Leverage
Normally, legislators who actually care about improving things are at an inherent disadvantage when negotiating with conservatives or venal “centrists.” Joe Lieberman can get his “get rid of something because it will piss off liberals this week even if it’s what I favored last week” amendment passed because his vote is necessary and even with his dumb amendment the bill improves the status quo. But it doesn’t work the other way, because if you refuse his demand and the bill goes down he doesn’t give a shit. Leverage comes from negotiating with people who really want to make a deal, and this dynamic favors reactionaries and nihilists.
The expiring Bush tax cuts, however, are an exception to this rule. Here, it’s wingnuts who desperately need to make a deal, and progressives and moderates who should happily be willing to walk away. Fortunately, as Matt and Barbara explain, Senate Democrats seem finally to have figured this out. Look, this strategy here couldn’t be more obvious — let the Bush tax cuts expire, and pass your own “Democratic middle-class tax cut.” If House Republicans vote for it, the policy is better and the popular tax cuts are associated with you. If Republicans just let all of the tax cuts expire, fine — it’s not the optimal time for an across-the-board tax increases, but the revenue will be useful, there will be plenty of opportunities to cut middle-class taxes, and Republicans are responsible for a big tax increase. Unlike in 2010, you’re not going to get anything for extending the cuts and you’re not facing a presidential election in 2 years which would make an anti-stimulus worse for progressive interests. Indeed, the play here is so obvious that any Senate Democrat who won’t go along with it is more committed to upper-class tax cuts than not only good policy but the interests of their party. What makes me unsure about how this will play out is that such Senate Democrats may well exist.
Such Senate Democrats certainly do exist. Lieberman, Landrieu, and Nelson come to mind immediately.
DrDick,
Lieberman’s no longer a Democrat – since 2006, when he lost the Democratic Primary in CT.
Since then, he’s been
a Republicanan Independent.He’s caucused with the Democrats consistently, and DW-NOMINATE shows that he’s much closer to the Democratic mean than the Republican. He’s an asshole who likes to give the Democrats the finger, but he’s essentially still a Democrat, no matter what his nominal affiliation.
Concentrate on characteristics, not labels.
I am aware of that, but as Craigo notes he caucuses with the Dems and Scott specifically cited him in the post.
And as of 2013 he’ll either be a lobbyist or a pundit. Or both, I guess. But thankfully not Senator. (Though if Linda McMahon wins, I might — perish the thought — miss Holy Joe).
This is a no-lose propositi…
Wait!
These ARE the Democrats I’m talking about.
Well, ok – about as close as it comes for a party of (too many) cowards and corporatists.
Let the tax cuts all expire.
Blame it on the Republicans.
And promise if President Obama wins, and if they have the House AND Senate, the first thing the Democrats will PROMISE to do is reestablish these middle-class tax cuts.
But, if the Democrats don’t have President Obama, and BOTH houses, they can’t promise anything – because the Republicans will block them, just like they’ve BLOCKED EVERY SINGLE DEMOCRATIC JOBS BILL IN THE LAST TWO YEARS!
And if Republicans get control – they will give the rich even bigger tax cuts, but none for the middle class.
And that Republicans have already talked about INCREASING the taxes on the middle class and poor, while giving their rich cronies even steeper tax cuts.
Run ads on this in every district, from now until the polls close on November 6th!
The R’s want to play at “Class Warfare?”
This.
THIS, is how you Democrats can win at “Class Warfare.”
Please, I beg you – DON’T BLOW IT!!!!!!!!!!!!!!!!!!!!!!!!!!
The deadline on this is in the lame duck session, after the election but before the new congress and president take office.
That’s fine! (And I know that it happens in the lame duck :-)
But run on it NOW!
Give people even more incentive to vote for the Democrats.
And then you get another Democrat going off the reservation….
Link is to article about “high ranking Syrian defector” Not sure what you are implying there . . .
I thought so too, but scroll down.
Sorry, guys, when I googled “Blumenthal” that was the first link that came up, and when I clicked the link, his story was near the top.
Not surprising. “Senator from Connecticut” means “Senator from all those finance people with houses or headquarters in Fairfield County” — when it doesn’t mean “Senator from Electric Boat”.
