Charles Ellison
+ FollowTax Cut Debate Cutting In Lame Duck Session
As Democrats head into their first post-election week squabbling over leadership gigs amid a boiling stew of intra-party racial tensions, the White House is on the sideline, worried about the first big battle of the new political environment: tax cuts.
It’s also the first major political test of wills between an embattled President Barack Obama, seeking to regain his footing, and an emboldened House Republican majority seeking the final break in his Achilles heel.
Embedded within the tax cut debate is a troubling political calculus, as the GOP is eager to unleash its threat of a 61-plus seats gained and a majority in the House, 19 state legislatures under Republican control and 29 governors all poised to provide everything from grassroots-level back-up to redistricting power.
And with tax cuts being the sacred cow of Republican policy, conservative stalwarts are hopeful for a symbolic legislative win.
While some on the left were worried that Obama would compromise on the tax cut issue without a fight when signs of backpedaling leaked from the White House staff a few days ago, the president stated emphatically from Japan on Friday that he remains firmly in favor of only giving tax cuts to those who earn less than $250,000. Other senior Democrats like Sen. Chuck Schumer (D-NY) said they favored raising the tax cut limit to the $1 million. Under a compromise plan, tax cuts would remain for those earning under $1 million while they would expire for “millionaires and billionaires.”
“It would be much better to raise the limit to a million dollars,” said Schumer on CBS’ Face the Nation. “We have a big deficit problem. We have a big jobs problem. And I think that’s a good compromise.”
Some Republicans seem open to the idea.
President George W. Bush pushed a wide range of tax cuts and credits that were eventually enacted in 2001 and 2003, with a focus on relieving the tax burden on individuals earning $250,000 or more.
The Bush administration sought a two-pronged approach, one political and the other policy. Keep the base alive and mobilized for a second-term bid while providing a money cushion for small businesses in an effort to encourage both spending and hiring.
The cuts would expire at the end of 2010, long after Bush’s last term and midway through the first term of the current president faced with the difficult choice of letting it go.
“I believe it is important to protect tax cuts on the first $250,000 for every American and would consider increasing the income level to $300,000 or $500,000,” argues Philadelphia-area Rep. Alyson Schwartz (D-Pa.) “However, in order to be fiscally responsible and reduce our deficit, we can’t afford to extend tax cuts for the richest 1 percent of Americans.”
But, conservative economists argue the problem won’t just impact high-income earners.
“Supporters of a tax increase argue that the ‘rich’ were the primary beneficiaries of the original tax cuts and that an increase now would right that wrong,” writes Steven R. Cunningham of the American Institute for Economic Research. “The problem with such claims is that allowing the tax cuts to expire would raise the rates on the highest-income earners by only about 13 percent. But they also would increase taxes on the lowest-income earners by 50 percent.”
It’s an issue weighing heavily on the Obama administration as it must decide how to rein in a federal deficit nearing the $2 trillion mark and an overall national debt of $14 trillion.
The stakes rose higher as the president’s own bi-partisan National Debt Commission proposed deep cuts amounting to $4 trillion over 10 years, including massive draw-downs in Social Security and Medicare.
While critics on the left lambasted Debt Commission co-chairs Erskine Bowles (D), a former Clinton White House Chief of Staff, and former senator Alan Simpson (R), the right embraced their recommendations as the fiscal austerity they’ve been wanting for some time.
However, conservatives also have their disagreements with the Debt Commission co-chairs due to proposed tax hikes.
That adds an uncomfortable political element to the impending tax cut debate. Newly-minted House Speaker-designate John Boehner (R-Ohio) won’t compromise; Senate Minority Leader Mitch McConnell (R-Ky.) — still smarting over his party’s failure to give him a majority — wants the whole trifecta of conservative policy goods: tax cuts, health-care repeal and debt control. Some observers say they don’t have a choice, pointing to the threat of tea party insurgents taking them down in nasty primaries.
The president is caught in the middle.
“We have to deal with the world as we find it,” said White House senior political advisor David Axelrod during a telling Huffington Post interview, contradicting the administration’s resistance to extending Bush-era tax cuts just two months ago. Axelrod, however, began an about face on those statements as he later indicated the President’s unwillingness to extend them.
Dealing with that world means moving ahead with $700 billion in tax cuts, the cost of keeping cuts in place for those who make over $250,000 for a decade, which will add to a ballooning federal deficit. The White House, since Obama stood firm on his promise to keep tax cuts for those who earn under $250,000, will have to explain how it’s going to cut debt while extending measures that expand it.
Democrats in the House, sore from the Nov. 2 losses, aren’t feeling the humbled White House position.
“The world as we find it is a bunch of Republicans not willing to cut any deals,” said a Democratic aide speaking on condition of anonymity. “This licking-the-paw routine is a bit embarrassing.”
But, GOP leadership on the Hill faces its own set of problems as tea party Republicans flex political muscle, testing the waters to see how far they can push through policy preferences. Boehner was able to avoid an ugly battle for House Republican Conference Chair by forcing tea party Caucus founder Rep. Michelle Bachmann’s (R-MN) hand when she announced her intention to run for the spot reserved for Texas conservative Rep. Jeb Hensarling (R).
Bachmann, beating her political chest, claimed she “put that gavel in Boehner’s hands,” referring to the critical role tea party activists played in raising funds and galvanizing the Republican base.
And on the Senate side, firebrand Senator-elect Rand Paul (R-Ky.) is openly toying with the idea of a tea party Senate caucus version, pushing his mantra of debt reduction at all costs.
“This is something we worried about long before the wins,” lamented one well-placed Republican operative too close to leadership to speak officially. “It’s going to be a real zoo.”
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2 Responses to Tax Cut Debate Cutting In Lame Duck Session
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Pingback: On tax cuts, a potential deal begins to take shape – Los Angeles Times | Conservatives for America
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The whole idea of a lame duck session is a bit ridiculous. In most cases, as with this year's session, a completely opposite party will be taking over Congress in less than two months. Right now, the Democrats will be aiming to get as many bills passed in their favor before more Republicans take over in January. Either way, it will be interesting to see what political implications come about when session is over.