As the Bush tax cuts approach their expiration date, Democrats continue to wander around in confusion when the most obvious solution in the world is staring them in the face. Imagine American Pie, only instead of watching the teenage boys desperately scheme to lose their virginity on prom night, they're situated in a brothel, with pocketfuls of hundred dollar bills, and they spend the whole 90 minutes in the brothel lobby debating how to get the girl.
Here is the situation. The Bush tax cuts were a plan designed primarily to increase the after-tax income of the highest-earning 1 percent of Americans. Since tax cuts for the rich have little popular support, Republicans had to marry those tax cuts with broader-based tax cuts for middle-class taxpayers. That way, they could paint any Democratic opponents as being opposed to middle-class tax cuts, even if they actually supported the middle-class tax cuts.
The obvious solution is, and always has been, to break up the two parts of the tax cut. Democrats, after dithering on this question for months and delaying the vote until after the election, are finally considering this option. I don't understand why they haven't done it already. Republicans are absolutely terrified of a straight vote on tax cuts exclusively for people earning more then $250,000 a year:
And here's National Review's Josh Barro:
The "messaging challenge" is that it will no longer be possible to obscure the choices. Republicans want to use popular universal tax cuts to sell unpopular tax cuts that only benefit the richest couple percent of the population. They don't want to expose the fact that the universal tax cuts are something they actually don't care about. (They're not necessarily against them, they just see them as a political chip for getting the upper-bracket tax cuts that are their reason for existing as a party.)
Republicans will accept a temporary extension of all the tax cuts. That way, when the whole thing expires, they can once again use the threat of the universal tax cuts expiring to extend the upper-bracket tax cuts. Again, their entire goal is to avoid a situation where they have to vote only on tax cuts for income over $250,000. You can avoid giving them that cover when you hold the majority and you can decide what bills come to a vote. But--newsflash!--Democrats aren't going to have that majority very long. They need to hold the vote on their terms.
Now, to be sure, I think the Bush tax cuts for income under $250,000 is also bad policy. I'd extend that for a year or two and then let it die, if I had my druthers. But Democrats have learned the hard way that you pay a huge price for opposing middle-class tax cuts. Since Bill Clinton, they've taken the stance of calling the GOP's bluff on this issue, and I think it's the right call.
But the fact that the universal portion of the Bush tax cuts is bad policy doesn't make the tactical decision harder for Democrats. It makes it easier. It's not like Republicans are holding hostage some vital program. If they want to vote against permanent extension of very popular tax cuts because it doesn't include permanent extension of very unpopular only-for-the-rich tax cuts, let them! Then you get a great political issue, and meanwhile you've gone a long way toward solving the budget crisis. Then in 2012 you run against the plutocratic Republicans who blocked your tax cut because they're so devoted to the very rich.
The only way Democrats could lose either the policy or the politics would be to hold a single vote on the tax cuts for the rich and universal tax cuts. The choice is win-win or lose-lose.
You can see why this is so difficult for the Dems.
The correct way to proceed is manifestly obvious. Which means that the Democrats will continue to have a hard time figuring this all out.
The correct way to proceed is manifestly obvious. Which means that the Democrats will continue to have a hard time figuring this all out.
This weekend's WP reported that Obama was negotiating with the Republicans for a short-term (2 years maybe) extention of the high end Bush tax cut (over $250,000) in return for a permanent extension of the lower and middle (under $250,000) Bush tax cut. That would be bad policy (Chait) and bad politics (Chait again). So what is Obama thinking? Whether it's more evidence of "omnidirectional placation" I don't know, but it does help explain why the Congressional Democrats haven't yet made the move to split the vote: nobody wants to climb out on the limb only to have Obama saw it off. I think what we may be witnessing is the early stages of a 2012 challenge.
This weekend's WP reported that Obama was negotiating with the Republicans for a short-term (2 years maybe) extention of the high end Bush tax cut (over $250,000) in return for a permanent extension of the lower and middle (under $250,000) Bush tax cut. That would be bad policy (Chait) and bad politics (Chait again). So what is Obama thinking? Whether it's more evidence of "omnidirectional placation" I don't know, but it does help explain why the Congressional Democrats haven't yet made the move to split the vote: nobody wants to climb out on the limb only to have Obama saw it off. I think what we may be witnessing is the early stages of a 2012 challenge.
Notwithstanding that I stood up for Obama today on an earlier post, on this one I agree. Only the Democratic party could screw this up, and Obama could have gotten out in front of it and led months ago. Color me utterly disappointed on this.
