Friday, December 2, 2011

Tax battle 2011

Back in August, I warned that there would be a fight over the 2% Social Security payroll tax cut that expires at the end of the year. Now we are there. (For anyone keeping score on me, I blew it on my political reboot prediction and my super committee prediction. Overall my record isn't great. Sue me.)

This tax started just last year as part of the crappy deal to save the Bush tax cuts and blow another hole in our lousy deficit budget.

Now the Senate, and only the Senate, are voting on and discussing this issue. The Democratic proposal, which includes further payroll tax cuts and an unemployment extension, pays for the spending with a surtax on the wealthy. Republicans countered with a salary freeze on federal workers (acutally, a future freeze since the current freeze was part of an earlier deal) and personnel cuts by attrition. Neither proposal met the 60 votes minimum needed to move ahead in the Senate.

The Republicans aren't big supporters of this tax cut. It wasn't "paid for" with spending cuts (making it a kissing cousin to the Bush tax cuts, not that Republicans acknowledge that). It also was part of Obama's price for agreeing to extend the Bush tax cuts last December. If you're a politician who hates all things Obama, these tax cuts would be included. A lot of Republicans would like to see these tax cuts die quietly. In fact, 26 Republican senators voted against the Republican plan.

The Democrats, however, want to make hay over these cuts. They want to show that Republicans cling to their tax cuts, but won't raise a finger for Joe Sixpack's payroll tax cuts.

Republicans don't have a strong counter story to this... yet. They can say that it's bad for Social Security, which it is, among many other things. They can say that the Democrats just want to soak the rich and piled on even more spending, which is true, and not the best move by the Dems. But the Republicans aren't in a good place to defend the Bush tax cuts after this.

They should be scrambling to fix this narrative, but I'm not seeing it yet. The House isn't doing anything. They probably hope when Senate's competing bills fail, "it isn't the House's fault." I think the Senate will oblige them.

However, if  the Senate does manage to negotiate a continuation of this tax cut and negotiates a way to pay for it, that would be a hugely unexpected breakthrough in partisan gridlock. It would open a major new dynamic. Suddenly, the House, with its rigid, no-compromise, take-no-prisoners talk, would look like the obstructionists they've been. And many politicians up for re-election this year would have to show what camp they're in -- compromise or no compromise.

I'm not a fan of continuing stimulus, this particular tax cut, or its continuation, but I am a fan of putting politicians in stark relief, and making them justify the positions they've taken. This tax cut isn't sacrosanct, and either are the Bush tax cuts. That is where the real conversation should start.

Update 12/2/11. Boehner is trying to write something that his House Republicans will pass. They don't like the tax, so Boehner is trying to sweeten it with extraneous Republican tidbits. However, what Republicans consider tempting enough are actually huge concessions that the Democrats would never make:
  • "We'll give you this 2% tax cut extension if you give us the Keystone pipeline." 
That probably sounds as attractive as the Republicans super committee offer:
  • "We'll give you $500 billion in 'revenue' if you give us continuation of all the Bush tax cuts." 
Yet again, the Republicans don't understand their weak bargaining position.

Update 12/20/11.The Senate didn't manage a breakthrough, but managed to negotiate a reprieve for two months with solid bipartisan support (89-10). The House Republicans want to stick with their bill, and make the Senate accept it NOW. However, a minority of the House Republicans would rather vote for the Senate bill and take the reprieve. The Republican leadership, knowing they have wavering members, won't put the Senate bill up for a vote. The ball is in the House's court, and we'll see how stubborn the House Republicans are. This is the stark relief I hoped to see, though I'm looking forward to seeing it in the Senate too.

Update 12/22/11. McConnell is trying to close the gap. Currently the House Republicans are saying 'no deal unless it's negotiated before Jan. 1.' The Prez is saying 'two month extension, and we start negotiating on Jan.1.' McConnell can make them both partial winners--'two month extension, and negotiations start today.' I predict that is what will happen today or tomorrow, and McConnell will get the credit. The saga continues. (Eye roll on a national scale.)

Second Update 12/22/11. House Republicans give in and agree to a 2-month extension. Merry Christmas, good-bye Scrooge, and God bless us everyone.


Anonymous said...

Well, MP, you're finally getting to the crux of the issue today. "Moderates" like yourself want politicians to "work together" (an phrase I heard a well-respected toaling head use on Sunday) to solve these big problems for the benefit of everyone.

Perhaps you already know this but politicians on opposing sides are not supposed to work together any more than parties on opposite sides of a lawsuit. Sometimes those sides can come to an agreement, but that is only when both sides BATNA (best alternative to a negotiated agreement) is worse than the agreement itself.

In a political environment when one side (or the other) has decided to litigate issues to the end, let one election, then another (if they lose) then another to continually re-litigate until they get the result they want, or halt any progress until they do, then solidify their desired result when they can get it, where is the incentive for either side to reach a negotiated agreement?

