Sunday, December 5, 2010

Expiring Tax Cuts: Deal Or No Deal

Politics is and always has been about negotiations. Lines drawn in the sand are just to test the waters. Both sides know that ultimately you give some to get some. It appears that the trade off is going to be the tax cuts for the wealthy for the extension of the unemployment benefits. 

On Friday, House Democrats mustered sufficient votes to pass a bill that  extended the current tax cuts to the middle class and eliminated the Bush era tax cuts for the wealthy. On Saturday, the Senate Republicans voted unanimously to defeat the Senate version of that bill. The vote was 53 (yes) to 36 (no), seven votes shy of the 60 votes needed to pass the legislation in the Senate.  While Republicans voted in a bloc, four Democrats voted with the Republicans, Senators Russell Feingold of Wisconsin, Joe Manchin of West Virginia, Ben Nelson of Nebraska,  and Jim Webb of Virginia, as did independent Joseph Lieberman of Connecticut.

A second measure that would have extended the tax cuts to include those earning up to $1 million annually also failed to receive the necessary 60 votes to move forward. The vote on the second measure was 53 (yes) to 37(no) with a slightly different crew of Democrats voting with the Republicans--Senators Dick Durbin of Illinois, Tom Harkin of Iowa, Jay Rockefeller of West Virginia and the ever consistent Feingold and Lieberman.

At stake is not only the continuation of the middle class tax cuts, but the Republicans are also holding the extension of unemployment benefits hostage unless they get tax cuts for all. The White House has its own demands--passage of legislation extending the unemployment benefits for millions of people, as well as renewal of expiring tax breaks for lower and middle class wage earners, college students, and businesses that hire the unemployed.

I keep hearing how Obama and the Democrats should stand firm and declare no tax cuts for the wealthy. What then? What happens to the lower class (even if you don't have to pay income tax, there are some cuts for which you may qualify), the middle class and the unemployed who will find themselves with a decrease in revenue? When you have bills to pay to keep a roof over your head and food on the table, politicians having an old west style standoff are not a source of inspiration or admiration.

The Republican Senators aren't going to cave on the extension of unemployment benefits unless they get something that they want, in this case, the extension of the tax cuts for all. They will deny culpability, spinning it to be Obama's fault for being unwilling to compromise on the tax cuts and the public will buy it. I feel like a broken record, but the office of the president has no authority to force Congress to do anything. He influences Congress but he doesn't command Congress. 

Congress is answerable only to us and we seldom get off our collective asses to do anything to let Congress know that we will not accept their behavior. 

Of course Obama can veto the bill that comes to his desk if it contains an extension of tax cuts for the wealthy. Congress has the authority to override that veto but it's unlikely that both chambers would get the votes required to do so. However, it would be an incomplete victory. Any bill that the Republicans sign on to will also include the tax cuts for the middle class as well; veto the bill and taxes for the middle class also increase allowing the Republicans to again blame Obama for failing to keep his campaign promise to not allow an increase in taxes for the middle class.

It all reminds me of that game show hosted by Howie Mandel, the one where the contestants are asked, "Deal or no deal?" To get tax cuts for the people who need them the most, the administration will have to cut a deal with the Republicans to extend the Bush cuts to all. Rumor has it that the president is holding to setting a time limit on the cuts for the wealthy so that they will expire prior to the the tax cuts for the lower and middle class.

I wouldn't want to be in Obama's shoes; no matter what he does he will be condemned by the right and the left. However, Washington will roll on as it always has, playing some shady version of "Deal or No Deal."


Catherine said...

Republicans have power because voters wanted a change but at what cost? Now Republicans are holding the middle class and unemployed hostage for what? so that the rich can have their tax cuts too? And we wonder why most Americans consider the Republican Party to benefit the wealthy, they are proving it now. Keep it up Republicans - you will not be office long. The majority of the American people are middle class and we want to think that politicians are fighting for us, obviously the Republican Party is not!

Bucko (a.k.a., Ken) said...

It is a farce to have all the rhetoric about the deficit, and then have them tout the need to extend the tax cuts.

Sybil said...

As I have said before it is not for me to comment on the US governments way of working...all a bit complicated for wee me !! However I am so so sad as I had thought a wonderful new era was starting when Obama was elected and now it seems as if once more the other side..this time Republicans...will put paid to any improvement for the poorest of the poor..
Love Sybil x

Kyle said...

Sheria, I'm sure Obama and Democrats will eventually extend the tax cuts with a time limit(probably two years) and that will be acceptable to the other side of the isle. I don't like it(just adding more debt and sending money where it doesn't need to go), but it should keep some of the gears moving.