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Opinion: The Senate Let Bush Tax Cuts Expire and All We Got Was This Lousy Economy

Thursday, July 26, 2012 - 10:47 AM

Senate Democrats hold a press conference after a 54-45 vote to let the Bush tax cuts expire for people with income over $250,000 a year. (Getty)

Virginia Democratic Senator Jim Webb and Independent Joe Lieberman were right to vote against President Obama's political play to allow the tax cuts for those making more than $250,000 a year to expire in a few months.

Unfortunately, Webb and Lieberman were the only Senators who caucus with Democrats to vote against the bill. There should have been more. The Senate narrowly approved President Obama's proposal on Wednesday.

It's clear as day that this is really a political play by the Obama campaign, just like how the Republican-controlled House keeps passing repeals for the health care reform. Neither have any chance of passing; yet while Rome burns, the two major parties grandstand rather than push for potentially passable legislation that could help our country dodge bullets we know are coming. Patricia Murphy aptly lamented these "dueling fools' errands" over at The Daily Beast:

...official Washington has become little more than a backdrop for partisan campaign commercials, a land of make believe where bills never need to pass, press conferences substitute for negotiations, and both parties’ behavior would be comical if the problems facing the country were not so serious.

She's spot on. There are, in fact, some ongoing behind-the-scenes talks that are working on a compromise package based on an updated version of the Fiscal Commission's recommendations, but for the most part the only "work" getting done in Washington right now is that of of spinmeisters and partisan pugilists. Camp blue thinks this will play well in the polls, and they might be right. It also might be the opening salvo in negotiations to avoid the upcoming "fiscal cliff."

Bully for them. That doesn't make it good policy. Nor does it accomplish anything but get us a few days closer to economic disaster (again) without charting a course to avoid said cliff.

Don't get me wrong: I think taxes on people at that income level do need to go up, but as Joe Lieberman said on the issue, it's just "not what we need now." The kicker is the "now" part.

Senator Webb doesn't want to raise taxes on regular income at all, but would support tax increases on capital gains and dividends. I'm all for that as well, but doing any of this on its own would only make the serious, long-term tax reforms we really need more difficult to pass.

Lieberman gets right to to the heart of it in this quote from Politico:

"It’s not that I don’t think we ought to raise taxes on people that make more money,” Lieberman told POLITICO. “To me, we ought to be focused on achieving a bipartisan, long-term debt elimination agreement. And that tax reform and tax increases would be part of it. I don’t want to pick it off piece by piece."

Obama is trying to have his cake and eat it too. He knows there is no way this sort of thing passes right now. Like the House Republicans, he's only interested in scoring political points. If he really cared about this sort of thing, he would have gotten behind the Fiscal Commission's recommendations when it actually had a chance to pass during the 2010 lame duck session. I hammer this home at almost every chance I get, given how so many have been duped into thinking that Obama actually cares about the deficit.

Obama made sure that the Fiscal Commission's recommendations never got to the floor of Congress, by requiring it garner far more than even a super-majority to do so. He showed that he has the ability to use the bully pulpit to push important legislation during the run-up to the passage of health care reform. Yet he chose to sit back in early 2011, allowing the momentum of Simpson-Bowles to subside long enough for the far right to regroup, then push back against John Boehner's efforts to sell the 'Grand Compromise' to his caucus. And since then, Obama's continued to stay on the sidelines, as the 'Gang of Six' has been toiling to put together a package for long-term fiscal sanity that might actually have a shot of passing.

Both sides blow hot air about wanting to avoid the 'fiscal cliff' coming later this year, but then they follow that up with hyper-partisan grandstanding, often masquerading as legislation that has no chance of passing. All the while, excellent legislation that does exactly what our country needs—short term stimulus, phased-in spending cuts over several years to avoid harming near-term economic growth, cutting out tax loophole, simplifying the tax code and lowering rates across the board, among other things—languishes on the shelf.

Michael Gerson really nailed it:

The president has responded to a severe, continuing labor market slump with a four-year-old, marginally counterproductive tax increase proposal. His current economic agenda has little relevance to anything except his current political requirements: picking a political fight on tax-code equity to distract attention from his economic stewardship. It is the triumph of tactics and the surrender of seriousness.

Allowing the Bush tax cuts to expire for those making over $250,000 a year is not what the economy needs right now. If anything, it'll hinder it, although probably not nearly as much as the Republicans would like us to believe. Calling it a "surrender of seriousness" makes a lot of sense, but more than that, these are smoke signals to the American people that our sitting President is perfectly fine with playing political games right up until we get to the edge of economic calamity—again. How many times are we going to come to some sort of cliff like this, entirely a product of political ineffectiveness, before we end up slipping over the edge?

