Am I the only one who gets the feeling that congressional Democrats would simply allow the Bush tax cuts to expire for all Americans if we weren't in the midst of a recession (or at least, the most anemic recovery in US History)?
Republicans and Democrats are currently in a stand-off over what to do about America's pending tax increase. Republicans may have won huge gains in the congressional midterms last month, but those new senators (other than Illinois Senator Mark Kirk, who is filling the remainder of the term for controversial Democratic Blagojevich appointee, Roland Burris) and representatives won't be seated until January.
Democrats still rule the roost in this lame duck session, and while Republicans are chomping at the bit address the pending expiration of the Bush tax cuts and the appropriations bills to keep the federal government running (and keeping the Democrats from doing anything else), congressional Democrats don't want to waste their last, best opportunity to first address more ideological concerns, such as repealing "Don't Ask, Don't Tell" and passing "The Dream Act" - a modified amnesty bill for illegal aliens.
Outraged, all 42 Senate Republicans signed a letter last Tuesday, vowing to filibuster any legislation brought before the Senate before addressing the tax cuts and appropriations measures. House Democrats retaliated two days later; in a shrewd display of political gamesmanship, Nancy Pelosi promptly introduced a bill in the House which would extend the Bush tax cuts only for households making less than $250,000 per year (or individual filers earning more than $200,000- did you know that?), which passed almost exclusively along party lines, with only 3 Republican and 20 Democratic defections. You can almost hear Madame Speaker now, "Here's your damn tax bill."
Republicans are eyeing a compromise that would, at worst, extend the tax cuts for the $250,000-plus crowd temporarily, and extend all other cuts permanently; however, Dems are gambling that playing the class warfare and the "Party of No" cards together will be a political blackjack where public opinion is concerned. Missouri Democratic Senator Claire McCaskill said, at a press conference with some of her fellow Senate Democrats last Thursday, “…(if) they’re gonna pout if we don’t give more money to millionaires, it really is time for the people of America to take up pitchforks.” New Jersey Senator Robert Menendez compared negotiating with Senate Republicans to "negotiating with terrorists," holding tax-cuts for the middle-class hostage for the sake of the evil-rich.
Dems may score some political points with that kind of talk, particularly with their base, but there are a number of reasons why this strategy has the potential to backfire. Saturday, the Democrats in the Senate put the House bill to a vote in order to get Republicans on the record and, hopefully, on the defensive after the bill predictably failed to pass. Whatever the final outcome, the cracks in their approach are already beginning to show.
Democrats have held huge majorities in both houses of Congress for four years and congressional approval ratings are at historic lows for a number of reasons- not the least of which is due to the fact that the vast majority of Americans blame runaway congressional spending for much of what is wrong with our economy. One recent poll of found that 71% of likely voters believe spending is too high and 68% percent believe government spending affects their personal financial situation. (The vast majority of those are Republicans and Independents- whereas only 42% of Democrats believe government spending is too high- how do you negotiate with that level of ideological disconnect?).
A-ha! But if the American people are concerned about spending, won't they reject extending "tax cuts for the rich" that congressional Democrats say will increase they deficit? Doesn't this issue favor the Dems?
Not so fast. Take a closer look at the numbers. A Quinnipiac poll confirms numerous other polls' findings that although spending is a key issue, "more voters express support for spending that spurs job creation than for efforts to cut the deficit" (http://www.bloomberg.com/news/2010-11-17/u-s-voters-prefer-job-creation-over-deficit-cuts-poll-shows.html).
So while most Americans are worried about spending and the deficit, their first piority is job creation- even if it adds to the deficit. And while many Americans still place much of the blame for our economic meltdown on the Bush Administration and congressional Republicans, they clearly don't see their economic prospects as improving under Obama and the Democratic Congress, especially in terms of job creation. The unemployment rate when President Obama took office, and Democrats extended their majorities in Congress, was at 7.6%- the release last week of the November numbers reflected an unexpected surge up to 9.8%, and the midtem elections are a clear signal that fewer and fewer Americans believe Democratic measures to revive the struggling economy are working.
Furthermore, Americans are rightly skeptical that increasing taxes will reduce the deficit at all. As economists Stephen Moore and Richard Vedder pointed out in a recent editorial in the Wall Street Journal, "over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more...higher tax collections never resulted in less spending." (http://online.wsj.com/article/SB10001424052748704648604575620502560925156.html?mod=WSJ_hpp_sections_opinion)
Moore and Vedder went on to say, "We suspect that voters intuitively understand this tax and spend connection, which is why there is such hostility to broad-based tax increases. 'Polls consistently find that a majority of Americans believe any new taxes will be spent by the politicians,' pollster Scott Rasmussen told us recently in an interview."
So, if the Democrats want to drag this process out over tax revenue most Americans believe Congress would spend anyway, they have to hope most Americans don't also believe the Republican argument that increasing taxes at this time will further hamper the economy and stifle job creation. Last Thursday, Paul Bedard at US News (http://politics.usnews.com/news/blogs/washington-whispers/2010/12/2/delaying-tax-vote-could-crash-stock-market.html) reported warnings by market analysts that "(f)ailure by Congress to extend the Bush tax cuts, especially locking in the 15 percent capital gains tax rate, will spark a stock market sell off starting December 15 as investors move to lock in gains at a lower rate than the 20 percent it would jump to next year..."
The pressure on the Democrats to compromise on this issue will continue to mount. Republicans have no incentive to accept the Democratic plan to allow the the tax cuts to expire only for those making over $250,000 per year when they can come back to D.C. in next month in greater numbers. Even as Republicans in the Senate voted unanimously against the House bill Saturday, four Democratic Senators defected to their side. And, as the Assistant Director of Polling for Quinnipiac said in a statement regarding their November 17th poll, “Americans want both sides to compromise, but they want the president to make concessions more than they do congressional Republicans.”
This last statement speaks to another potential danger of Democratic stone-walling- that, even as they try to paint congressional Republicans as the "Party of No" and the "Party of the Rich," those in this lame-duck Congress have already carved out a reputation for themselves as rigid, tone-deaf, free-spending ideologues. That's largely due to the passage of a number of bills by this Congress, such as the health care reform and stimulus bills, that the majority of Americans opposed, and doing so along strictly party lines, with no efforts toward compromise. Dems should be wary of further cementing this reputation for themselves by ignoring the results of the November midterms, to boot.
The Democrats have painted themselves into an ideologial corner on this issue. They have had two years to address the pending expiration of the Bush tax cuts; as I said in November of 2008, then-President-elect Obama needed to inject some certainty into the markets and the broader economy with regards to taxes by saying, "'I have no plans to roll back the Bush tax cuts for the highest-income Americans, nor will I increase the capital gains rate in this current economic environment." "Current economic environment" being the key phrase there- would anyone but a rigid ideologue let our economy linger in uncertainty for two years when all they have to do is assure the people that they know better than to raise taxes on anyone in the midst of a struggling economy?
Clearly, Senator McCaskill doesn't get it when she speaks of extending the Bush tax cuts as 'giving more money to millionaires' rather than not raising taxes on any Americans. Not taking more of what people earn isn't the same as giving, it isn't government's to give- and it's that sort of disconnect in Washington, D.C. that has awakened the "silent majority" in this country. She should tread lightly with that talk, though- lest anyone else conclude that "it really is time for the American people to take up pitchforks."
