Can A Grand Bargain Be An Opportunity

Dave Johnson

As I mentioned Friday in “Real Jobs At Stake” I attended a blogger meeting with Rhode Island’s Senator Sheldon Whitehouse. The meeting was put together by Americans for Tax Fairness, a new coalition formed to help win the coming fight over the expiring Bush tax cuts.

Background

Two years ago the Republicans set a trap by holding unemployment benefits hostage, demanding the Bush tax cuts be extended for 2 years, dramatically increasing the country’s debt. Obama paid the ransom to free the hostage, the Republicans have since then cut unemployment anyway, and now are springing the trap, running ads against Obama that say Obama increased the debt.

That extension of the Bush tax cuts expire at the end of this year. Republicans and other servants of the 1% are ginning up a serious battle to keep that from happening. Meanwhile some Democrats aren’t helping matters. The President is proposing to restore Clinton-era tax rates only on those making more than $250,000. Now some Democrats are pre-caving even before negotiations begin, and raising that figure to $1 million. (Because people who make between $250 thousand and $1 million are’t rich I guess, if you are used to the people that members of Congress and the Senate hang out with.) Americans for Tax Fairness wants a $250K cutoff.

From the press release announcing the launch of the coalition:

“We established Americans for Tax Fairness to help make the economy work for all,” said Americans for Tax Fairness Campaign Manager Frank Clemente. “To achieve this goal, we need adequate levels of investment in critical areas like education and rebuilding infrastructure that create and sustain jobs. We also need a balanced and equitable approach to the federal budget challenges we face, which includes protecting critical services for the middle class and the most vulnerable. This requires that we all pay our fair share of taxes, especially big corporations and the richest 2 percent making more than a quarter of a million dollars a year.”

There are proposals on the table to end the Bush tax cuts for those making $1 million a year. One of the coalition members, Citizens for Tax Justice (CTJ), estimates that 43 percent of the tax revenue would be lost if the threshold for extending the Bush tax breaks is set at $1 million in income rather than at $250,000 – the level President Obama has proposed. In addition, CTJ estimates that half of the breaks resulting from moving the threshold from $250,000 to $1 million would go to people with income exceeding $1 million.

From the Meeting

The following is from notes of Senator Whitehouse’s comments.

Our side fights a guerrilla war, without a top-down message structure.

We offer a lot in substance and facts: Taxes right now are upside-down, with people at the top paying lower rates than the middle.

  • Here are some facts: 65% of people making over $1 million pay a lower tax rate than people in the middle class.
  • In 1930 the ratio of taxes was for every $1 in individual taxes we got $1 in corporate taxes. Now it is $6 individual for every $1 in corporate taxes.

    With their taxes down but (and the result of) their political contributions up, corporations now fund our politics, not the country. The result is that corporations not only don’t pay much in taxes they have enough control that they do what economists call seeking rents.

    On the other hand, most of the Republican “facts” are wrong or misleading.

    On understanding what is going on, the public is way behind us. (We are not communicating our positions in ways that reach the public and resonate.) So if we bring something up once and move on we take a punch. But if we keep bringing these things up, if we are persistent, then the public starts to learn. Attention brings public awareness. In the Bible it took several times before the walls of Jericho were brought down.

    The Coming “Grand Bargain”

    Still from notes, summarizing Senator Whitehouse’s comments:

    Republicans learned that hostage-taking works. It pays off. So now instead of fighting on bills they want to do a debt ceiling drama and attach their stuff to it.

    Framing the question is very important as the grand bargain debate begins.

    Do we let them expire first, and not let a lame duck session of Congress happen? (Nothing is going to pass before the election, so the only way to change something before the expiration at the end of the year is to do it in a “lame duck” session — after the election but before the people elected take office, and the people tossed out leave office.)

    The President says he will veto bush tax cuts, but that obligates him to be reelected.

    After Jan 1 norquist pledge expires by fiat.

    A lame duck session won’t happen if house or senate changes, because the winning side will want to wait for their control to come in.

    He is worried about an October surprise where they get the entire Republican machine (Fox, Limbaugh, lobbyists, op-ed writers, bloggers, etc.) on a message, try to get a stampede going, A stampede is not a rational process

    Can we block Simpson Bowles? That requires 40 on our side to hold out. So it depends on how attractive the offer is.

    Be prepared, legislation is chaotic, things can happen, if we have to take a hit then why now do something for us, like remove the cap on Social Security payroll taxes in exchange for the hit we take.

    Other things can come out of that chaos if we are ready: environmental taxes, fuel taxes, we should be thinking about things like this. We should be prepared to seize moments and grab things we have wanted in the chaos of legislation

    So a grand bargain can also be an opportunity. IF they remove the cap on Social Security.

    My own opinion? During the questioning I asked, if the point is reducing deficits, don’t the scheduled expiration of the Bush tax cuts, and the cuts in military spending do just that?

    If you really want to keep the Bush tax cuts for people making less than $250K or whatever, let the Bush tax cuts expire and then next year push a new tax cut, and call it the Obama tax cuts. (And push up the deficit with tax cuts that tell the public taxes are bad therefore government is bad…)

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