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Comments [9]

kevin

How would it hinder it? Do people sincerely believe that If i make $275,000 per year, and i pay 36% on that $25,000 today, that paying the extra $750 from the rate raising to 39% would have any impact on what I spend on a day to day basis?

I'm sorry - but that's completely false. It's $750 less that would be in my Citibank savings account this year. That's all.

Break it down mathematically and you'll see that arguing i would negatively impact the economy is ludicrous.

Jul. 27 2012 11:24 PM
Alan MacDonald from Sanford, Maine

"Fiscal Cliff" is another Frank Luntz scare and confuse term like "death tax" etc, just made to scare the shit out of ill-informed people and gutless politicians and to effect a continuation of the 'piss-up-stream' movement of wealth from the 99% to the ruling elite 1% --- who constitute a virtual dual-party 'Vichy' faux-democratic facade of government driven by a disguised global Empire, much as the Nazi Empire used a crude and single-party 'Vichy' facade of phony government slugs (including Petain) to try to disguise the Nazi Empire's own elite rule in France c. 1940.

These tricks of the better disguised 21st century global Empire today and the political pimps and whores that the Empire controls like puppets is what this 'game' of threats, fears, and looting is all about ---- or as Nobel economist George Akerlof exposed as early as 2001 during the faux-Emperorship of shrub Bush, "this is not normal government economic policy, but rather a form of looting".

All serious economists understand that this is all about the 1% global elite corporate/financial/militarist Empire merely trying to hide its own massive global looting and beggaring of the masses through austerity programs world-wide, while giving their political puppets some fig leaves to cover their asses while the Empire loots average people.

Best luck and love to the fast evolving new "Occupy Empire" educational and revolutionary movement.

Liberty, democracy, justice, and equality
Over
Violent/Vichy
Empire,

Alan MacDonald
Sanford, Maine

Jul. 27 2012 03:30 PM
Solomon Kleinsmith from Omaha, NE

@Osborne - "I appreciate the sentiment of your article, but i have to say that is just reads as naive. We are in the middle of an election year. The political parties representing us in Washington are polarized. Nothing is going to get done. NOTHING!"

It's a bit strange to have you say I'm naive... then repeat the core message of the post. Are you calling yourself naive too, or do you really not see that this is what I was saying?

Yes, my attack is on the system that we have. I will continue to attack it, because it's one of the biggest root problems we have in our government.

--

@DfromCLE - Spot on. The Political Class Baby Boomers have shown time and time again that their follow up to the Greatest Generation is the Selfish Generation. Whether they're spending more money than they have, or cutting taxes we can't afford to cut, they're all about stealing from the future to pay for what they can't afford now.

--

@Adam Dawson - Thank you sir.

--

@listener - "The moral equivalence argument doesn't work."

You're right, which is why I didn't make one. Saying both sides are bad is not the same as saying they're equivalently so. They're both off the deep end, corrupt and irresponsible, but in different ways, and to different degrees depending on the issue.

Obama and the democrats made a HUGE mistake in pushing the individual mandate. The rest of the ACA health care reforms are quite popular, but they stole money we needed to keep Medicare solvent and pushed the unpopular individual mandate to pay for a large portion of it, and that choice bit them in the arse in 2010, and continues to weigh them down.

You're also right that the democrats haven't done their duty to pass a budget. No Labels is spot on with it's suggestion that Congress shouldn't get paid unless they pass a budget on time. But it's a joke to pretend like the budget proposals that the House GOP passed were serious. They're as serious as the competing "legislation"/propaganda devices that the two parties pushed in the Senate that I talk about above.

Jul. 27 2012 02:36 AM
Eugene Patrick Devany from Massapequa Park, NY

For Some Depression is Better than Real Tax Reform

The top 10% wealth holders gained $3,558 billion - six times the amount of wealth owned by the bottom 50% ($584 billion), between 1995 and 2010.

The tax code has made most people poorer over the last 20 years (by 70%) but has been very good to those at the top.

The Wealth Gap in the U.S. has not been this bad since the Great Depression of 1929 when unemployment was also as bad.

Payroll taxes (which did not exist in 1929) are the biggest obstacle to job creation because they reduce consumer demand (7 ½% employee share) and impose a large per worker tax on business (7 ½% employer share).

After the great depression top income tax rates were increased from 24% to: 63%, 79%, 81%, 88% and finally to 94% in 1944 in order to correct the economic imbalance. [Most of the rich cared than].

