Playing the Hand You Were Dealt
Breaking news update: Tax cut deal close to being done. It will be a two year extension of all tax cuts. Democrats in return for giving in on this got a 13 month extension on unemployment benefits and several other goodies.
In Nate Silver’s most recent article, ‘Democrats Tax Cut Dilemma’, he breaks down the Catch-22 that President Obama is confronted with over the tax cut expiration. The President is taking a lot of heat over this and I do not envy his position. Bill Maher went so far as to call him a ‘Wussy’ in an interview on GPS with Fareed Zakaria. And the comment sections of articles I read are loaded with disaffected voters who swear they’ll never vote for him again. The President, it would seem, is hemorrhaging political capital at an alarming rate.
Much of the criticism is, I believe, misplaced. The Republicans have left him very little maneuvering room with their ultimatum that all legislation will be held hostage until they get permanent tax cuts for the wealthy. Saturday, the President finally (although somewhat gently) put his foot down and declared he would not accept any tax cut deal that did not include unemployment benefits and other middle class relief provisions. This was the first hint at the use of the veto pen.
Realistically, that’s about the best he can do given the circumstances. Nate lays out the strategy behind the President’s options in greater detail than I will go into. I continue to use the poker analogy because I think the President has his poker face on. Basically all the Democrats can do is fold, call, or raise. Folding is out of the question. The political backlash alone in 2012 would gut the party giving the Congress right back to the people who got us into this financial mess. But more importantly, it would really hurt the middle class at the wrong time.
One thing Nate did not point out is all the other things on the plate of the Lame Ducks. Harry Reid can probably give up on the DREAM act but there’s also the unemployment extension (and just how long it would be), Don’t Ask Don’t Tell, and probably, most importantly, the New START treaty. Republicans seem hell-bent on letting Americans suffer longer and even jeopardize their safety in order to plunder the Treasury.
Why? Because they can. Even if the tax holiday expires on December 31st, it won’t be the wealthy that will feel the pain. I presume Republicans will spend the next two years blaming Democrats for the ensuing hardships that they will be responsible for. And I grow weary of the meme that this will be a tax increase. I also grow weary of the meme that tax breaks to the wealthy will create jobs. We’ve seen that this hasn’t worked and it’s been proven. I particularly continue to be astounded at the mendacity of the Republicans who claim to be fiscally conservative while acknowledging that tax cuts for the wealthy will add 700 billion dollars to the deficit yet they still demand a hand-out for their rich buddies. I really hope this tactic backfires on them.
I like using visuals to get the point across. Ezra Klien of the Washington Post uses a great chart to illustrate.
Tax Cut Comparison (image courtesy of The Washington Post)
The tax breaks remain relatively constant under both plans until the $500,000 mark at which point the Republicans take off. And this is 2% of the population. And look at the income gains since 1981.
Income Disparity Since 1981
This is an obscene disparity. But back to the poker analogy.
Raising is off the table as the President has already signaled his willingness to deal with Republicans. So the best he can do is call and hope there aren’t Democrats in Congress trying to distance themselves from the President. I suspect we’ll see a two year extension on tax cuts for everybody. But I wouldn’t do the deal until DADT, New START, and unemployment are addressed. If there’s one thing that has become apparent, Lucy will happily yank the football away, particularly if you give the Republicans what they want first.
The other analogy that gets used quite frequently is that this is akin to a game of chicken. There’s only one way to win at chicken, Mr. President: you take it from one of your predecessor’s, John F. Kennedy. When facing down an adversary such as Nikita Khrushchev, don’t flinch.
Related Articles
- Democrats should call GOP’s bluff on tax cuts (seattletimes.nwsource.com)
- Op-Ed Columnist: Let’s Not Make a Deal (nytimes.com)
- Barack Obama gives way to Republicans over Bush tax cuts – The Guardian (news.google.com)
- Obama Open to TaxCut Deal for a Price (foxnews.com)
- Obama seeks compromise over tax cuts (alternet.org)
- Obama, tax cuts, and the rich – USA Today (news.google.com)
- Wanted: A Democratic tax-cut backbone (salon.com)
- Barack Obama gives way to Republicans over Bush tax cuts (guardian.co.uk)
538 Refugees 
Meanwhile, an exhaustive search from coast to coast has turned up one Republican who loves his country more than his party.