Here’s the thing, tho: when Blumenthal was AG of the state, he was pretty in the face of the insurance industry.
I mean, I can understand his logic if the Republicans held the Senate, but they don’t, and so even paying lip service to tax cuts for the wealthy makes no sense.
Unless your point applies, of course.
I think it’s the prospect of the sequester kicking in, and its effects on General Dynamics and United Technologies in particular, and not the FIRE people….
No, no, no, dear FSM NO! This is a disastrous time for any tax increase. The last thing we need is any more drag on demand, least of all for the purpose of “revenue” which is an antiquated concept at the Federal level. The Federal government doesn’t need “revenue” to have funds for spending. This is an operational fact of the monetary system. It is also a a fact that Federal taxes take money out of the private sector, and lack of money in the private sector is precisely the problem.
I agree in general, but you have to account for where the money’s being taken from. The upper class is actually doing phenomenally well, and the lack of demand isn’t because the 1% don’t have enough money. It’s because the middle and working class has shed jobs, and automatic stabilizers meant to keep demand afloat either were too stingy, or have been slashed to the bone.
Well, yeah, which is why the Admisntration’s preferred position is to let the cuts for the 1% expire, while continuing the cuts for everyone else. But the proposal here is for letting all the cuts expire, if the Rs won’t agree to do what the admisntration prefers
That’s true, but as Scott says, the Dems can cut middle-class taxes before the raise goes into effect. It’s the top brackets where they’re drawing the line.
The Republicans in the House might have something to say about that. They would rather have a million poor die before a rich man miss a steak dinner.
This is the most optimal time to turn Mitt Romney upside down, turn out his pockets and take what is found into the Federal Treasury.
How much would they actually hurt the party to break ranks.
There are at least six Democratic Senators who will torpedo this plan by my count. They DO care more about tax cuts for the wealthy than their party. Webb, Nelson, Pryor, Landrieu, you know McCaskill will fold, Lieberman and in all probability Warner.
Don’t forget Joe Machin (or has he officially switched parties?)
He’s probably waiting in the hopes that it’ll be a 50-50 Senate next year and he can extort something good from the Republican leadership in exchange for giving them control of the Senate.
And even then, he might decide to play both sides against the middle.
West Virginy is a place where you are born a Democrat and you gonna die a Democrat. He’s not going to switch.
Be one of the worst people and take down national Democrats every chance he gets? Sure!
Is that enough senators to override a veto?
Obama has said he will veto a bill that gives in on incomes over $250k.
He has been pretty good on keeping his word.
You’d need two-thirds or 66, so no.
67.
All those contemptible “Democratic” shitstains aren’t necessarily going to be able to join Republicans in extending the tax cuts for the rich. All they’ll be able to do is vote against any new middle-class-on-down tax cut bill … as long as Harry Reid holds firm on letting all the Bush tax cuts expire. “Letting them expire” requires no action, while anything else would have to be brought to the floor, and even then would presumably need sixty votes for cloture.
Now, if the GOP is on top come January, Majority Leader McConnell will certainly be able to introduce Bush Tax Cuts 2: Electric Fuckyou, but that list of “Democratic” asswipes will be also be much shorter in that case, and probably irrelevant to shitting all over a Democratic filibuster. And assuming Obama’s still in the White House, there’s always his veto threat if there are any reconciliation shenanigans. If Obama isn’t still in the White House, than this will quickly become one of the least of our problems.
I hate to quote John Stewart, but, much like the Gilded Age, there are two parties in America: the money party and the rest of us. MANY, MANY Democratic Senators are members of the Money party.
Sadly, I always hoped the tax cuts would end, just because the money would close the deficit and we wouldn’t have to hear about it any longer.
Being able to borrow for free is apparently not as appealing to the Know Nothings as having a deficit. At least, they says it that way.*
*After listening to Limbaugh talk about Mark Zuckerberg’s mortgage yesterday on the radio, I now he perfectly understands the principle and has been lying all this time. And, yes, I am more offended by liars than stupid people
the money would close the deficit and we wouldn’t have to hear about it any longer.
If you haven’t spotted the sucker at the table in your first half hour…
Almost every pundit in Washington?