A net wealth tax creates a healthy negative reinforcement (“use it or lose it”) to use assets for productive business investments (as opposed to opening a foreign bank account, investing in precious metals, hording assets of any type, etc.)

A 2% tax on individual net wealth (excluding $15,000 cash and retirements funds) could replace payroll taxes and create millions of jobs without government spending.

Read more at www.TaxNetWealth.com

Jul. 26 2012 01:36 PM
Rohinnton Irani

House Minority Leader Nancy Pelosi (D-CA) :

“Yesterday was a great day. The United States Senate voted to give 100 percent of Americans — everyone in this country — a tax cut. We all agree that’s a good idea. The only thing standing in the way of a middle income tax cut is the House Republicans,” she told reporters. “We call upon our Republican colleagues to bring this bill to the floor today.”.
--------------------------​--------------------------​--------------------------​--------------------------​--------------------------​-
But....But....Nancy, We CAN'T MAKE The RICH pay thier FAIR SHARE of TAXES?

I mean Muffy & Buffy WON'T get thier Matching Pair of Rollls Royce's!

Oh The HUMANITY!
--------------------------​--------------------------​--------------------------​--------------------------​-------------------------
Oh by the way, speaking of TAXES? Oh Willard, have YOU SHOWED us what YOU are HIDING?, in YOUR TAX RETURNS & OVERSEAS' ACCOUNTS?

Just Checking.

4 MORE YEARS!

Jul. 26 2012 01:22 PM
Osborne

Solomon,
I appreciate the sentiment of your article, but i have to say that is just reads as naive. We are in the middle of an election year. The political parties representing us in Washington are polarized. Nothing is going to get done. NOTHING! Both parties are defining themselves, and their opponents, to help voters make their decisions in the fall. This is the world we live in. After the election there will be six months, maybe nine if we are lucky, where governing will be possible. (Note however, the Republicans turned obstructionist by March 2009 last go round)

In other words, your gripe is with the system we have. The election cycle comes around too frequently for any legislating to get done. It would be nice if members of Congress and the President could meet and intelligently work together. Unfortunately this is not possible in the current political climate. Voters see compromise as weakness. And seeing how legislators are constantly required to go before those voters, there is no chance for them to find middle ground, much less put together a "bipartisan, long-term debt elimination agreement."

I will add, that i largely blame the media for this conundrum. The story is always about who won the latest hill vote or the latest gaffe or the very politics grinding things to a halt. Why not repeatedly hammer home simple facts: anybody who is talking about deficit reduction and also proposing tax cuts is an idiot.

Stepping off soapbox

Jul. 26 2012 12:27 PM
DfromCLE

This raises taxes on less than 1% of small businesses and only sallary over 250k per year. The first 250k is taxed like everyone elses... only money over 250k is taxed at higher rates.

Now that we have that info out of the way being from the younger generation, raise taxes to pay for the boomers and their retirement i now have to pay for. For 30+ years we saw this coming and they did nothing with entitlements, the military industrial complex, Big Pharma and oil companies before they pulled up the ladder behind them. Until something is fixed with their own entitlements they just push the debt onto the youngest generations but take ours away so lets tax them more. Even if Obama wasn't elected the debt would still be 15 trillion. WAY TO GO BOOMERS!

Jul. 26 2012 11:56 AM
Adam Dawson from Washington, DC

Good piece, Solomon.

Jul. 26 2012 11:31 AM
listener

The moral equivalence argument doesn't work.

The latest effort of the Republican-controlled House to repeal Obamacare may have narrowly passed in the US Senate if it were allowed to come to a vote since many Democrat Senators in an election year are distancing themselves from the unpopular new TAX which is not what they voted for in 2010.
If the Congress doesn't confront the President on an unpopular tax than who does?

Raising taxes on job creators and their businesses would discourage hiring and just be the opening salvo for higher taxes for everybody which is why the House would sensibly reject it.

Playing politics is what Pelosi and Reid did when they nearly quadrupled the deficit and then refused to raise the debt ceiling and taxes when they controlled the Congress. They deliberately waited until January 2011 to start demanding the Republicans vote to raise taxes to pay for the increased debt the Democrats created.
For political reasons Pelosi did not pass a budget in 2010 and Reid still hasn't passed a budget in over three years. The Republican House passed a budget and several long term economic plans.

It may be fashionable to call for a pox on both their houses but recent facts contradict that condemnation.

Jul. 26 2012 11:21 AM

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