******
From the article:
Ohio Republican Sen. George Voinovich is planning to oppose legislation that extends any of the Bush-era tax cuts, becoming the first senator to state his opposition to any extension even as the White House and congressional leaders are expected to reach a deal on the issue this week.
…………..
“The American people should know that a lot of the reduction of their taxes is borrowed money from China,” he said. “You’ve got to pay for it. You’ve got to pay for it. You’ve got to pay for it.”
He said that “a lot of people” in the Senate have told them they agree with him on the issue, although most of them are in a tough spot politically as opposing any extension of the cuts would allow taxes to rise at a time when the economy is still struggling.
On Ezra Klien’s snowman chart — Notice too what this is percentage-wise.
Taxpaers at the 50-75K level get a tax savings of about $1000, or less than 2% of their income.
Tax payers at the $1,000,000 + level get a tax giveaway of $100,000, or a whopping 10% of their income.
Republicans love those elite puppet masters. Republicans hate the common people.
A dose of cold water in the face.
The >$250k income level tax cut beginning in 2011 will add $700 BILLION to the debt over ten years. That’s equal to the TARP bill and the “Stimulus” Bill. Funny the GOP is NOT complaining about THAT!
Even the <$250k income level only tax cut beginning in 2011 will add $3.2 TRILLION to the debt over the next 10 years.
That's almost FIVE TIMES the cost each of the TARP and the "Stimulus" bills. In 2001 and 2003 the DEMS were saying that we could not afford such cuts. They were right BACK THEN. The last 10 years has seen $4 TRILLION added to the National Debt because of those cuts back then. That's almost ONE-THIRD of the TOTAL current debt.
Now throw in another $50-$100 BILLION for the unemployment extension as part of the "compromise".
So BOTH sides compromise, so that each can say they helped their constituents and EVERYBODY'S HAPPY!
But the DEBT MONSTER keeps growing. This "compromise" will effectively add ANOTHER third to the already $14 TRILLION National Debt.
Anybody else see the hypocrisy on BOTH sides?
I can take the chart and show you contributions by tax bracket with all the big bubbles being the rich as well.
robert,
But what you can’t do is show how the rich are getting poorer because their money is all being taken to give to the poor. Try looking at the big picture, OK? Focusing on a single measure is just so conservative.
shrinkers,
The chart is cute, but we need to be careful about applying percentages based on averages. Comparing the average to only the lower bound of the top range creates a skewed picture of how much those low-end millionaires will actually save.
Keep in mind that unlike all of the lower ranges, there is no upper bound on the top range. That means that a very small fraction making extraordinarily large amounts of money can skew the average for the entire group. The median would probably be a better comparison, but only if we still recognize that those few at the extreme high end are skewing the numbers.
The real difference between the plans is that once you get above about $200K, your tax savings is capped at ~$6K for those high earners, which becomes an increasingly smaller percentage of their income. Under the Republican plan, the percentage actually stays relatively constant at 2%. Those in the $500K-1M range save 17K, or ~2%. Those making $1,000,000 start with about $20K in savings, which is the same 2% that you noted for those at the 50-75K range. As the income continues to rise, that percent stays at around 2%… It’s just that those very few bringing in billions skew the average for the rest of the millionaires.
shrinkers,
I’ll add that I don’t disagree with you that the Republicans favor wealthy elites over average Joes, but I wanted to make sure we’re being fair with our numbers.
As was discussed on Michael Weiss’s earlier thread regarding taxes and unemployment, a 2% tax cut for the wealthy is a lot different in terms of impact on their life and budget than a 2% tax cut for someone living on the cusp of poverty.
Mr. U:
Interesting WP chart. To start, there are no tax cuts under either plan. The rates stay the same as in 2010 under the GOP plan, while the Dem plan raises the taxes for everyone making over $20,000 (the capital gains and business taxes), whacks those making between $500K and 999K with an average $10,000 tax increase and those making $1 million or more with an average $100,000 raid.
