The deal on taxes

Lotsa people are pretty pissed right now. The President and Republicans in Congress cut a deal that will extend Bush-era tax cuts – taxes opposed vigorously by Democrats and fiscally sane Republicans at the time. In exchange for giving in to Republican demands on the tax cuts, the President got a payroll tax holiday (which benefits lower income workers), an extension of unemployment benefits, and tax credits to encourage business investment. Nothing huge, but those are policies which will be at least modestly stimulative, moreso than tax cuts for the super-rich. So the President got a deal that has something in it for everyone, and that seems to be better than any other tax deal or stimulus deal that we’re likely to get in the next few months, and we need a stimulus rather badly.

So why are people upset? Because the tax cut deal is bad. People earning over $250,000 are getting two tax cuts, while the middle class only gets one. The rich haven’t earned that tax break, and the existence of that tax break since the early 2000s has been singularly ineffective at stimulating the economy for anyone but people earning more than $250,000. A lot of people wanted to see a deal that extended the tax cuts that apply to everyone in the middle class and higher, and to have the extra tax cut for the rich be left off. If that couldn’t pass in the lame duck session, a lot of people (myself included) wouldn’t have minded letting the tax cuts all expire in January 2011, so that Congress could start with a blank slate. Force Republicans to take hard votes on taxes throughout 2011 and 2012, the argument went, and pretty soon the country would see a serious contrast between the parties, and Democrats would benefit in 2012.

Here’s the thing: Nothing stops anyone from doing that now. But in September, Congress actually considered taking up these taxes, and instead of doing that very smart thing, they punted. They could have made tax cuts an electoral issue, forcing a hard vote on Republicans, and maybe even saving some seats. Majority Leader Steny Hoyer explained that actually holding the vote didn’t matter, because the Senate wouldn’t act, and anyway “Our position is clear. We don’t need to have a vote to let the American public know where we stand.” Alas, the caucus was actually badly divided, and couldn’t agree on a position on the tax cuts for the rich. So rather than bringing a clear message to the public and to Republicans, the Democrats split themselves, taking the issue off the table.

Given that utter vacuum of both Congressional leadership and political instinct, the President had to step in. Not only would he surely get a worse deal in the next Congress than in this one, but the GOP could chew up precious time in the lame duck session fighting about taxes. And he doesn’t want that, because he has actually important things he wants done:

  1. Military authorization: He’d like soldiers in the field to have clothes and food and ammunition, and that takes money, and that means Congress has to pass the authorization bill, and soon.
  2. Don’t Ask, Don’t Tell: Repeal of the military’s discriminatory policy towards certain patriotic (gay) Americans who want to serve their nation is part of the military authorization bill. The President has made this a priority, it was a major campaign issue, and the military brass wants it to happen. A Republican Congress will kill it ten different ways, maumauing Democrats at every step. He wants this to pass in the lame duck session.
  3. New START: With the expiration of the last START treaty, our ability to verify Russian compliance with arms control agreements ceased. Programs that secure weapons, that secure weapons grade plutonium, and other vital measures have all ceased. The new treaty restores those safeguards, reduces nuclear stockpiles in both nations, improves verification mechanisms, and proves to states like Iran and North Korea that the great nuclear powers are serious about disarmament. It’s a major issue for the President, for national security, and for global survival. Naturally, Republicans in Congress oppose it. Even if passing it quickly weren’t vital to regaining our verification capacity on Russian nuclear status, it’d still be urgent to pass this in the lame duck.

What I haven’t seen any reporting on is whether the President’s deal on tax cuts included an agreement to bring those bills to the floor. But until tax cuts are addressed, those votes are sure not to happen. So the President did what had to be done.

Is it the best deal imaginable? No. Is it the best deal possible? Probably. Time to move on to bigger fish.

Comments

  1. #1 Nick
    December 8, 2010

    The rich haven’t earned that tax break

    =================

    You don’t earn tax breaks. You earn money. The government then extorts the money from you.

    Big reframing going on. Why don’t you go the full hog? All money is the governments. Everything you earn. Then the government being generous gives you some.

  2. #2 Left_Wing_Fox
    December 8, 2010

    pfft. Get back to me when the rich stop benefiting from an educated and healthy public workforce, a decent transportation and delivery infrastructure, living wages that create their consumer base, and politically favorable government contracts and business friendly courts.

    Until then, the biggest parasites in America are not the wage slaves making less than 20K/year, but the millionaires and billionaires who whine that paying 35% of every dollar they make over $373,000/year is just too heavy a burden to pay for the system they benefit from daily.

  3. #3 D. C. Sessions
    December 8, 2010

    pfft. Get back to me when the rich stop benefiting from an educated and healthy public workforce, a decent transportation and delivery infrastructure, living wages that create their consumer base, and politically favorable government contracts and business friendly courts.

    That has nothing to do with taxes in the USA, though, since that workforce, transportation, etc. are all in other countries (where the wealthiest have been moving their investments for thirty years.)

  4. #4 Scoremore
    December 9, 2010

    If the concern is that a lot of the wealthy may cut or prevent job hires then why not provide a tax incentive for the business they are in charge of rather than boost their income? How many of those making 250K+ are directly responsible for hiring employees? I’d guess (I know I shouldn’t) that some proportion of these wealthy either inherited it, or or are responsible for a minimum (and not negotiable) number of jobs like doctors, lawyers, actors and sports players (the latter of course to a possibly negligible degree. It seems like a crude way to ensure job growth to just give them all tax reductions. I know there are already business incentives but proposing more to compromise would be much more helpful than flat out giving money to the wealthy. Of course there’s nothing wrong w/ giving money to anyone, except when there are people trying to make ends meet, with no purchasing power on their own to afford necessities like food and health care, which are by the way much more efficient for productivity than luxury cars and 4-star dinners. Something’s off here. Is it just that democrats are completely inept at explaining things or am I not understanding the message?

  5. #5 Heather
    December 9, 2010

    Since the ratification of the START treaty is so important I also see the compromise on tax cuts as an inevitable step to receive the support of Republicans when the bill is brought to the floor.