Notwithstanding that I stood up for Obama today on an earlier post, on this one I agree. Only the Democratic party could screw this up, and Obama could have gotten out in front of it and led months ago. Color me utterly disappointed on this.
I decided that Chait is confused on taxes when I read this obviously wrong statement: "Here is the situation. The Bush tax cuts were a plan designed primarily to reduce the after-tax income of the highest-earning 1% of Americans."
In any event, the notion that a couple making $250,000 a year is "rich" is absurd. That couple, especially if two income, is merely middle class. The truly rich make a million or more a year. That's where the tax increases should be.
If the Democrats want a vote that will gain them points, they should propose a vote on an increase of 5% on all income above $1 million a year, and 8% on all income above $2 million a year -- together with a commitment that the money ... view full comment
I decided that Chait is confused on taxes when I read this obviously wrong statement: "Here is the situation. The Bush tax cuts were a plan designed primarily to reduce the after-tax income of the highest-earning 1% of Americans."
In any event, the notion that a couple making $250,000 a year is "rich" is absurd. That couple, especially if two income, is merely middle class. The truly rich make a million or more a year. That's where the tax increases should be.
If the Democrats want a vote that will gain them points, they should propose a vote on an increase of 5% on all income above $1 million a year, and 8% on all income above $2 million a year -- together with a commitment that the money would be used for something that most Americans favor. That would be a politically smart move.
PeteBeck: From a Census report released in September, the median household income in America is $49,777.
If you make five times the median income of the country, you are indisputably rich. I don't make nearly that much, and I definitely consider myself rich.
The workers at my local Wendy's are earning salaries in the mid-20s, with a few hoping to work their way up to manager and make 30 grand someday. With that income, they all have to pay for housing, food, transportation, and (for the truly ambitious) send their kids to college on that.
Meanwhile, while I'm certainly not able to say I don't care about how much things cost, my difficult financial decisions typically center around holding myse ... view full comment
PeteBeck: From a Census report released in September, the median household income in America is $49,777.
If you make five times the median income of the country, you are indisputably rich. I don't make nearly that much, and I definitely consider myself rich.
The workers at my local Wendy's are earning salaries in the mid-20s, with a few hoping to work their way up to manager and make 30 grand someday. With that income, they all have to pay for housing, food, transportation, and (for the truly ambitious) send their kids to college on that.
Meanwhile, while I'm certainly not able to say I don't care about how much things cost, my difficult financial decisions typically center around holding myself to only buying a few new books and movies at a time from Amazon. I never have to worry about choosing whether to pay my mortgage payment or get my car fixed, or whether to sacrifice this month's food money to pay for my kid's tuition.
Not having to face those choices also means I'm not going to worry much about paying a bit more for a better society, so I'm with Chait, Bill Gates, and Warren Buffet: raise my taxes.
Pete Beck has a point. I'm not sure how the politics would play out given the present environment, but we do have evidence that picking on this 250K demographic backfires.
Catering to these families was Chuck Schumer's whole premise to his book and then to winning back the Senate in 2006. Remember what success looked like? Yes, my dispirited brethren - Democrats enjoyed a mid-term sweep in 2006 at least in part by following Schumers plan. (Remember the fun of watching the disgusting George Allen conceed VA for us to claim back the Senate? aaahhh those were the days).
Schumer insisted that Democrats stop calling families that make 250K rich (80 hour work weeks? Exploding education and health ... view full comment
Pete Beck has a point. I'm not sure how the politics would play out given the present environment, but we do have evidence that picking on this 250K demographic backfires.
Catering to these families was Chuck Schumer's whole premise to his book and then to winning back the Senate in 2006. Remember what success looked like? Yes, my dispirited brethren - Democrats enjoyed a mid-term sweep in 2006 at least in part by following Schumers plan. (Remember the fun of watching the disgusting George Allen conceed VA for us to claim back the Senate? aaahhh those were the days).
Schumer insisted that Democrats stop calling families that make 250K rich (80 hour work weeks? Exploding education and health care costs? Rich? Well, OK) and took care of their daily concerns. Obama is still following this script with his education and student loan reforms, and yes - health care reform.
I haven't hidden the fact that I think Americans are showing themselves to be quite the entitled, impatient and deeply immature group of people in this election, but I don't think sloppy thinking about the demographic that handed us the Senate is going to suddenly have young people and minorities rushing the polls in 2012, let alone independents.
