08 December 2010

More Tax Cut Politics

I see where Club for Growth Prostitute Chris Chocola and South Carolina Extremist Senator De Mint both came out against the "deal" with Obama to extend tax breaks for the rich and richest in exchange for a few crumbs. (OK, I'm editorializing).

I say, at minimum, the Democrats in Congress should not let this pass without virtually every Republican voting for it. I hope at least 45 Democrats vote No! in the Senate... forcing McConnell to come up with almost every Republican vote to pass it.

Then we can blame it on them later.

My preference would be to table the whole thing and let the Republican House deal with it in January. Frankly, although many economists say restoring 1990s tax rates across the board would be a "disaster," etc.; most people don't pay taxes until April, and if the whole thing just dies in the lame duck session and all the tax cuts expire, (including the estate tax), that would obviously kill the "deal," but I really believe the pressure on Republicans would be unbearable... they would cave, and sooner than people think. This president has consistently been afraid to call their bluff, but the fact is that a large majority of Americans favors the Democratic position on this.

Within just a few weeks, they'd have to pass an other-98%-only tax break extension. They might be able to squeeze in the Senator-from-Wal-Mart Blanche Lincoln's crappy Estate Tax plan, that's in the "deal," (or even repeal the estate tax entirely). But if Harry Reid is worth his salt, he (hopefully with the president's help and some cranked up messaging from Democratic party propaganda) could take that out in the Senate and turn the tables on the Republicans' deceitful "Death Tax" framing and propaganda. Use some juicy quotes from that Republican President, Teddy Roosevelt.

Then the president could sign the other-98%-only tax breaks, and promise to VETO any change to the estate tax, which, without any new legislation, will revert to the 2002 level on Jan. 1.

Same with unemployment. Admittedly, this is a more troublesome issue, but the fact is that politically, it wouldn't be a bad thing to force the Republicans to stand up and be responsible. First, and now, the Democrats should introduce stand alone extension legislation and force it to a vote. And keep doing that as often as possible. The Republicans don't really want to have the finger pointed at them for killing extension of unemployment benefits. If they do hold together and insist on blocking them, they will be signing their death warrant for 2012. It'd be tough, but I think it would be better than what we got, certainly politically. Democrats could introduce unemployment extensions over and over again and make them shoot them down. Eventually, I suspect, there would be another "deal," but on much better terms than this one.

I guess the question is whether caving to the Republicans on this critical issue, thus in their words "ballooning" the deficit, is worth it for extension of unemployment benefits that a poker player's best estimate has to be that they'll have to give in on anyway. I say, forget it. The Obama deal really sucks. Vote No. Let all the tax cuts expire, and make them negotiate with us. 

Turning to another element of the "deal" I find troublesome, but one where the political options aren't real good. I agree with Olbermann that there is a potential downside to cutting payroll taxes, in that it could give a back door argument to cutting Social Security later. Making murky the fact that Social Security is self-funding, and that the Social Security Trust Fund holds US Govt. debt but is not part of the general fund or the budget, could make it easier to argue that cuts are permissible to this program to address the general debt. Which, as it stands, would be a default on the full faith and credit of the US Government obligations to the bonds held by the Social Security Trust Fund. I say, keep it that way, and keep social security fully funded. If they want to do anything to the Payroll tax, they should 1) keep the income-based cap on benefits but eliminate the cap on FICA-taxable income; and 2) provide FICA only tax credits, financed directly from this increase, for lowest income workers. The change to payroll taxes on all earned income would go a long way towards financing Social Security forever, even if a portion were used for such tax credits. Unfortunately, and realistically, nothing of the sort will likely be possible for the duration of the Republican control of the House.

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