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Fiscal Cliff Averted & Farm Bill Extended

posted on January 4, 2013


The government released its latest assessment of the U.S. labor market Friday, stoking a New Year’s rally on Wall Street.

According to the Labor Department, U.S. employers added 155,000 positions to their payrolls in December, reflecting a steady gain in hiring despite fiscal uncertainty in Washington.

The gain wasn't enough, however, to reduce the U.S. unemployment rate, which held study at 7.8 percent.

Strong hiring in manufacturing and construction fueled December’s job growth. Construction firms added 30,000 workers in their largest increase in 15 months. And manufacturers added 25,000 jobs, to record their best showing in nine months.

The news was cheered on Wall Street, where the S&P 500 settled Friday at a 5-year high.

Robust hiring in December indicates employers didn't panic as fiscal negotiations between Congress and the White House collapsed. Ultimately policymakers did avert the, so-called Fiscal Cliff” – but not until the last minute.

Fiscal Cliff Averted & Farm Bill Extended

Rep. Sandy Levin, D – Michigan: “…this legislation allows us to get done what we need to get done. This bill is vital for our nation's economic well-being."

Rep. Darrell Issa, R – California: “…there's Four-Trillion dollars of new debt and deficit and there's no pay-for. And there's no anticipation of a pay-for."

More than 500 days after a budgetary time bomb began ticking, congressional leaders partially defused the much-maligned fiscal cliff.  In last minute negotiations between Senate Minority Leader Mitch McConnell and Vice President Joe Biden, a combination of permanent middle class tax cuts and fresh tax increases on individuals making more than $400,000 as well as couples earning over $450,000 - sealed the deal.

President Barack Obama: "A central premise of my campaign for President was to change the tax code that was too skewed toward the wealthy at the expense of working, middle class Americans. Tonight, we've done that.”

President Obama claimed victory before heading back to his Hawaii holiday vacation but the last-minute deal only delayed more painful decisions on federal spending.  The cliff deal pushed dramatic spending cuts bundled alongside the next debt ceiling increase to a congressional standoff in March.

The New Year’s congressional wrangling sent legislative shockwaves on key policies in rural America.  After months of tedious work on the 2012 farm bill, House leaders acquiesced to a simple one-year extension of the current farm bill.  The extension is viewed as a blow to midwestern farmers hoping for policy certainty for everything from direct payments to proposed crop insurance programs.

The next farm bill is likely to be used as a savings resource for congressional leaders searching for spending cuts in 2013.

Another key tax agreement this week was a one-year extension of the production tax credit for wind energy projects that break ground in 2013.  The federal tax incentive is viewed by industry advocates as an essential piece of wind sector growth.

The mix of tax cuts and increases may have an equally mixed result according to Midwestern economists.

Ernie Goss, Creighton University Economist: "Let's give alternative energy this, let's give educators that.  No.  We're getting into everybody is an interest group now.  We're out there lobbying instead of mining for natural gas and mining for oil and so on we're mining for tax credits, mining for tax benefits and this and that.  It's not healthy economics in my view."

David Swenson, Iowa State University Economist: "We start to impinge our ability to govern period by focusing on this debt ceiling issue as an artificial obstacle to good governance.  Remember, the debt ceiling is just authorizing the United States to pay for what is already legislated into law.."

Despite the frantic pace of the last week of the 112th Congress, the newly sworn-in 113th Congress will have a busy 2013.

 


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