessary to resolve the debt problem, as well as the country's poor economic condition (due in part to the total stagnation of the debt talks) many economists believe the dollar could continue to decline through the end of the year.