Trumka: Fiscal Cliff Settlement Good, But Inadequate

WASHINGTON (PAI)—The settlement of the so-called “fiscal cliff,” which Congress hammered out on Jan. 1 was good but inadequate, AFL-CIO President Richard Trumka says.  He was one of several union leaders with that view.

And Steelworkers President Leo Gerard added the settlement shows the GOP still trashes the middle class, since most House Republicans opposed the deal.

Trumka gave his judgment after the GOP-run House voted 257-167 to keep income tax rates the same for anyone earning less than $400,000 yearly in salary — $450,000 for couples – as part of a package to avoid the cliff.  Most of the votes came from Democrats.  Gerard aired his comments in late December, during the wrangling.

The cliff included tax hikes and federal spending cuts, called a sequester, that economists said would throw the U.S. back into recession.  The legislation also extends jobless benefits for another year, but it lets payroll taxes rise, hitting 77% of taxpayers.

And the labor-backed Economic Policy Institute added the lawmakers’ solution still avoided solving many of the economy’s problems.

Trumka called the deal a “breakthrough in beginning to restore tax fairness.” He also said it “achieves some key goals of working families,” by avoiding Social Security, Medicare or Medicaid cuts, while raising “over $700 billion over 10 years” through tax hikes on the rich.

“A strong message from voters and a relentless echo from grassroots activists over the last six weeks helped get us this far,” he added. “But lawmakers should have listened even better. The deal extends the Bush tax cuts for families earning $250,000- $450,000 a year and makes permanent Bush estate tax cuts exempting estates valued up to $5 million from any tax.   These concessions amount to over $200 billion in additional tax cuts for the 2%.

“And because of Republican hostage-taking, the deal simply postpones the $1.2 trillion sequester” – the budget cuts – “for only two months and does not address the debt ceiling, setting the stage for more fiscal blackmail at the expense of the middle class,” Trumka warned.

Gerard said the lack of House GOP support for the final deal – Democrats provided most of the votes for it there – shows how out of touch the party is with voters.

“These guys are so disconnected from reality, it’s hard to believe,” Gerard told a radio talk show host.  “We have the most inequality since the Great Depression … If we are going to have a society where people are going to work with dignity, retire with dignity and raise their kids with dignity, we can’t do it unless we have collective bargaining back in the system.”

American Federation of Government Employees President J. David Cox also called the bill a mixed bag. “While we are glad to see a bill that requires the wealthiest Americans begin to pay a fairer share of taxes, AFGE members are very concerned about the use of additional agency funding cuts to pay for delay of the sequester,” he said. “How agencies will achieve these amounts is not clear.”  Cox said the government should cut the excessive pay and perks of contractors and their executives before it uses more “unpaid furloughs” for workers or “other cuts to critical agency programs.”

“The big minus is that very little has been decided” by lawmakers in their lame-duck session, said EPI Research Director Josh Bivens.  And he cited other negatives.

“It has done very little to deal with the real problem of fiscal contraction in the coming year, making the recovery much slower.  If the sequester is canceled in two months, or even if it is canceled but ‘paid for’ with tax increases on high-income earners then much of this fiscal drag could still be averted.  But it hasn’t been yet.

“Permanent enshrinement of low dividend tax rates is bad policy, and looks especially ugly when paired with tax breaks for lower-income households that are not permanent, but sunset in five…And apparently the “middle-class” that Congress is always pledging to protect now starts at $450,000 in taxable income.

“The verdict on the sequester will be decided just as the nation hits the statutory debt ceiling,” Bivens noted. The House GOP “are hoping this will give them leverage to force their own agenda.  And it worked before.  Which means this time, the Obama administration needs to be deadly serious about not negotiating over the debt ceiling.

Meanwhile, payroll taxes rise for all, taking $120 billion from workers’ paychecks.  Restoring that money “just seems completely off the table now,” Bivens lamented.

The package also included one specific change the Amalgamated Transit Union strongly lobbied for: Restoring the equal $240 yearly benefit for workers’ transit vouchers.  That benefit was cut in half last year, while a similar benefit for parking vouchers stayed at $240.  Now both benefits will be the same again, ATU says.

“This commuter tax benefit will provide much needed financial assistance to working families,” said ATU President Larry Hanley.  “The average family devotes nearly 20% of its income to transportation – second only to housing.  The increase in this benefit means they have one less expense to worry about, and in today’s economy, every dollar counts.  When people take public transit, there are fewer cars stuck in traffic, decreased pollution and less dependence on foreign oil.”