You’re right — they also think that if you agree to a “Grand Bargain” will cause Republicans to talk using “the deficit” as an argument against any decent reform. What’s inexplicable is why you agree with such a conclusively disproven assumption.
I don’t care about a deficit in a demand crisis, but getting rid of ALL tax cuts would improve the deficit and I wouldn’t have to her about austerity any longer.
I’m fine with just stopping it as a conversation piece.
Like Elaine fixing George up with her best friend: “Elaine: Cynthia thought we should nuke the rainforest, get rid of it in one sweep, just so we can eliminate it as a topic of conversation.”
Read more tv spoilers at: http://www.tvfanatic.com/quotes/cynthia-thought-we-should-nuke-the-rainforest-get-rid-of-it-in/#ixzz211j00RaI
See, while I buy this argument in general, I don’t buy it in Lieberman’s case. He clearly wanted another term in office, and Obama and Reid could well have used that as leverage to get him to stand down. As in, stop making waves and we’ll support you for another term. Mess with us and we’ll bury you. For whatever reason, they chose not to do this, and that could well have been the right decision. Lieberman is fairly unhinged. But with him (and with Blanche Lincoln too, she had a strong primary challenger), Dem leaders weren’t without plays to make. This is not true of Ben Nelson or Mary Landrieu, really, but they weren’t kicking up quite as much trouble.
The most likely explanation is that the Obama Administration figured that any sort of public option would make the entire bill toxic to Republicans, including the two moderates who showed any interest working on the bill, and that’s why they didn’t bother with it. It wasn’t to coddle the insurance companies, who by this point had walked out of the process. Considering how desperate the Obama WH is about bipartisanship, this makes the most sense to me.
He clearly wanted another term in office
I’d say the fact that he’s not seeking another term makes this rather less than clear. Anyway, Reid obviously did the right thing. Kick Lieberman out of the Democratic caucus and there’s no ACA and no DADT repeal.
Also, your argument about the public option makes no sense. Lieberman’s vote isn’t worth anything unless you also get Nelson, Bayh et al.
As I recall, Lieberman more or less personally threw the process into chaos after the opt-out public option was settled on. Could be remembering it wrong, but that’s what I pretty clearly recall. And I always assume that Senators want another term in office because they almost always do. Lieberman isn’t too old to do it, and that guy lives for the attention, the morning show appearances, the adulation from centrist media. (I’d also been operating under the assumption that Lieberman’s genuinely admirable leadership on DADT repeal was an attempt to reboot his relationship with his electorate, since that guy doesn’t do anything that’s not for himself. But I don’t know for sure.)
Lieberman’s genuinely admirable leadership on DADT repeal was an attempt to reboot his relationship with his electorate,
But he announced he wouldn’t run just a few weeks after that. If that’s really what it was about, I don’t see why he would have given up so quickly.
Obama endorsed him last time around. He wouldn’t have needed reminding.
Obama endorsed him in the primary, opposed him in the general (where he was not the Democratic candidate)
The reality is that the best policy is for all the tax cuts to expire. There was nothing anti-stimulative about the Clinton tax rates and the government needs the money. Further, there’s nothing sacred about the “middle” class– every European social democracy funds its welfare state with significant middle class taxes. The whole “middle class” / “working families” schtick was dreamt up by right wing DLC types who favored throwing the poor over the side of the bridge as an electoral strategy.
Just get rid of all the Bush tax cuts. Like just about everything else Bush did, they were an irresponsible idea.
The thing you learn when talking to people from “socialist” countries is that, yeah, taxes are higher, but that’s because the government covers a lot of things that ours doesn’t, and does it more cheaply than the private sector does in many cases (health care, transportation, family leave, etc.). I remember talking once with a Canadian working in the U.S. who said that taxes were lower in America, but she had more money to spend when she was working in Canada.
The Clinton tax rates in the 1990s during an economic boom have a different economic impact in 2012. The state of the economy and the expectations of its participants really do matter for determining the best monetary and financial policy. Raising taxes on the middle class right now would be disastrous. It would most like trigger a new recession given how weak our recovery is.
