If the Bush-era tax cuts had completely expired, workers across the economic spectrum would have faced a punishing jump in their tax rates. The median household, for example, would have faced a 13 percent increase. As it stands, however, the average taxpayer will fork over about 1.8 percent more than last year, mostly due to the expiration of what was always intended to be a temporary payroll tax break.
Thus far, much of the pain from the Great Recession's high-unemployment legacy has been blunted by federal unemployment benefits to help workers who have been out of a job for more than 26 weeks. These benefits were set to expire in January, which would have left 2 million people scrounging for food immediately, and another million would have joined their ranks by April. As it stands, the fiscal cliff deal extended federal unemployment insurance for another year.
It might be excessive to claim that the fiscal cliff directly threatened millions of families' access to the American dream. Then again, the Earned Income Credit, the Child Tax Credit and the American Opportunity Tuition Credit, all of which were set to expire this year, have been a major boost for middle-class households -- particularly those with children. The fiscal cliff deal extended all of those tax credits for five more years.
As I noted a couple of weeks ago, the legislative limbo surrounding the fiscal cliff caught another victim in its net: the Farm Bill. Congress was unable to pass an extension on the bill, which meant that -- among other things -- the equation calculating the amount of money that the government pays for milk was set to revert to a 1949 standard, which would have more than doubled the price of milk. Fortunately, the fiscal cliff deal extended the expiring Farm Bill for one more year.
Remember when Mitt Romney got in trouble for telling an audience "I like being able to fire people"? After a couple of years of watching a stunningly incompetent Congress, it's a fair bet that millions of Americans are wishing they could fire their legislators. The fiscal cliff deal offers the next-best option: a pay freeze on Congress.
Remember sequestration, that big, scary series of cuts that were poised to shred Medicaid, the Department of Defense, and every other government program? Remember all the talk about how they would pull tons of money out of the economy and push the country into another recession? Well, the good news is that sequestration isn't happening (right now), a factor that undoubtedly helped propel Wall Street's post-fiscal cliff rally. The bad news? This reprieve is only going to last for two months -- after which, sequestration will once again threaten our lawmakers with the dire consequences of inaction.