The "fiscal cliff" bill that President Obama just signed after the totally unnecessary cliffhanger (fiasco?) in the House of Representatives leaves a lot to be desired. Its biggest impact, perhaps, was a 308 point advance in the Dow Jones average on January 2nd. It also extended unemployment insurance for many unemployed Americans. But, it also provided hundreds of millions of benefits to various special interests and did very little to reduce the deficit.
As Nobel Prize winning Princeton economist Paul Krugman said after the bill was approved, President Obama almost gave away the house. He didn't have to compromise so much. He had insisted for almost an entire year that taxes would have to go up for those making more than $250,000. Yet, he agreed to raise this barrier to $450,000. As a result, only less than 1% of people would be affected.
Krugman said, "Obama has to be aware just how much is now riding on his willingness to finally stand up for his side. If he doesn't, nobody will ever trust him again, and he will go down in history as the wimp who threw it all away."
If the bill passed by Congress was supposed to reduce the deficit, it failed miserably. In fact, while it will raise about $600B in new taxes over ten years, it will also increase the National debt by about $4 trillion over ten years. So, it is a total failure if the goal was to reduce the National debt.
In review, the main accomplishment of the recent bill was the temporary postponement of a financial and economic crisis that may have led to a new recession. More bloody battles are expected during the next two or three months.
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