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.
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.
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.
- 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)