"In any event, the notion that a couple making $250,000 a year is "rich" is absurd. That couple, especially if two income, is merely middle class."
I'm going to go the lumber yard and pick up some wood. Then, I'm going to take some of that wood to build the world's smallest violin, whereupon I will play the theme to Schindler's List as the wealthy bemoan a small income tax increase. First they came for a few bucks. Then they came for a couple more. It's the same old story. Then, I will take the remaining lumber and start building crosses, so that the wealthy can nail themselves to them.
"In any event, the notion that a couple making $250,000 a year is "rich" is absurd. That couple, especially if two income, is merely middle class."
I'm going to go the lumber yard and pick up some wood. Then, I'm going to take some of that wood to build the world's smallest violin, whereupon I will play the theme to Schindler's List as the wealthy bemoan a small income tax increase. First they came for a few bucks. Then they came for a couple more. It's the same old story. Then, I will take the remaining lumber and start building crosses, so that the wealthy can nail themselves to them.
So many trees it's hard to see the forest. A warmed-over version of the Bush tax plan is no plan at all, and inevitably leads to a discussion about who is "rich". Instead, Obama (he is the Party leader) should have proposed his own tax plan, one designed (i) to stimulate the depressed economy (by being targeted to low and middle income earners who have a very high (more than 100%) MPC and (ii) to encourage firms to hire (by decreasing the tax cost of hiring). My preference is a large but temporary payroll tax cut (or holiday), a cut that is felt immediately (A) by income earners at all levels in the form of fewer payroll deductions and higher take-home pay (what I would call a "two-for" i ... view full comment
So many trees it's hard to see the forest. A warmed-over version of the Bush tax plan is no plan at all, and inevitably leads to a discussion about who is "rich". Instead, Obama (he is the Party leader) should have proposed his own tax plan, one designed (i) to stimulate the depressed economy (by being targeted to low and middle income earners who have a very high (more than 100%) MPC and (ii) to encourage firms to hire (by decreasing the tax cost of hiring). My preference is a large but temporary payroll tax cut (or holiday), a cut that is felt immediately (A) by income earners at all levels in the form of fewer payroll deductions and higher take-home pay (what I would call a "two-for" in that (1) the "wealth effect" would induce an immediate increase in consumer spending and (2) (though it's too late now) some folks might remember when they go to vote) and (B) by firms in the form of a reduction (in the employer's share) of payroll tax. Others have good (maybe better) ideas for a tax plan. Obama, apparently, has no plan (other than the warmed-over Bush plan).
One thing the Dems never point out--to their detriment--is that the Obama plan isn't a tax cut for just those making $250K or less; it is a tax cut for EVERYONE on the first $250K. Making that point undermines the Republicans' claims of class warfare (Dems want a break for everyone) while highlighting the silliness of the Republicans' position. Why aren't the good guys making that point more strongly?
One thing the Dems never point out--to their detriment--is that the Obama plan isn't a tax cut for just those making $250K or less; it is a tax cut for EVERYONE on the first $250K. Making that point undermines the Republicans' claims of class warfare (Dems want a break for everyone) while highlighting the silliness of the Republicans' position. Why aren't the good guys making that point more strongly?
Why can't the Democrats do this: They could wander about bent over moaning: "What are we going to do? Bush left us two wars; he left us a terrible economy; everyone's worried about homeland security; and he left us a tax mess because next year everyone's taxes go way up on January 1st automatically." Then, President Obama could spring upright and say, "I have it!! We'll repeal the tax increases for people under $250,000.00 and we'll work on the rest as soon as possible."
Why can't the Democrats do this: They could wander about bent over moaning: "What are we going to do? Bush left us two wars; he left us a terrible economy; everyone's worried about homeland security; and he left us a tax mess because next year everyone's taxes go way up on January 1st automatically." Then, President Obama could spring upright and say, "I have it!! We'll repeal the tax increases for people under $250,000.00 and we'll work on the rest as soon as possible."
Nusholz has a point. I know the tenor of this piece and the comments is "only the Dems can turn a sure thing into a stinging defeat" but it's not impossible that Obama will do exactly that. Introduce an Obama Tax Cut that will serve everyone's needs except the top 2% and watch the GOP twist in the wind.
Nusholz has a point. I know the tenor of this piece and the comments is "only the Dems can turn a sure thing into a stinging defeat" but it's not impossible that Obama will do exactly that. Introduce an Obama Tax Cut that will serve everyone's needs except the top 2% and watch the GOP twist in the wind.
Read Full Article »