Stocks surged the day after Democrats and Republicans in Congress reached a compromise to avoid sending the country over the fiscal cliff, but fewer people invest in stocks anymore, so fewer people cared.
According to a recent Gallup poll, 54 percent of Americans say they hold stocks, the lowest level since the polling firm began monitoring ownership and 11 percentage points lower than in 2007, before the economic crisis began.
It may be best for those who have opted out of the market to stay there, at least in the short term. Stocks are certain to waiver again in a few months, and perhaps nosedive altogether, since this fiscal cliff fix is really a temporary one. Another one looms as the battle over raising the debt ceiling begins in earnest and Washington continues to batter the country’s economy with self-inflicted wounds.
Montana Democratic Sens. Max Baucus and Jon Tester supported this recent poorly named deal, “American Taxpayer Relief Act of 2012,” which actually passed in the first hours of 2013 and actually results in tax increases for the majority of Americans. But who’s counting?
The senators offered only tepid endorsements following the vote. “This deal is far from perfect,” Tester said. “We have a lot of work ahead of us,” Baucus added.
Departing Republican Congressman Denny Rehberg voted against the measure, but enough of his colleagues offered their support for it to pass the House. He told Gannett newspapers, “I don’t think anyone’s happy about it.” He’s right.
Conservatives hate it because it raises taxes. Liberals say President Barack Obama caved on his key campaign promise: That taxes would return to pre-Bush-era levels for individuals making more than $250,000 a year. Instead, in this so-called compromise, income taxes will return to that level for individuals making more than $400,000 a year and married couples making more than $450,000.
Following the vote, Obama praised the deal “that protects 98 percent of Americans and 97 percent of small business owners from a middle class tax hike.” While this statement is true in regard to the income tax, it fails to mention that other federal taxes are, in fact, increasing.
The deal failed to extend the reduction in the Social Security payroll tax, which means taxes are increasing for about 77 percent of Americans, according to the Tax Policy Center.
That group, in an Associated Press report, estimated that households making between $40,000 and $50,000 a year will see an average tax increase of $579 this year, while those making between $50,000 and $75,000 will pay an average of $822 more.
The payroll tax cut, enacted before 2011, was supposed to be temporary. But workers expecting their 2013 paychecks to be as large as those in 2012 are in for a surprise.
But the deal is worse because it provides no certainty since another crisis looms. It blocks deep across-the-board spending cuts to the Pentagon and domestic programs for only a couple months and does little to reduce the national debt and nothing to increase the debt ceiling, which Republicans say they will use as leverage in the next budget fight – again. Remember, a similar fight in 2011 caused Standard & Poor’s to lower the country’s credit rating and the stock market to plummet.
Business leaders have lamented the deal as a missed opportunity to finally put the country on stable economic footing. Much of the next two months will look a lot like the last two, this time with the added threat of the United States defaulting on its debt and the government shutting down.
But a few people should be happy. Somehow $76 billion in tax breaks were tucked in the latest bill that benefit everyone from film producers to racetrack owners. Not editors, though. Go figure.