A Fiscal Cliff Solution...Maybe

The Senate passed a Fiscal Cliff avoidance bill by an overwhelming 89-8 vote but Republicans in the House, led by Eric Cantor, appear ready to balk.

They're talking about amending the measure and sending it back to the Senate which could result in an extension of the stalemate. The other thing I'm a little confused about is how what appears to be a revenue bill can originate in the Senate in the face of Section 7 of the Constitution which states "All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."

Anyway, Eric Cantor and constitutional violations aside, what exactly is the supposed solution?

It extends the Bush era tax cuts for individuals up to $400,000 and couples up to $450,000. For those over the limit the tax rate will go to 39.6% up from 35%. The bill also extends the cap on itemized deductions from the Clinton era. This is less than Obama wanted but a lot more than the Republicans originally said they would allow. If it passes Grover Norquist can go suck a lemon.

Taxes on Capital Gains and Dividends exceeding $400,000 for individuals and $450,000 for couples will go up from 15% to 20%.

It permanently indexes the Alternative Minimum Tax for inflation thus eliminatong the need for yearly bandaids.

It extends for five years expansions of the child tax credit, earned income tax credit, and an up to $2,500 tax credit for college tuition. It also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.

It extends jobless benefits for the long-term unemployed for one year.

It blocks a 27% cut in Medicare payments to doctors for one year. This cut was the product of an obsolete 1997 budget formula.

It allows a 2% cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent but doesn't address the issue of raising the salary cap which I think is necessary to insure the solvency of Social Security. That would have been a progressive adjustment this is a regressive one that hits low income wage earners harder than high earners.

It Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week.

Overall it's not a solution. It's a bandaid because it doesn't fully resolve the spending side of the issue. It just kicks the spending problem down the road again.

Still, it's better than nothing (I think) and should calm the jitters in the stock market until the spending ceiling debate starts. That should be another fiasco.