The strategy should be very simple. If nothing happens in Congress, the Bush tax cuts will expire on the rich and the poor alike. Some kind of bill has to pass in order for us to avoid a tax hike on everyone who pays income taxes. Even if, as Peter Orszag tried to express, we cannot afford these tax cuts in the long-term, there is no good reason to let them sunset on the poor and middle class at a time when anemic consumer demand is keeping unemployment unacceptably high. While tax cuts are an inefficient means of stimulating the economy, tax hikes on those with limited disposable income are downright counterproductive. Therefore, the administration should do the following.
Craft a bill that maintains the current marginal rates except for the highest bracket, which will return to thirty-nine percent for fiscal year 2012. This is in keeping with the president’s campaign promise, but does allow the rich to enjoy one more year at reduced rates. Millionaires will be getting a $100,000 break next year.
The bill would offer to maintain Bush-level taxes for everyone next year, and for 97% of Americans in the years after. The alternative, doing nothing, would raise everyone’s taxes and immediately cost millionaires a hundred grand. Then we can see who really wants to see the bill fail.
The bill would involve an expensive concession, so it can’t fairly be said to be “rammed down anyone’s throat.” And, even rich people make discretionary purchases of things like planes, yachts, and second or third homes. So, there would be some weak stimulative effect in those industries and markets.
Another advantage of this approach is that it would eliminate the Bush tax cuts for the wealthy in a way that it would be near impossible to revoke. Even a Republican House and Senate couldn’t overcome filibusters and vetoes to restore the old rate.
But the main advantage is that this approach involves a bit of compromise without going back on an important campaign pledge, and while addressing legitimate concerns that weak demand argues against tax hikes on anyone at this time. It’s not optimal policy, but optimal policy isn’t on the table.
It’s good politics, too. It allows the Democrats to blame the Republicans for raising everyone’s taxes because they care only about rich people’s taxes. It highlight’s their obstructive tactics and clarifies the kind of gridlock we can expect if Republicans make gains in the midterms.
What about advocating to let the richest bracket expire altogether and just push forth a bill that extends the cuts for the middle class and lower brackets? Then let the Republicans suggest the compromise position. Make them bring the votes to make the compromise work. If they can’t deliver the votes, they don’t get the amendment to extend the upper-income bracket cuts for another year.
This pre-emptive compromise thing doesn’t work with Republicans because they think they have a vested interest in blowing things up right now. So I really don’t see how it helps politically to make the compromise position the “default” position and then try to compromise for votes from there. You make the compromise position the “drop dead” position and start your proposals to the left of that. Make the Republicans negotiate so that they can point to something to say “I wasn’t going to give my vote, but they compromised on this, so now I can vote for it.” Giving them cover may only bring around Collins, Snowe and maybe Brown but that’s three more votes than you’re going to get without giving them some kind of cover for bucking their party.
Yeah, this.
If the Democrats can’t negotiate what they want out of this situation, we really should start a new party.
Well, maybe.
The problem we have is the Democrats in Congress who don’t play along with these hardball tactics. Unfortunately, to get them on board even rhetorically, we have to compromise with them preemptively.
But, the president is trying to walk the line you set out. He’s holding the line rhetorically while signaling that there’s a compromise to be had by refusing to promise a veto.
Herding cats is never easy.
He’s going to lose whatever he does – HuffPo is already screaming about Obama’s refusal to promise a veto as if that’s yet another betrayal of liberals. Sometimes I just want to cry.
Then the solution is to do nothing and let those Democrats who don’t play along hang out. And use the issue to pick up some Republican seats to offset those losses.
The public understands this issue clearly. Reluctant Democrats are not pandering to their constituents but to their large contributors.
Yeah, I suspect that’s what the president is doing right now. I hope he sticks to it – he’s getting way too much advice from folks like Orzog and others that he should be leading with the compromise, instead of letting the folks who want the compromise come to him.
And yeah, I know that there are folks in his own party who are going to need to be compromised with. I should have listed some of them in there with Brown, Snowe and Collins – he will probably have to go your route just to get Nelson, Lincoln, and a few others to vote for it.
It would be better if he could convince them to let the Republican members of the Senate be the ones to bring the compromise to the table for a change, but I also understand that that’s not likely. Nelson, at the very least, will need to be publicly placated and seen as having his own demands answered before he’s willing to vote.
Still, better to tie a particular set of names to the compromise rather than bring it out as the starting point of the argument. Make sure that people know “we did this to get Nelson and Lincoln on board” or “we did this to get Snowe and Brown on board”. I think that would not only help the logistics of getting the damn thing passed, but it also helps both Obama and the “moderate Republicans” who go along with the compromise politically. The Republicans get to appear as serious people who can get concessions, Obama gets a narrative where he doesn’t look like he’s selling out, and the bill gets passed.
