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Catching a Falling Financial Knife

Congress Finds One Thing It Can Agree On – Spending Your Money

Politics / Government Spending Dec 05, 2011 - 05:37 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleDavid Zeiler writes: Time and time again, a divided Congress has failed to come up with desperately needed solutions to America's debt and budget deficit problems.

But when a major spending bill came along last week, members from all across the political spectrum suddenly found themselves in agreement.


Last week the Senate approved a $662 billion defense spending bill for 2012 by a vote of 93-7. A similar bill passed the House in July by a vote of 336-87.

Still, another piece of financial legislation in the Senate last week that would help the average working American, the extension of the payroll tax cut holiday, failed - a victim of the same partisan posturing that led to the debt ceiling crisis this past summer.

In truth, there was some debate in the Senate on defense spending bill. However, the senators were arguing over a provision that could take away a citizen's right to trial should they be determined to be a member of al-Qaeda or its affiliates, or if they're suspected of involvement in a terrorist plot.

The vast $662 billion price tag drew little opposition, however.

The continued inaction on everything but spending proves once again why America hates Congress. According to the latest poll averages at Real Clear Politics, 81.2% of the American people disapprove of the job Congress is doing, a measure that hasn't gone below 60% since the middle of 2009.

"Having lost almost all faith in the legislative branch, people want Congress to prove us wrong," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "More gridlock is potentially catastrophic for our country and our way of life."

A Record of Incompetence
Despite a $15 trillion debt and yawning annual budget deficit, legislators in Washington have turned every attempt to address America's fiscal problems into a circus of finger-pointing and name-calling.

Over the summer, the two parties sparred over the need to raise the country's debt ceiling, with Republicans insisting on future budget cuts and Democrats calling for some tax increases along with milder cuts.

In the end, Congress did raise the debt ceiling but did nothing to fix the budget issues causing the debt to grow. As a result, Standard & Poor's downgraded the U.S. credit rating from its gold-plated AAA to AA+.

The deal to raise the debt ceiling included the creation of a "super committee" of twelve legislators assigned the task of cutting $1.2 trillion from the federal budget over the next decade.

After two months of work, the super committee came up with exactly nothing. Their incentive - automatic and arbitrary budget cuts equal to the $1.2 trillion they were supposed to make intelligently - doesn't go into effect until January 2013.

So Congress will spend the next year doing what it does best - procrastinating while the problem gets worse.

Taxpayers Caught in Crossfire
Amazingly, while voting for $662 billion in defense spending raised few objections in the Senate, the $200 billion extension of the Social Security payroll tax cut is mired in partisan bickering.

Payroll taxes were lowered from 6.2% to 4.2% for 2011, adding $934 to the take-home pay of the average American worker. If Congress does nothing before the end of the year, the tax will revert to 6.2%.

Democrats want to lower the tax to 3.1% for 2012, which would add $1,500 to the take home pay of the average worker, but pay for it with a 3.25% surtax on millionaires. Republicans want to keep the tax at 4.2%, but pay for it by freezing federal salaries and reducing the federal work force by 10% but not replacing workers who leave.

In other words, it's another partisan impasse that will end up causing more pain for taxpayers while hurting the economy.

Even some members of Congress admit they've completely dropped the ball.

"Washingtonis broken," Rep. Tim Walz, D-MN, said in a recent statement. "Americans are understandably frustrated with the bickering and gridlock that has become a staple of the way Washington operates."

Now if only they'd do something to change it.

Source :http://moneymorning.com/2011/12/05/congress-finds-one-thing-it-can-agree-on-spending-your-money/

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Catching a Falling Financial Knife