And the argument that the government needs the money is just ignorant. The government can sell 10 year notes at a below inflation rate. In other words, the government is getting the money for free right now. Stick with that until rates go up, that will indicate you finally have a situation that might call for higher taxes.
And most of these rates involved maintenance, not increases, which are very different if we’re talking about “stimulus.” Over the long term the Clinton tax rates are perfectly conducive to economic growth, but this doesn’t make middle-class tax increases in a bad economy a good idea.
Reset all tax rates to the Clinton levels, then pass a temporary stimulus tax rebate for the poor and middle class, along with infrastructure and education funding, and a sparkling pony.
The Clinton tax rates were adopted during a recession !
Charlie Brown, football.
I’m going to take a nap now. Wake me up after the tax cuts have been renewed.
I haven’t seen the Lucy and the football analogy since DADT repeal wasn’t going to pass.
Zzzzzzzzzzzz.
Plan on sleeping through the presidential election, do you?
Look, if lower taxes on the middle class are such a big “stimulus”, how come wages stagnated in the Bush era?
You guys are letting your desire for some rough justice for the middle class override actual evidence. The reality is that income taxes just aren’t the economic drivers that right wingers say they are. Raising them doesn’t crash the economy, and lowering them isn’t much of a stimulus.
Meanwhile, if we adopt the principle that the sacred middle class can never pay more taxes, Paul Ryan’s budget becomes inevitable long term.
Stop buying into the right wing frame that taxing incomes is bad for the economy.
If you think that across-the-board tax increases won’t have a negative impact on a bad economy, I don’t think I’m the one who’s ignoring the data. You seem unable to distinguish between “what tax rates are optimal in general” and “what short-term policies are optimal in a recession.”
I agree with Dilan, which puts me at odds with Scott, which scares me. As a middle class voter, I already upped my with-holding and charitable giving in anticpation of those cuts going away. It wan’t that much money
“Look, if lower taxes on the middle class are such a big “stimulus”, how come wages stagnated in the Bush era?”
Because we were coming off the collapse of the stock market bubble, and the Bush cuts were “not stimulative enough”. They were tilted toward the wealthy (i.e., their added wealth-at the margin-tends to not be spent). Further, the spending priorities of the Bushies, that is wars, was not as conducive to goosing demand as, say, getting people jobs.
Otherwise, over the long run, I’d agree with you. Taxes basically serve as a way to create demand for the currency and also to impliment government’s politically driven wealth distributional policies.
“Look, if lower taxes on the middle class are such a big “stimulus”, how come wages stagnated in the Bush era?”
Because the correct measure of whether of policy is stimulative is GDP growth, not wages. The stagnation of wages during the Bush years (and the three decades preceding them) was a distributional issue, not an overall-economic-activity issue.
Rewritten for edification: “Look, if lower taxes on the middle class are a moderately effective stimulus in response to a catastrophic collapse in demand and consumer spending when the government is against a zero lower bound, how come long term productivity and technology growth didn’t accelerate and a more regressive tax structure didn’t decrease income inequality during non-recessionary conditions?”
Scott:
Again, show me the evidence that raising INCOME tax rates has ever worsened a bad economy. Did Bush’s 1990 tax increase worsen the 1991 recession?
Keynes didn’t say that there was some magic quality to marginal tax rates. Arthur Laffer said that. And the reality is that if you were really right, we shouldn’t raise taxes on high earners either. Because that would be contractionary too.
As I said, you are using economics as a cover for a desire not to hit the middle class. But “don’t hit the middle class” is not a workable principle. We need their money to fund the government.
But “don’t hit the middle class” is not a workable principle. We need their money to fund the government.
How bout we get it later, when they have some?
In Keynesian economics, deficit spending is stimulative, right? What happens if the government increases taxes? Deficit spending goes down.
Nobody’s saying that there’s any “magical quality to marginal tax rates.” It’s just the banal point that austerity reduces economic growth; when people have less money to spend this hurts the economy. Increases of the top marginal rates aren’t a big deal, but the farther down they go the bigger the effect. This is absolutely straightforward Keynsianism. All things being equal, middle-class tax increases during a recession are a bad idea.