The only people who lose in this are the rest of the Republicans – who get branded as do-nothings who care more about the rich than anyone else – and possibly the conservative Dems who get to be the people who care more about the rich than they do about their constituents. But for some of the conservative Dems that seems to be a good thing, so screw ’em if that’s the narrative they want to own.
If you remember the Bush tax cuts, they produced very little savings for the middle class and the poor. It was not just the rates, it was all the ways that wealthy folks could avoid taxes.
While letting the Bush tax cuts just lapse might be a political issue, from the point of view of helping the middle class and the poor, it is a wash. It looks big in aggregate because there are so many folks who have enough taxable income to experience some increase. But for these folks, the increase is insignificant to helping them deal with this economy. And because the tax is on income, if you have suffered a loss of income, you also have lower tax liability or in some cases no tax liability at all; indeed you might now qualify for earned income tax credits.
If you want to deal with taxes, come back after the first of the year with a middle class tax relief program that tightens up loopholes to make it deficit neutral.
If you want to have a political issue, extend only the middle class tax cut and stand fast: no compromise on the high-income earners. But don’t start negotiating with yourself like Orszag and several Congressional Democrats have done. It’s take it or leave it on the table. And Democrats better have absolute lockstep party unity on this or the message gets garbled.
The wealthy do not need reduced rates and it does not stimulate the economy; it only stimulates Wall Street. Indeed raising taxes on wealth could stimulate employment by reducing the marginal value of additional wealth, incentivizing putting the brakes on further wage reductions on workers making less than $250K a year.
according to benen today you’re basically advocating meeting the rats halfway:
uh huh, sure, that’s the ticket. kick the can down the road for another year or two which gets us into the general/ presidential election season in 2011 – 2012 when obama and the dems are going to be fighting for their political lives.
this strategy is a lose now, lose more later, recipe for disaster because there’s no way in hell anything will happen…talk about getting rolled.
essentially, obama’s already staked out the position nonynony notes above. that’s the the compromise. let the damn thing sunset, point out loud and often that there was a proposal on the table to help the middle and lower bracket taxpayers and the rats wouldn’t play. anything less l woulld consider an abject failure of leadership, from both the wh and congress….although l’d wager pelosi can get it thru the house…like benen says: “Describing this as some kind of “concession” is truly ridiculous.”
Obama waffling again. I think that if someone was raping Michelle, he would offer a compromise solution, “Uh, OK if you use a condom?”
Less guts than Jimmy Carter and less principle than Richard Nixon.
There is absolutly no reason to be so offensive. Go back to the wilderness.
this is unnecessarily cruel. please be more considerate of everyone
If ever there was an issue to stand firm on, this is it. Unlike Health Care, it’s simple to explain and readily understood by a vast majority of voters. Why muddy such a gift? It’s the rare Democratic issue that everyone in the country gets with little or no need to explain. Just like John Boehner personifies everything that’s despicable about Republicans, so too do tax cuts for the wealthiest epitomize everything that’s off the rails about this country since Reagan first took office.
This is also where Pelosi and Reid can help: in the event that there’s a stalemate, they can craft something cunning (using arcane rules if necessary) that will offset tax cuts for those under 250k.
Tax cuts don’t stimulate the economy, they don’t create jobs and they don’t increase revenue. The wealthy did damn well the last 10 years. The middle class had their worst decade since the depression. It’s time for patriotic american millionaires to do their part for the country and pay their fair share.
You cannot compromise on this issue. If you’re going to lose the congress anyway you might just as well hang these weak-assed dems out to dry for not going with you. I have been very patient with this President, but frankly I need to see him stand for something on principle, and any concession on this issue I believe will further erode confidence in him to be the type of decisive leader that the country needs.
I saw the chart the other day showing where the tax cuts were. If they are all rescinded anyone below 80k is not going to take much a hit.
Once you reduce taxes on the rich it takes catastrophe to raise them. So no, better that all the tax cuts go away.
No, screw compromise on this one! I’d much rather pay a little more and watch those bastards squirm over their 100K.
I am actually hoping that no compromise is reached, and all the tax cuts are rescinded. It would hardly effect the working class at all, and it would restore fiscal sanity. It would be the best thing for the country. Sure, the upper half of the middle class would take a hit, which wouldn’t be painless for many, but what’s the alternative? Raising the retirement age to 72? Defaulting on the debt? I’ll take a tax hike, thank you.