The GOP got what they wanted in 2000, by the skin of their teeth or not. They launched wars, challenged their opponents' patriotism, passed huge, unreversible tax cuts, set a political time bomb to insure it, and claimed sole capability to defend people from being murdered by foreign zealots.

When that political strategy ultimately failed in 2006 and 2008, do they then seek a negotiated settlement of the one-sided policies they pursued? No. They decided to relitigate. They had a weak bargaining position then, so they decided it was better to litigate some more than accept a disadvantageous agreement that their opponents would use to break them.

And that plan was rewarded with a huge victory in 2010 so they are now in a much stronger negotiating position. Why settle at all now? Just maintain the litigation strategy (attack, attack, attack) and hope to secure a victory in 2012 and put the other guys in the weakened position.

So I agree that the GOP doesn't like the payroll tax cuts and is putting up all sort of roadblock to having it continue, even if it makes them look hypocritical. I suppose they can look to blame Obama and the Dems for it, and they can definitely blame them for any negative impact on the economy from not renewing it. They want anti-stimulus to stall the economy, if possible, to fit their political strategy. That's their BATNA, and it helps them.

It's the Dems and Obama in the weak bargaining position, and it's been that way since Obama and the Dems allowed the Republicans to pursue their political strategy at the expense of the economy, assuming things would get better anyway.

ModeratePoli said...

Moderates like me (and you don't need to use quotes--we aren't just pseudo-moderates) are a large slice of this country. So, yes, a lot of people would like the parties to work together, as they have in the past (Welfare reform, saving social security, base closures, Simpson-Bowles, etc.).

I agree that Republicans have made big mistakes and look awful. But take a close look at Democrats, and Republicans don't look as bad anymore. As Jesus said:

"You see the sliver in your friend's eye, but you don't see the timber in your own eye. When you take the timber out of your own eye, then you will see well enough to remove the sliver from your friend's eye."

I disagree with your reading of post-2008 election history. The Democrats in the House jammed some (not all) of the Democratic agenda through without enough consideration for where the country stood. The Republicans made hay on that mistake, and won big in 2010.

Why do you say the Dems "allowed" the Republicans to take advantage of the mistake? The Dems couldn't stop them because this is a country with freedom of speech. The Dems handed the Repubs an issue, and the Repubs talked about it.

Listen, you can spout your hate of Republicans all you want, but you aren't going to convince me until you have clearer view of what's wrong with your own party and what the Republicans get right. Until that time, you have credibility only when you make a strong argument, but not in general.

Anonymous said...

Short memory, huh?

I believe it was the GOP screaming about death panels regarding HCR in 2009. And filibustering any "stimulus" that wasn't mostly tax cuts (which didn't work) versus infrastructure and other jobs program that might have, then voted against it anyway just to demagogue it.

And it was the GOP that INSISTED that only programs that were "paid for" now were legitimate or would "kill the economy", despite completely ignoring those requirements when they had control.

The Dems and Obama were weak, no doubt about it, but they didn't go where the country didn't vote for them to go. In fact, they should have gone farther with the public option (far more popular than individual mandate), including among "moderates", I'll continue to use those quotes, because I don't know what it means, exactly, when one has to vote yes or no.

Again and again, the Dems compromised and the GOP voted no anyway. That was weak. If they had just passed what they felt was best, and called the GOP cry-babies (as the GOP would do to them if the circumstances were -- and have been -- reversed), at least then they would be held responsible for the results fairly. Now they get the blame for compromises they barely supported (like the TARP bailout), even though they were GOP-led efforts -- but abandoned at the end for political reasons -- and you say I should look at the Dem's problems? I ask, where's the self-reflection on the GOP side. I've seen no evidence of it from anyone who mattered. When they lost, they simply returned to a strictly adversarial stance and hoped to switch the blame.

BWT -- you can't just turn your head and attack tone in a litigation. There's no justice there. The GOP deserves the vitriol and the Dems deserve the shame for weakness in the face of concerted minority opposition. That's it. I'm not going to mope or scrawl away with my tail between my legs over my 10% responsibility for failure. Again, the GOP felt ZERO responsibility or shame for implemented their radical agenda in the 00s that destroyed the economy and made it so no fiscal policy could undo the damage.

My solution is the wealthy repay the national debt. I disavow any "share" of the GOP-administered explosion in national debt anyone might want to assign to me. I was against it and got nothing from it. And I suspect the bulk of OWS and the people who live around me the Philly 'burbs', which by most people's recogning is "moderate", would agree.

ModeratePoli said...

@Anon, you are so screwed up in one particular aspect of your political thinking. You forget that 40% of the country is conservative, 40% moderate, and 20% liberal. If the Democrats do what the 20% most want, they are probably not going to keep enough of the moderates to stay in office. (These numbers are based on well-known Pew figures.) Minorities should be careful what they try to impose, and a smaller minority has to be even more careful.

But, amid your repetitive rants, you do have a workable idea. The rich can pay down the debt. But keep in mind that no one is paying down the debt until we are out of deficit territory.