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Monday, December 06, 2010

(Updated) Will U.S. House Dems Stop Obama's Backroom Deal on Taxes?

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Update: According to the latest leak on the tax cut "deal," Obama has agreed to give up the “Making Work Pay” tax credit that was the central tax break for middle and low-income Americans in last year’s economic stimulus bill. The credit provided a tax break of up to $400 for individuals and $800 for couples. But Republicans opposed the idea so it would be replaced with a one-year reduction in payroll taxes for workers. Negotiators were also close to an agreement to restore the federal estate tax, which lapsed at the start of this year, with an exemption of up to $5 million per individual, and a maximum rate of 35 percent.
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On Saturday, Senate Dems tried to muster the 60 votes needed to get past a GOP filibuster to end debate on two bills that included the extension of tax cuts for the middle class while letting them expire for America's top earners. They failed, and got little or no support from President Obama in trying to build public pressure to force Republicans to relent on their single-minded pursuit of protecting our most well off earners from paying taxes at the rate they did during the Clinton years.

The cloture vote on the first bill, to permanently preserve the cuts for earnings less than $200,000 per individual and $250,000 per couple -- or 98% of Americans -- failed by a margin of 53 to 36. Not one Republican voted for cloture. Sen. Jeff Bingaman and Sen. Tom Udall both voted to end the filibuster.  Dem Senators Russ Feingold (D-WI), Joe Manchin (D-WV), Ben Nelson (D-NE) and Jim Webb (D-VA) and Independent Sen. Joe Lieberman [CT] voted no. This bill also would have extended unemployment benefits for one year, scaled back the alternative minimum tax for two years and extended dozens of other tax provisions from the stimulus bill and elsewhere.

On the second bill, to permanently preserve the cuts for earnings less than $1 million per couple -- extending the tax cuts for all of income for more than 99% of Americans -- the vote was 53 to 37 for cloture. This bill also included the additional measures in the first bill. Again, not a single Republican voted yes, and Senators Bingaman and Udall voted for cloture. Dem Senators Dick Durbin (D-IL), Tom Harkin (D-IA) and Jay Rockefeller (D-WV) voted no, saying they objected because they thought the $1 million limit was too high.

Obama Urges Surrender
In response, Obama issued his usual bland statement: “I am very disappointed that the Senate did not pass legislation that had already passed the House of Representatives to make middle class tax cuts permanent. I continue to believe it makes no sense to hold tax cuts for the middle class hostage to permanent tax cuts for the wealthiest 2 percent of Americans." Nobody expected anything different from the president, as he had already put everyone on notice that his closed-door effort for a "compromise," led by Tim Geithner, was his preferred way to deal with the issue.

Today, during an appearance in Winston-Salem NC, Obama urged that Dems find "consensus," and mentioned that Rs and Ds in Congress were still "working through some differences." He failed to provide any tough talk about the utterly unacceptable behavior of Rs who have stated they will bring Congress to a halt unless the tax cuts for the wealthy are continued. "Mr. Surrenderer" instead seemed to advocate a total capitulation to GOP blackmail with nary a whimper in protest.

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The latest word is that Geithner's deal would propose that all the Bush tax cuts be extended for two years, and that extended unemployment benefits be offered for another year. The compromise would have to gain approval in both the Senate and the House. Because all tax bills must originate in the House, the Senate would have to amend the recently passed House bill (by a margin of 234-188) that extends only the tax cuts for income earned by couples under $250,000, and then the House would get to vote on that.

Will House Dems Support the Deal?
The question becomes, will progressives in the House reject the bill and risk having taxes rise for the middle class, at least for now? VP Joe Biden reportedly met with Dem House leaders at the White House on Saturday evening, and President Obama summoned Dem leaders to the White House today to discuss the parameters of a compromise that would be acceptable to the Dem majorities in the House and Senate. With no backing from Obama for calling the GOP's bluff on this, it might be difficult for House Dems to stand against the compromise even though the Dem base is incredibly up at arms about Obama's sheepish cave-in to the Republicans.