“As I said, you are using economics as a cover for a desire not to hit the middle class. But “don’t hit the middle class” is not a workable principle. We need their money to fund the government.”
No we don’t. Not now at least. In general you do, yes, because you need the tax power to make government function, but in the short run people are lining up to loan the U.S. government at negative real interest rates, so you do not, in fact, need tax increases to fund the government.
In fact, this is so true that I would probably rather see all of the tax cuts reauthorized than all of them rescinded. That sucks as long run policy, but in the short term “economic drag” means extended suffering for millions of real people, which sucks even more IMO.
Look at the multiplier effect of middle-class tax cuts on overall GDP during a recession. Now look at that in a mirror. That’s the (marginal) effect of raising taxes in those conditions. There is some actual research on these effects, although I Am Not An Economist (though like Ben Stein I play one on TV) and can’t testify to the strength of those arguments. We do need their money in the long term, but Keynes did in fact say something about that.
I think the Republicans are hopeless, which is one of the reasons I don’t want the left to rule middle class taxes off the table.
One other thing. Even if you believe that increasing the marginal rates on middle incomes is uniquely contractionary (but increasing them on rich people will not cause any contraction at all), you still have a big problem, which is you need the Fed to play ball with any fiscal policy. As long as the Fed continues to target less than 2 percent inflation, no Keynesian stimulus will work anyway as the Fed will just tighten the money supply.
(This, by the way, is why the Clinton tax increases ended up being stimulative even though they were enacted right after a recession. Alan Greenspan favored the fiscal policy and delivered monetary expansion. Bernanke, unfortunately, is unable or unwilling to repudiate the “keep inflation under 2 percent” madness.)
Why do you keep using this word “uniquely?” It’s not like I favor spending cuts in a recession — which are even worse — either. It’s you that’s treating tax rates as “unique” by assuming that tax-code austerity doesn’t affect the economy at all.
Bobbyp:
Unless you believe that tax cuts for the rich are contractionary (and nobody thinks that to my knowledge), it makes no sense to say the Bush middle class cuts didn’t work because they were bundled with cuts for the wealthy. These are the exact same tax cuts that didn’t stimulate the economy in the early 2000′s. If they didn’t work then, they won’t work now, and that’s because lowering marginal rates, including on the middle class, is a lousy stimulus and the Fed won’t let it work anyway.
I think you’re not addressing the fact that in the early 2000s, first, the Fed wasn’t up against a zero lower bound and could pursue expansionary policy through orthodox lower interest rates rather than exotica like monetary easing. Second, I’m not sure the burst of the dot-com bubble had as much of an effect on household incomes or consumer spending. It’s possible they didn’t work then but would work now because conditions are different.
“it makes no sense to say the Bush middle class cuts didn’t work because they were bundled with cuts for the wealthy.”
Well, that’s not what I said. I said the marginal propensity to save is greater for the rich. Work it out from there.
Scott:
You are missing a key point. These tax cuts may be on middle income marginal rates, but much of the money goes to rich people.
So you are misusing an economic theory that actually says giving money to POOR (not middle class) people gives you the biggest stimulus to apply it to marginal tax rates. With respect to marginal tax rates, it isn’t much of a stimulus to cut middle rates OR upper rates.
“Second, I’m not sure the burst of the dot-com bubble had as much of an effect on household incomes or consumer spending.”
The dot com crash, much like the housing boom crash, destroyed wealth and led to reduced demand. There was, in fact, a recession 2001-03. See Dean Baker on this.
I would agree that direct government purchases or providing jobs is the best way to stimulate the economy vs. fiddling with marginal tax rates. I’d raise upper income marginal rates substantially and couple it with a jobs guarantee, but I don’t run things….so we’re left with (yet again) another of those ‘lesser evil’ choices.
What about letting the income tax cuts expire and then enacting a more significant payroll tax cut (with expiration date)? We have a employee-side cut running now, but it’s pretty small. I’d be inclined to keep the cut on the employee side, but could be pursuaded to also cut the employer side as well if that makes sense.
Everybody (who works for wages) pays that tax, including the poor. That seems like the most stimulative tax cut I can imagine. It impacts the broadest base of people, including those who are the most likely to spend it.