Keep your parachutes packed. We didn’t need them on January 1st, but we will probably still need them on March 1st.
The Federal estate tax exemption was made permanent at an inflation-adjusted $5 million. The Department of Revenue has confirmed that this change eliminated any Wisconsin estate tax. Payroll taxes went back up; reports indicate the average worker making $50,000 per year will pay an additional $1,000 in payroll taxes now in 2013. And the great news? They did nothing to address runaway government spending and the burgeoning annual budget deficits we are facing without significant changes in Social Security and Medicare.
I would not be surprised if the ratings agencies don’t use this latest lack of serious action to address our budget problems as a basis for further downgrades to our government debt. Do you really think the government is going to be able to abide by its stated intent of holding interest rates low for a couple more years if the world begins to understand that, despite our rhetoric, we are really no better than some of the European countries at getting our fiscal house in order? If they don’t do it before, look for action when we have another round of inaction when the “final” shoe supposedly drops on March 1.
Why should any of us believe the government is actually going to do anything by March 1, anyway? We had a debt commission – Simpson/Bowles. They came up with a great recommendation. Nothing happened. The tax law changes enacted in the early 2000s were set to expire at the end of 2010. Everyone knew action needed to be taken. No one would want to go through the end of 2010 without action. Did we do anything? Yes. The last week of December, 2010. We had a great debate over the debt ceiling in August, 2011, and threatened to shut down the government and default on our debt. At the last-minute we decided we’d come up with a Super Committee to come up with livable solutions which allowed us to temporarily extend the debt ceiling. And if the Super Committee didn’t come up with anything, we’d have automatic sequestration. Well, there was no agreement by the Super Committee, so we were to have automatic sequestration January 1. Now that has been extended until March 1. And we have another round of debt ceiling discussions. A lot of talk and nothing gets done. Why should we believe this time is any different?
Oh, and one last thing. Let’s say you had a job in which you were supposed to create a budget. Let’s say you didn’t get it done. For a few years in a row. And let’s say that as a result of you not getting a budget done, your company continued to spend money without a plan and absorb huge losses. If you worked in the private sector, your company would be bankrupt or you would be fired or both. Why don’t we hold our lawmakers similarly accountable?