I'm like Don Quixote and attempts at starting rational discussions on heated topics here at DU are my windmills.
DECEMBER 2, 2010, 1:17 PM
The Kenny Rogers Theory of the Bush Tax CutsBy DAVID LEONHARDT
Did the Democrats make a tactical mistake by not being tougher on the Bush tax cuts for the affluent? Absolutely.
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But should the Democrats start getting tough now? That’s a very different question.
Several other bloggers argue the answer is yes, and their arguments are worth reading. But I want to lay out, in more detail than I did in my recent column, what a hard line position for the Democrats would probably lead to. Once the full chain of events is clear, I’m left thinking the Democrats waited too long and could well compound their earlier mistakes by starting to get tough now.
If the Democrats announced that they simply would not accept an extension of the tax cuts for households making more than $250,000 a year, it couldn’t pass. It certainly could not pass before the tax cuts expire on Dec. 31, because the Democrats still control the House and the Senate. Starting next year, the Republicans could pass any extension they wanted in the House. But it would then die in the Senate, so long as at least 40 Democrats pledged to filibuster it, or President Obama could veto the extension.
The Republicans, though, have made clear that they will not pass a partial extension applying only to income below $250,000. So as of Jan. 1, tax rates will go up for everyone. People would not see an immediate hit to their paychecks, because the Treasury Department would probably wait to adjust the withholding tables, given the uncertainty. But at some point in early 2011, the tables would have to change, and the typical worker would experience a pay cut of something like 2 percent.
This issue would surely come to dominate the political debate.
No other significant economic legislation would be likely to pass, including the additional efforts to encourage job creation that the Democrats favor.Mr. Obama and the Democrats could then make the case they wanted to cut taxes for everyone making less than than $250,000 a year, but the Republicans were holding those tax cuts hostage to tax cuts for the rich. Democrats could paint themselves as the true friends of the middle class, much as Mr. Obama did during the 2008 campaign (when he pledged to cut taxes for everyone but the rich even more than John McCain did). It would be a reasonable case, and I acknowledge that it would have some chance of working.
Here is how the Republicans could respond, however
We have passed a tax cut. It was the first thing we did when we took over the House. All the Democrats have to do is pass it in the Senate and send it to the president, and you’ll have your tax cut. Instead, they’re playing class warfare, trying to raise people’s taxes in the middle of an economic slump. The Democrats had two years to deal with this issue, when they controlled the White House and Congress, but they couldn’t get their own members to agree on raising some people’s taxes. So they left the issue until after the election. Then we won the election. The voters chose our positions. And now the Democrats decide they really, truly do favor raising some people’s taxes?Would some of this be disingenuous? Of course. That’s natural in politics. But it strikes me as a pretty good political case. It also doesn’t even address arguably the biggest reason for the Democrats to fold.
If everyone’s taxes go up — and Congress enacts no new legislation to create jobs — it’s very likely to have a negative effect on the economy.
Just the tax cuts for the rich are unlikely to have a big effect one way or the other. (As I’ve pointed out before, the economy lost jobs for two years after President Bush signed the 2001 tax cuts, and economic growth during his presidency was weak.) But an across-the-board tax increase on all households doesn’t seem like a very good prescription for an economy as troubled as the current one.
Who do you think is likely to receive more blame if the economy remains weak for another year or so – the top Democrat in Washington (Mr. Obama) or the top Republican (John Boehner)?
http://economix.blogs.nytimes.com/2010/12/02/the-kenny-rogers-theory-of-the-bush-tax-cuts/?pagemode=printSTRATEGY SESSIONS: Vice President Joe Biden met Saturday night at his residence with House Speaker Nancy Pelosi, House Majority Leader Steny Hoyer (D-Md.), Rep. Chris Van Hollen (D-Md.) and interim White House Chief of Staff Pete Rouse.
They discussed next steps in the debate over Bush-era tax cuts for about two hours, according to a source familiar with the meeting -
a unusual weekend strategy session that suggest the administration is anxious to bring the issue to a resolution. Earlier, President Obama met with Senate Majority Leader Harry Reid (D-Nev.) and Pelosi (D-Calif.) at the White House, telling them that he'll oppose any deal that doesn't extend unemployment insurance and lacks a package of tax cuts targeted at the middle class, said a White House official. It was the kind of clear signal that congressional leaders were seeking, but they still want the president to lay down these markers publicly.
http://www.politico.com/politico44/wbarchive/whiteboard12052010.html
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