Next, there is no poker game. Obama has already shown his hand that his highest priority is to keep the tax rates the same for the middle class voters he needs for reelection and that he intends to fold on his desire to increase taxes for the wealthy. All that needs to be done is for the GOP to pull in the chips.
What is the clinical term for someone who continually steps in their own fresh feces?
The kabuki dance is over. Obama has announced that he folded and accepted the exact two year extension of the Bush rates which I told you was the deal from the beginning.
I don’t recall Bart saying that the deal would include a 13-month extension of jobless benefits or a 2 percent payroll tax reduction. Ah, confirmation bias — the friend of fortune-tellers everywhere.
The payroll tax reduction in particular appears to be a sensible move, so this wasn’t a completely lost deal.
its all moot,
anyway I am happy about the holiday in social security, its a 2% pay raise for a year. (6.2 to 4.2)
http://thecaucus.blogs.nytimes.com/2010/12/06/obama-congress-near-deal-on-tax-cuts/?hp
I think the public is already having buyer’s remorse. I am seeing GOP and blackmail and hostage show up a good deal more in my searches. Maybe the Republicans in the 112th will actually have to, you know, govern for a change.
Apparently there was some deal making after all. Obama raised the death tax to 35% with a $5 million deduction and the GOP received a very nice supply side 2% reduction in payroll taxes on income and a 100% write off on business investments.
Extending unemployment benefits for another 13 months for up to I believe an incredible 112 months is very bad policy. We are paying folks to stay unemployed for the long term and become basically unhirable as their skills deteriorate. Obama may have also sealed his reelection defeat as unemployment is likely to still be north of 9% when 2012 starts.
Ooops, that is 13 months or 57 weeks on top of the current 99 weeks (not months) of unemployment benefits for a total of 156 weeks.
The Republicans have really stepped in it this time. I almost feel sorry for them. They are gravely outclassed… which is what always happens when rigid ideologues are confronted by actual THINKERS.
Here is what is going to happen.
1.) despite Bart’s fondest hopes America is not going to fail, there is not going to be a double-dip, and unemployment rates are going to begin showing steady improvement.
2.) with improvement on the horizon, Obama is going to announce in his SOTU a number of deficit-reducing austereity measures that are going to be undertaken by the entire populace. The shared sacrifices will be deep, painful and onerous… just like the ones now being adopted by many European countries.
3. ) In conjunction with the new austerity measures, Obama will calmly, unemotionally point out how much the tax cuts for the rich (which the Republicans fought for so fiercely) have added to the deficit, how much America owes to China as a result, and how much everybody in the country will now have to suffer in order to finance them.
4.) By the time he is finished and American has braced for belt-tightening and austerity, the Republicans (and their corporate masters) will look like gross, undisciplined gluttons and will be universally loathed and reviled.
WELL PLAYED, SIR!!!
@mclever
I’ll add that I don’t disagree with you that the Republicans favor wealthy elites over average Joes, but I wanted to make sure we’re being fair with our numbers.
Understood. I just wanted to be a Republican for a moment, and misuse the numbers. 🙂
@Bart
To start, there are no tax cuts under either plan.
Probably too late, but it’;s time to kill another mindless right-wing meme.
If nothing happens, the taxes return to a Clinton-era tax structure.
What is going to happen is that the tax the Republicans arranged to happen on Jan 1, 2011 are going to be cut, by law.
So, once again, you’re lying.
Shrinkers:
Mindless rightwing meme? The President himself said that taxes should not be allowed to increase on working folks. Every year the Dems continued the current AMT rates instead of allowing them to rise on the middle class, they said they were preventing a tax increase. Only when you Dems offer legislation to spike taxes on the wealthy does the word tax cut come up.
In any case, your President sold you out on raising taxes for the wealthy and compounded it by cutting taxes on evil corporations and implementing an across the board supply side payroll tax rate reduction. Maybe the man did read the election returns.