Cave-In Would Set Dangerous Precedent
Today, Paul Krugman urged Dems to refuse the deal:

What should Democrats do? The answer is that they should just say no. If G.O.P. intransigence means that taxes rise at the end of this month, so be it.

Think about the logic of the situation. Right now, the Republicans see themselves as successful blackmailers, holding a clear upper hand. President Obama, they believe, wouldn’t dare preside over a broad tax increase while the economy is depressed. And they therefore believe that he will give in to their demands.

But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils.

Krugman believes that capitulation now would set up a scenario next year, when there are more R Senators and they control the House, for all the Bush tax cuts to become permanent. He explains how we couldn't afford such folly unless deep and massive cuts are made in Medicare and other vital programs -- a virtual dismantling of just about everything except military spending. 

... if Democrats give in to the blackmailers now, they’ll just face more demands in the future. As long as Republicans believe that Mr. Obama will do anything to avoid short-term pain, they’ll have every incentive to keep taking hostages. If the president will endanger America’s fiscal future to avoid a tax increase, what will he give to avoid a government shutdown?

So Mr. Obama should draw a line in the sand, right here, right now. If Republicans hold out, and taxes go up, he should tell the nation the truth, and denounce the blackmail attempt for what it is.

Yes, letting taxes go up would be politically risky. But giving in would be risky, too — especially for a president whom voters are starting to write off as a man too timid to take a stand. Now is the time for him to prove them wrong.

Potential Consequences for Dems
I wish I could believe that Obama or a majority of Dems in the House would stand up against the blackmail but, so far, all we've heard publicly are calls to give in from the party's leaders. If the powers that be within the Dem Party want to see their traditional base, young voters and many independents walk away from supporting them in the 2012 election, or support someone willing to fight for America's working and middle classes in a primary or general election challenge to Obama, they should definitely keep pushing for more acquiescence to GOP demands.

If Dem members of Congress aren't prepared to stand up for the people -- even if it takes their standing up against a Dem president -- I hope they, too, are prepared to take the backlash going forward. We need a lot more tough talk from Dems, backed by voting against the President's wishes, if necessary:

Sen. Bob Menendez (D-NJ) said,

Do you allow yourself to be held hostage and get something done for the sake of getting something done, when in fact it might be perverse in its ultimate results? It's almost like the question of do you negotiate with terrorists.

Sen. Claire McCaskill (D-MO) said,

I'm trying to figure out how anyone can keep a straight face and say they are for deficit reduction when they insist on a permanent tax cut for the wealthiest Americans, completely unpaid for. If they think it is OK to raise taxes for the embattled middle class because they are going to pout if we don't give more money to millionaires, it really is time for the people of America to take up pitchforks.

December 6, 2010 at 03:31 PM in Democratic Party, Economy, Populism, NM Congressional Delegation, Obama Administration, Republican Party, Right Wing, Taxes | Permalink

Comments

Is Obama from Mars? Maybe he's waiting till The Meteor hits to stand up for the masses.

Posted by: Terry Schleder | Dec 6, 2010 4:38:36 PM

Do you really believe there's a chance that Heinrich and Lujan will vote no on the crappy deal engineered by Geithner? I wish.

Posted by: Deaniac | Dec 6, 2010 4:56:32 PM

The more I read about Obama and the Democrats who keep following him the more I want a strong candidate to challenge him in 2014. Right now nobody seems to be fighting hard for working people when it counts. Lip service only.

Posted by: Worker | Dec 6, 2010 5:16:36 PM

I also feel very discouraged. I have given up on Obama. Maybe he was too young and inexperienced, maybe he lied his way to the WH. Whatever it is, this is incredibly disappointing.

Each week is worse that the last.

Posted by: bg | Dec 6, 2010 7:46:48 PM

I voted for him last time but I won't in 2012. If I have to write in a loyal Democratic candidate I will.

Posted by: LT | Dec 6, 2010 8:26:14 PM