Use The Fiscal Cliff To Defend Our Budget Priorities

Perhaps the best strategy for avoiding having to settle for a bad "grand bargain" on the federal deficit that would shortchange the pillars of economic security for struggling households is to jump off the feared "fiscal cliff" at the end of the year and push Congress into negotiating a new budget plan in a world in which the Bush tax breaks no longer exist, Sen. Sheldon Whitehouse, D-R.I., suggested during a meeting with bloggers at Netroots Nation.

The "fiscal cliff" or "taxmageddon" is January 1, 2013, the day the 2001 and 2003 Bush administration tax cuts and the Obama administration payroll tax cuts all expire. Some economists are predicting that the sudden increase in tax burdens for almost every working American would dampen demand enough to cause the economy ti slip into a mild recession.

On the other hand, allowing all of these tax provisions to expire would do significantly more to lower the federal deficit than the budget proposal favored by congressional Republicans, which would make the Bush tax breaks permanent and combine them with deep cuts in domestic federal spending. Those cuts, directed largely at programs that serve poor and working-class families, would also weaken consumer demand and inhibit economic growth.

Some Democratic leaders, meanwhile, have been working either covertly or overtly toward some bipartisan "grand bargain" that would most likely be firmed up between the November elections and the end of December, in order to avoid slipping over the so-called fiscal cliff.

That bargain would likely include cuts to Medicare, Medicaid and Social Security, among other domestic programs, and would likely include some form of "revenue-neutral" tax reform in which corporations and the wealthy would be taxed at a lower rate but would lose many of their deductions and loopholes.

Whitehouse agrees that would be unacceptable, but he also thinks that it "does not seem very likely" that the parties in Congress would be able to strike that kind of bargain with each other and the White House.

"The Republicans have learned that hostage-theory negotiating works well for them," Whitehouse said, and he believes that as long as the Bush tax cuts are the law, congressional Republicans would never vote to allow any portion of those cuts to expire.

Hence, they have to die on their own first. "Our side will have much more room to maneuver after January 1," Whitehouse predicted.

In the meantime, Whitehouse is supporting the work of a new tax coalition that is pushing Congress to end the Bush tax cuts on income in excess of $250,000 a year. That coalition, Americans for Tax Fairness, not only opposes Republicans who want to extend those tax breaks indefinitely but Democrats who have publicly set a $1 million or $500,000 threshold.

The Center for Budget and Policy Priorities found in a recent report that setting the threshold at $1 million instead of $250,000 would mean $366 billion in lost revenue in the next 10 years. That is more than enough money to restore all of the cuts in such social programs as nutrition assistance and health care that House Republicans made in their budget proposal last month [1].

Given that set of realities, Whitehouse thinks progressive organizations should be prepared to shape the political debate on taxes and spending, starting now. He is urging a more aggressive take-down of falsehoods used by conservatives to sell the nation on the idea that tax breaks for the wealthy should be sacrosanct. And he is a fan of repetition—"the Republicans are very good at saying the same thing over and over again"—and persistence, citing the Biblical story of the fall of the walls of Jericho. "I call it the Jericho principle. The walls of Jericho did not fall the first time around," he said.

Even though ample polling data shows that voters support the idea that corporations and the wealthy should pay their fair share, in accordance with what's become known as the "Buffett rule," there is enough misunderstanding among ordinary people about how taxation works and enough fog being spewed around the issue by the right-wing noise machine that progressives should not take for granted that the public gets that conservative prattling about needing to protect the "job creators" is just nonsense.

Whitehouse also said that activists should watch diligently for opportunities to push critical reforms that appear on the surface right now to have little chance of happening, such as lifting the payroll cap on Social Security. While that single step would almost single-handedly solve Social Security's long-term solvency problem for decades into the future, it is not a solution that is being considered seriously in Congress right now. But, Whitehouse said, that could change if such a proposal became a bargaining chip in the deal-making over taxes, spending and the deficit.