@filistro
Your analysis is right on.
And with the 2% cut in the payroll tax and the accelerated depreciation that Obama got, plus the extension to unemployment benefits, this will all be a big stimulus to the economy. By the time 2012 rolls around, with the economy looking up, and with the deficit being reduced — painfully, but reduced — the public will not look kindly on the stunning greed of the immensely wealthy. With millionaires and billionaires being the only ones who haven’t been asked to suffer — and with Republicans being their boot-licking toadies — 2012 is going to look very different from 2010.
Particularly with Sarah Palin as the Republican nominee (or as the disgruntled and whining also-ran), dragging down the ticket at all levels!
Bart ~ your President
He’s your president too Bartles … unless of course you are, in fact, taking that slow boat to china … 😀
solo estoy diciendo
Wishing you fair winds and following seas!
@Bart
In any case, your President sold you out on raising taxes for the wealthy and compounded it by cutting taxes on evil corporations and implementing an across the board supply side payroll tax rate reduction.
I thought you said Obama is a socialist 🙂 Are you prepared to drop that bit of asininity, or are you just being disingenuous again?
Actually, he didn’t “sell out”. The choice was between throwing a bone to Republicans, or allowing the Republican blackmail to hold up all business in Government for months. Obama chose to actually do the nation’s business, and put the Republicans in a tight spot to boot. The R’s wanted a permanent tax giveaway to millionaires and billionaires, further stealing money from the rest of the country. Obama denied them that.
As for “evil corporations” — who ever said corporations were “evil”? A tax incentive to invest in increased hiring is a good idea.
And the payroll tax holiday — you claim that is supply side???? You must be standing on your head.
Awwwwwwwwwwwwwww!
Poor Bart.
His boys in the GOP Congressional leadership just negotiated almost another $1 TRILLION dollar addition to the National Debt over the next two years and he just can’t bring himself to admit it. Instead he spins on and on about the staggering failure of the President.
Bart, get out your Bible and read Matthew 7: verses 3 – 5.
@shrinkers: With millionaires and billionaires being the only ones who haven’t been asked to suffer — and with Republicans being their boot-licking toadies — 2012 is going to look very different from 2010
It’s brilliant. The timing is absolutely exquisite… and the contrast will be so stark. And nobody can say the GOP was tricked into this. They stampeded into the trap with their eyes wide open. Hoist on their own petard; ensnared by their own greed and mindless adherence to dogma.
As I said, I’d almost pity them… if they weren’t so heartily loathsome.
Bart doesn’t have a Bible … but, but, but he’s following mama grizzly’s tweets religiously!
You Bet’cha!
“The middle class does not get a tax cut unless America goes $1 trillion more into debt to for a giveaway to my rich friends.”
Republicans will really be able to run on that. And will use that to prove 1) they are fiscally responsible, and 2) they are on the side of We the People.
Riiiiiiiight.
Shiloh:
I stuck in the gratuitous “your President” to rub in the fact that it was a Dem you voted into office who caved on your priorities.
Get used to it. This will not be the last time.
Bartles, got used to your nonsense my 1st week at 538 and have enjoyed your ad nauseam winger whining ever since! 😀
solo estoy diciendo
Bart,
re: the GOP received a very nice supply side 2% reduction in payroll taxes on income and a 100% write off on business investments.
Bart, you are clueless. A 2% reduction in payroll taxes helps the non-wealthy middle class working folks, like me. At a $65,000.00 salary, a 2% reduction in the amount of taxes that I currently pay towards my federal tax liability is money in my pocket – money that the Administration is hoping I will spend in order to stimulate the economy. The Administratio’s focus being on stimulating the economy.
And a 100% write-off on business investments is a bet that I win. My ex husband (a wealthy owner of a number of small businesses) said that this was something small businesses needs and would LOVE to have but that my ex previously assured me that President Obama would NEVER do. And then today he did.
Aside from the real-life benefit to small businesses, a 100% write off of business investment is something that causes small business owners to rethink their previous opposition to Obama and is a smart political move by President Obama.
