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Tuesday, October 21, 2014 | Last updated: 10:39am


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Political, economic issues linger after fiscal cliff bill passes






Although lawmakers managed to avoid the so-called fiscal cliff, MSU experts say there’s still more to be done to prevent cuts to financial aid and federal grant money currently in jeopardy.

The last-minute plan prevented tax increases for 98 percent of families and 97 percent of small businesses. The bill also extended unemployment insurance, tax breaks for families paying for college and the farm bill, which averted a steep rise in the price of milk in the first few months of 2013.

Although many MSU students’ families avoided higher income taxes, economics professor Charles Ballard said the most widespread effect of the fiscal cliff agreement is the noticeable 2 percent increase in payroll taxes. Now, students who work will see a 6.2 percent tax on their payroll.

Local Michigan politicians were united in voting to approve the agreement. U.S. Rep. Mike Rogers, R-Brighton, as well as Michigan Sen. Carl Levin, D-Detroit, and Debbie Stabenow, D-East Lansing, all agreed to the provisions of the final bill.

Levin said although he wished for a better agreement to avoid the fiscal cliff, he felt approving an “imperfect agreement” was better than falling back into nationwide recession.

There are still two looming issues lawmakers must solve: fixing the sequester and raising the debt ceiling.

During fiscal cliff negotiations New Year’s Day, lawmakers decided to postpone the deadline to resolve massive spending cuts, known as the “sequester,” by two months.

Now, lawmakers must decide which programs to keep and which to cut. That might mean students’ financial aid and federal grants for research end up on the chopping block, Ballard said.

“If there are big cuts to the National Science Foundation, the National Institutes of Health or other agencies from which MSU professors get grant money, that is (concerning) to our institution,” he said.

For graduate research assistant Nate Walton, who conducts research at the Organic Pest Management Lab through the Department of Entomology, cuts to federal grants might put his job studying various types of insects in MSU’s fields and apple orchards in jeopardy.

“It’s really important that the federal government funds science because there’s a lot of research that wouldn’t get done (without it),” he said, adding he often writes grant proposals to help fund the program.

Levin said as lawmakers work to agree on a solution to the sequester by February or early March, there are a few ways Congress can avoid cutting federal spending on essential programs.

“Closing offshore tax loopholes and ending corporate tax avoidance gimmicks will help us avoid the harmful automatic cuts to important domestic and national security priorities and make the tax system fairer,” Levin said in a statement.

Lawmakers also must figure out how to raise the debt ceiling to ensure the U.S. pays its bills. The country already has borrowed more money from other countries in the market than its legal limit — currently maxing out at about $16 trillion.

Although the Treasury has found ways pay bills and buy the country some time, lawmakers must agree on a way to raise the debt ceiling by late February or early March before the country defaults on its payments.

Although Congress was able to avoid falling off the fiscal cliff, political science assistant professor Matt Grossman said he predicts more eleventh-hour decisions for the country’s remaining issues.
“We’re going to wait until the last minute on (these issues),” he said.

“There’s incentives for no (party) to agree before they’ve given up in getting their best deal.”


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