Four months ago, in this column, I predicted we would drive off the fiscal cliff and that it would be “less injurious” than most believed, with the tax increase causing the most pain.
We have now driven off that cliff and the dramatic reintroduction of payroll taxes makes this year’s tax increase most injurious to the working poor and the lower-to-middle income families.
It would’ve been worse if the full Bush tax cuts had been repealed, but the middle class votes in big numbers in mid-term elections. The president would have been ill-advised to let the Bush tax cuts fully expire, and reveal as false the claim that they were primarily a tax cut for the rich. Still, disposable income plummeted more last January than any month on record (we started keeping these data in the Eisenhower administration).