President Obama is playing a totally different game than you teapers and Republicans are. He is actually is still working to drive the car out of the ditch that Republicans drove this country’s car into, despite how this may play politically for him in the short-term. As you may have noticed, the country and our economy is not out of the ditch yet.
@Jean
Isn’t it interesting? Obama is primarily concerned with improving the country, and addressing the nation’s problems, while the Republicans are primarily concerned with providing tax giveaways to their corporate masters.
A tax cut for the wealthy does nothing to help small businesses. A write-off on business investments does a lot. The latter provides incentive to expand. The former does nothing to help expansion — in fact, it encourages wealthy people to keep more money in their pockets, instead of investing it on business growth.
Only 2% of small business owners benefit from the Republican giveaway to the wealthy. Zero percent of actual small businesses benefit from it. (The Republican tax giveaway is directed to after-investment income, not to any sort of encouragement to invest.) In contrast, potentially all small businesses benefit from Obama’s investment write-off. So do the people who might potentially be hired (thus putting money into their pockets, and raising demand).
The right wing does not at all understand the concept of doing what is right and what is good for the country and what helps We the People, rather than merely what scores you talking points and benefits your rich overlords. Hence, Bart imagines that progressives are anti-business. We’re not. We’re anti-stupidity.
@Jean
At a $65,000.00 salary, a 2% reduction in the amount of taxes that I currently pay towards my federal tax liability is money in my pocket
You betcha. Two percent of $65,000 is over $100 / month. That’s a bigger annual raise than most people get these days. Unless you’re in the tax bracket that benefits from the Republican giveaway to millionaires and billionaires. Those folks are already getting about 10 – 20% per year, thanks to Republican economic policies, while the rest of America has barely broken even since 1980.
And conservative economic “thought” claims those billionaires with their enormous annual increases are overtaxed. Give me a fricking break.
You folks are a laugh riot. The Bush “tax cuts for the rich” cut your taxes far more than the temporary 2% knock off, especially if you were married, had kids and invested money for your retirement. As Obama correctly noted, the average family would be hit with another $3,000 in taxes of the “tax cuts for the rich” were allowed to lapse. That is a big savings considering the average family pays very little of the tax burden.
Obama did the right thing caving and continuing the Bush tax rates. His original plan would have raised taxes for everyone earning more than $20,000, which is nearly every family.
BD: : the GOP received a very nice supply side 2% reduction in payroll taxes on income and a 100% write off on business investments.
Bart, you are clueless. A 2% reduction in payroll taxes helps the non-wealthy middle class working folks, like me.
Its an across the board tax rate reduction which helps everyone. Pure Reagan.
And a 100% write-off on business investments is a bet that I win. My ex husband (a wealthy owner of a number of small businesses) said that this was something small businesses needs and would LOVE to have but that my ex previously assured me that President Obama would NEVER do. And then today he did.
Thank the GOP. It was their plan. Obama caved.
BTW, it applies to all businesses equally. Pure Reagan.
Indeed, these tax reforms were the first good news out of Washington since 2003 when the Bush tax reforms went into effect.
Next up, spending cuts.
@Bart… You folks are a laugh riot. The Bush “tax cuts for the rich” cut your taxes far more than the temporary 2% knock off, especially if you were married, had kids and invested money for your retirement.
It’s already starting to burn a bit, isn’t it? Do you see now how vulnerable you all have made yourselves, and how difficult it’s going to be to defend this when the rest of the country is belt-tightening to reduce the deficit?
Epic FAIL, Bart, truly staggering.
And you did it to yourselves. How totally awesome 🙂
@filistro
The under-250K tax cut would also have helped everybody. The Republicans simply insisted on helping the uber-rich even more.
Wingers are totally clueless, aren’t they?
It’s funny when wingers pretend Obama is like Reagan. Especially when they’ve been telling us for three years that Obama is a Socialist. LOL!
I predicted a while back that Obama would take a page out of Clinton’s playbook. After all, he has both Bill ad Hillary as advisers.
