Sunday, December 5, 2010

Expiring Tax Cuts: Deal Or No Deal

Politics is and always has been about negotiations. Lines drawn in the sand are just to test the waters. Both sides know that ultimately you give some to get some. It appears that the trade off is going to be the tax cuts for the wealthy for the extension of the unemployment benefits. 

On Friday, House Democrats mustered sufficient votes to pass a bill that  extended the current tax cuts to the middle class and eliminated the Bush era tax cuts for the wealthy. On Saturday, the Senate Republicans voted unanimously to defeat the Senate version of that bill. The vote was 53 (yes) to 36 (no), seven votes shy of the 60 votes needed to pass the legislation in the Senate.  While Republicans voted in a bloc, four Democrats voted with the Republicans, Senators Russell Feingold of Wisconsin, Joe Manchin of West Virginia, Ben Nelson of Nebraska,  and Jim Webb of Virginia, as did independent Joseph Lieberman of Connecticut.

A second measure that would have extended the tax cuts to include those earning up to $1 million annually also failed to receive the necessary 60 votes to move forward. The vote on the second measure was 53 (yes) to 37(no) with a slightly different crew of Democrats voting with the Republicans--Senators Dick Durbin of Illinois, Tom Harkin of Iowa, Jay Rockefeller of West Virginia and the ever consistent Feingold and Lieberman.

At stake is not only the continuation of the middle class tax cuts, but the Republicans are also holding the extension of unemployment benefits hostage unless they get tax cuts for all. The White House has its own demands--passage of legislation extending the unemployment benefits for millions of people, as well as renewal of expiring tax breaks for lower and middle class wage earners, college students, and businesses that hire the unemployed.

I keep hearing how Obama and the Democrats should stand firm and declare no tax cuts for the wealthy. What then? What happens to the lower class (even if you don't have to pay income tax, there are some cuts for which you may qualify), the middle class and the unemployed who will find themselves with a decrease in revenue? When you have bills to pay to keep a roof over your head and food on the table, politicians having an old west style standoff are not a source of inspiration or admiration.

The Republican Senators aren't going to cave on the extension of unemployment benefits unless they get something that they want, in this case, the extension of the tax cuts for all. They will deny culpability, spinning it to be Obama's fault for being unwilling to compromise on the tax cuts and the public will buy it. I feel like a broken record, but the office of the president has no authority to force Congress to do anything. He influences Congress but he doesn't command Congress. 

Congress is answerable only to us and we seldom get off our collective asses to do anything to let Congress know that we will not accept their behavior. 

Of course Obama can veto the bill that comes to his desk if it contains an extension of tax cuts for the wealthy. Congress has the authority to override that veto but it's unlikely that both chambers would get the votes required to do so. However, it would be an incomplete victory. Any bill that the Republicans sign on to will also include the tax cuts for the middle class as well; veto the bill and taxes for the middle class also increase allowing the Republicans to again blame Obama for failing to keep his campaign promise to not allow an increase in taxes for the middle class.

It all reminds me of that game show hosted by Howie Mandel, the one where the contestants are asked, "Deal or no deal?" To get tax cuts for the people who need them the most, the administration will have to cut a deal with the Republicans to extend the Bush cuts to all. Rumor has it that the president is holding to setting a time limit on the cuts for the wealthy so that they will expire prior to the the tax cuts for the lower and middle class.

I wouldn't want to be in Obama's shoes; no matter what he does he will be condemned by the right and the left. However, Washington will roll on as it always has, playing some shady version of "Deal or No Deal."

4 comments:

  1. No matter what happens the republicans will spin it into a bash Obama and Democrats issue.

    If Obama declared no taxes for anyone forever republicans would complain that it's not enough and would destroy jobs and embolden our enemies.


    My share of the Bush tax cut was around $7 a week. I'm more than happy to pay the $7 again to help my Nation pay it's bills. Keep it's promises. Rebuild and maintain infrastructure and get out of debt. Why the argument isn't framed in a patriotic way why Democratic leaders and talking heads is beyond me. I think they are going down the wrong road with their "tax cuts for the middle class" meme.

    It appeals to greed and selfishness which are of course powerful motivators. But the millions who voted for Obama dodn't vote for him based on those emotions.

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  2. Sheria...

    12 billion dollars in unemployment benefit extensions for 740 Billion in lower taxes (that is 3.7 trillion divided by 10 times 2 years).

    Now, we both know that politics is about horse trading...

    Looks to me like the democrats are the minority party as they always seem to be getting the short in of the stick.

    Barack Obama is a big boy and he knew what the name of the game when he took office; whatever one says about the Republicans we all know that they are consistent.

    As such the democrats, if they were true to their constituents, should have gotten more out of the stimulas and TARP for their constituents than what they did get.

    Sometimes in the game of "chicken" or "deal no deal" you gotta let them know that you will drive over a cliff....Let the tax cuts expire and blame the Republicans then go ahead and fund unemployment benefits out of funds already allocated....

    Wouldn't that be a game changer?

    Let the defense department go without funding until DADT is repealed.

    Wouldn't that be a game changer?

    Overnight you would not only prove to the republicans that you got what it takes to run the country but you would go a long way toward balancing the budget with these two decisions....

    But the reality is that Obama and the Democrats cater to the same constituents that the Republicans do.

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  3. Perhaps President Obama is a bit sharper than some give him credit for; he may be painfully aware that he is presiding over a declining republic in which agents of powerful interests incompatible with the continuance of this form of government are wielding ever more unrestricted power. His much-mocked civility may well be just a way of trying to keep the republic together with baling wire and bubble gum, at least for a while. I'm not at all sure that Democrats ought to be savaging him for that effort, frustrating though it may be. Some criticism is at times warranted, but I don't see the point in taking it too far.

    Well, the President's gambit may or may not work -- it assumes that the GOPers in government are capable of shame and therefore likely to respond to calls to statesmanship and moderation, but very few of them have shown any sign of such decency. Their one goal, it seems to me and leaving room for a very few honorable exceptions, is to channel ever more wealth into the hands of the plutocrats who helped put them in office.

    In sum, if we realize exactly what the man is up against and how limited his powers are in many respects, it's fair to say that President Obama is by no means the the irresolute failure that so many Democratic talking heads keep claiming him to be.

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  4. Sometimes in the game of "chicken" or "deal no deal" you gotta let them know that you will drive over a cliff....Let the tax cuts expire and blame the Republicans then go ahead and fund unemployment benefits out of funds already allocated....

    Wouldn't that be a game changer?

    Let the defense department go without funding until DADT is repealed.

    Wouldn't that be a game changer?


    Certainly would be a game changer, TAO, and once the impeachment of the president was over and done we could all have a good laugh.

    Presidents cannot make allocations. Nor can the president take funds allocated for one purpose and use them for another purpose!!! The president cannot hold defense funding hostage until DADT is repealed. Congress controls the purse strings, this is why the president, not just Obama, but every president this nation has elected, negotiates with Congress to get projects funded. The entire design of our government as laid out in the constitution is to prevent the concentration of power in the hand of a single person. that's why we have three branches of government. It is by design that the president has limited powers. Those illustrious white men who set up the governing laws of this country intentionally rejected a governmental structure that would allow for the abuses of power by the head of the government that they had fled from in Great Britain.

    Lord Truth, I think that you speak with righteous conviction and I wish that the Democrats would reframe the issue as you suggest.

    Dino, I totally agree; I don't think that Obama is failure and I think that the talking heads no that but their criticism makes for better sound bytes.

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