Economic Outlook: The Mel Brooks tax code

Why is Nancy Pelosi smiling?

With a new tax code finding approval in Congress, this might be a day for Democrats to find a dark bar and a beer to nurse their wounds, play some darts and put some early New Year's resolutions together. In the short-term, the triumph of the day is that the tax bill forged largely by the White House and Sen. Mitch McConnell, R-Ky., found equal support -- that is, split support -- among Democrats and Republicans in the House. In the longer-term, it may be a template for further political compromise (and salvage the next two years for President Obama). In real terms, however, the tax code is still a patched together jamboree with 141 temporary provisions that resembles a pair of piebald blue jeans at a Fish concert.

The bill is as close to progressive as a fur coat. The rich get the biggest breaks; the lowest-earning taxpayers get skinned just a bit as President Obama traded in the Making Work Pay provision to help grease the wheels of injustice.

The bill that will cost $858 billion over 10 years, reveals that neither party is serious about reducing government debt. Not now, anyway.

The good news is that the economy, for now, gets a boost with middle-income taxpayers gaining about $613 on average and all workers able to enjoy a one year cut of 2 percent on Social Security taxes. In addition, workers who are long-term unemployed were granted an additional 13 months of unemployment benefits.

Worth smiling about: 15 million taxpayers will get some form of extended relief from the bill, which certainly gives the bill political sex appeal. And no one expects a lame-duck session to get serious about debt reduction.

In total numbers, breaks that add up to a gain of $600 for those earning $34,000 to $64,000 look paltry compared to thousands of dollars saved by those earning $100,000 or more. Liberal groups, including Moveon.org, were incensed by the bill where more than half the gains, the Tax Policy Center said, were given to people earning $100,000 or more.

Politically, "I think the big picture … is that it puts the 2012 election under the cloud of impending tax increases," Michael Ettlinger, vice president of the Center for American Progress told The Wall Street Journal.

Similarly, Rep. Dave Camp, R-Mich., said the biggest benefits of the bill are that "it prevents taxes from going up and gives us some breathing room to begin work on fundamental tax reform."

That recalls an answer Mel Brooks gave in the classic comedy routine where Carl Reiner interviewed Brooks as the oldest living human being in "The 2,000 Year Old Man."

"What did the 2000 Year Old Man use for transportation?" Carl Reiner asked. "Fear," Mel Brooks replied.

In international markets Friday, the Nikkei 225 index in Japan lost 0.07 percent while the Shanghai composite index in China fell 0.15 percent. The Hang Seng index in Hong Kong rose 0.2 percent while the Sensex in India added 1.1 percent.

The S&P/ASX 200 in Australia dropped 0.44 percent.

In midday trading in Europe, the FTSE 100 index in Britain shed 0.08 percent while the DAX 30 in Germany lost 0.06 percent. The CAC 40 in France shed 0.17 percent while the Stoxx Europe 600 lost 0.4 percent.
ANTHONY HALL || United Press International