For now, it seems that the fiscal cliff crisis has been temporarily adverted. The Senate and House approved the American Taxpayer Relief Act of 2012, which has prevented old budgeting from sending the country hurtling down the Fiscal Cliff.
But don’t get too excited. The battle isn’t over and in some ways it’s just beginning. The new deal, which is designed to keep our economy from another recession, increases taxing on the wealthy but has temporarily halted many changes in government spending.
In further detail, here’s what some of the new bill entails:
- Tax rates will increase for taxpayers with incomes higher than $450,000
- Changes in estate taxing were averted
- Middle class gains an extension on stimulus tax cuts
- Capital gains taxes increase to 20% for high earners
- Some estimates say the deal will provide bout $600 B in revenue over the next 10 years.
However, there’s been no real agreement on what should be done about government spending cuts. Obama argued that cuts wouldn’t be made if they didn’t produce enough revenue. The result: a second fiscal cliff-like dilemma that will happen over the next two months. It’s exactly what Congress has been bickering about over for the past year, so another battle ’til the bitter end is to be expected.
While most of us in college thought that these tax hikes wouldn’t affect us, the new Fiscal Cliff deal may affect what federal funding we receive for school. According to the New York Times:
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“The American Opportunity Tax Credit, which helps defray undergraduate college education expenses by allowing borrowers to deduct up to $2,500, has been extended for five years, through the end of 2017. The Tuition and Fees Deduction, which allows taxpayers to claim up to $4000 in tuition expenses, has also been extended. The deduction, which was set to expire at the end of 2011, will continue through the end of 2013. Some changes to the Coverdell Education Savings Accounts have been made permanent. This means that the contribution limit has been increased to $2,000 from $500 and that the account may be used for elementary and secondary school expenses. Higher income phaseouts have also been made permanent. The deal permanently repeals a five-year limit for deducting up to $2,500 via the Student Loan Interest Deduction. This means that students and families can claim on their tax forms student loan interest beyond 60 months.”
But cuts in federal aid funding and work study may be approaching. For Young Politicas out there hoping to get a degree, this may not be great news.
Unfortunately, the public does not see much resolving until one of these ‘deals’ is made. This last deal has been less than ideal for both parties. For a man who built on his trademark campaign slogans of hope and change, President Obama looks a little weak in terms of how he’s failed to change the opinions of Congress.
Media expected Obama’s second term to start full throttle, but obviously a Republican-run Congress had other ideas. His original proposal for solving the Fiscal Cliff crisis did reflect some of his ideals, but getting that plan into action was not easy. By January 1st, the Obama administration had softened up to Republican requests. Today’s Taxpayer Relief Act looks very different from what the POTUS and his administration drafted up. However, solving the crisis required agreement from both sides–not just a cave in from the Democrats. John Boehner was also heavily criticized by his own party for cutting a deal.
This bill does little to decrease the deficit and is a band-aid for the problem more than it is a stitching solution. So now, more than before, it is time to recognize that as a nation, we are still at risk of defaulting. This could mean drastic changes for the country and in our personal lives, too. Even if it does not seem like an immediate danger, the threat still needs to be dealt with in a more economically sustainable way.
The fiscal deal is not even close to where we need to be. So sit back and relax, because now it’s time to wait for the House to iron out another proposal over the next two months. The upcoming talks will—hopefully—provide a more long-term solution.
Maegan Vazquez, a Texas born sophomore at New York University, brings her young woman’s lens on all things political to Heartfeldt Blog every Monday. Send news tips to firstname.lastname@example.org