When the Republicans took over Congress in ’94, Bill responded by stealing all of the Republican issues from then on. Remember “The era of big government is over”? Remember “We will end welfare as we know it”? Remember actual steps to balance the budget instead of merely talking about it?
The result is that Clinton continued to grow in popularity and in influence, and he got most of his agenda enacted. And Democrats picked up seats in every election after that until 2000. The Republicans were completely flabergasted, and have been reduced to trying to take credit for Clinton’s policies.
Guess what?
So Bart, you run the numbers. At a salary of $65.000.00 and as a single perso (my kids are grown and I can no longer claim them as dependents) how much would the the Bush “tax cuts for the rich” have cut my taxes, and as you claim. cut my taxes taxes far more than the temporary 2% knock off.
@Jean, regarding that “the temporary 2% knock off”….
An important point here is that it is temporary, and it disproportionately benefits the middle class as opposed to the rich (which have their FICA taxes capped) . That makes it stimulus spending given to consumers for the purpose of increasing demand.
It’s amusing when a Republican tries to cast this as a supply-side Reagan-like tax cut. Republicans usually call this “welfare.” That they are now trying to take credit for it shows how effectively Obama has put them in a box of their own making.
Bart,
re: Bart, I hate to have to break it to you, but Reagan’s dead. Dead. And he has been for a number of years.
But looking at it in the real-time NOW ( not Reagan’s yesterday, as Bart would prefer) the majority of middle-class income folks and small business owners will see this NOT as a Reagan initiative, but as an Obama initiative. Whyever WOULD they see this as Reagan incarnated? Nowdays, folks will see it as an Obama iniative. Obama, stole the hallowed Raygun high ground.
And Fili, I agree. The next two years are going to be a lot of fun.
Not only is Reagan dead but “…an across the board tax rate reduction which helps everyone… [is] Pure Reagan.” is a lie.
Reagan raised taxes on the lowest income brackets by lowering the minimum taxable income.
Bartles ~ the first good news out of Washington since 2003
At least Bart is admitting everything cheney/bush did from 2003 to 2009 was a frickin’ disaster including Roberts/Alito!
Oops! as maybe 538’s fav winger troll should choose his words more carefully lol.
and the truth shall set you free!
>
And speaking of frickin’ disasters: Patriots 45 ~ Jets 3 as the Pats are scoring a plethora of points as Cosell would say and Meredith would mock Howard’s extended vocabulary. 😀 In tribute to Dandy Don, Turn out the lights, the party’s over ~ They say that all good things must end. Rest in peace!
btw, the Browns beat the Jets in the 1st MNF game.
I digress.
Bart would like to thank Denver Broncos owner Pat Bowlen for stimulating the economy as he will paying (3) head coaches next year:
Mike Shanahan
Josh McDaniels
and whoever Denver’s coach is next year …
McDaniels went to Canton McKinley HS and John Carroll University as did Don Shula, but McDaniels pro football head coaching career was a tad shorter that Shula’s.
>
And let me say something nice about the University of Michigan ~ Tom Brady is a very, very, very good quarterback!
Jean: “Bart, I hate to have to break it to you, but Reagan’s dead. Dead. And he has been for a number of years.”
If you have not noticed from the Obama 2008, Blue Dog (2006 & 2008) and GOP/Tea Party (2010) campaigns and electoral results, we very much live in Reagan’s America. This is why socialists are terrified to call themselves liberals nevertheless socialists, refer to taxes as “revenues” and call their socialism “investments” as if they were T Boone Pickens.
Indeed Bart as cheney/bush were pretty terrifying and someone like Obama has no chance of being elected president w/say around (((69.5 million))) votes, (7.5) million more than cheney/bush in ’04.
Oh wait!
Yea, Republican er Reagan/Bush41/43 high deficits and debt are pretty terrifying …
>
but, but, but obviously you are terrified of Obama and of course faux Socialism has such a stranglehold around your neck you can hardly breathe, eh.
Give it a rest Bartles …
Or not.
And let the record show Bart did not disagree cheney/bush were a frickin’ disaster !!! from 2003 to 2009 er 2001 to 2009. 😀
take care