Sunday, December 05, 2010

The great cave: How Obama and the Democrats have lost the battle over the Bush tax cuts

(For my first two "great cave" posts, see here and here. And make sure to check out Dcap's great post on wealthy senators supporting wealthy Americans at the expense of everyone else from yesterday.) 

Aside from the fact that the Bush tax cuts for the wealthy make absolutely no fiscal sense (and that America needs a far more progressive tax code), what really bothers me about how this has played out -- with the Senate voting yesterday against extending the cuts for the middle class but letting the cuts for the wealthy expire -- is that the Democrats should have been able to win the issue politically. As Ezra Klein wrote the other day (via Jonathan Chait):

It's very important to realize how strong of a hand Democrats had -- and to some degree, have -- on the Bush tax cuts. Right or wrong, the Democrats' original position on this was that the tax cuts for income under $250,000 should be extended, and the tax cuts for income over $250,000 should expire. The public agrees: 49 percent share the Democrats' position, 14 percent want all the tax cuts to go, and 34 percent want to see all the tax cuts extended. Put another way, 63 percent of Americans don't want the tax cuts for the rich extended.

The GOP understood this just fine: Back in July, Rep. Dave Camp, then the ranking Republican on the House Ways and Means Committee, admitted that his party couldn't hold tax cuts for the middle class hostage in order to secure tax cuts for the rich. "I'll probably vote for it myself," he said of the Democrats' proposal. In September, John Boehner joined him. "If the only option I have is to vote for some of those tax reductions," he told Bob Schieffer, "I'll vote for it."

Democrats, it seemed, had won this one. They had the popular position, the president's veto pen and control of the Congress. But they simply refused to carry the ball over the goal line. Instead, they began negotiating with themselves, talking about millionaires' brackets and short-term extensions. Republicans noticed the Democrats' disarray and lost their fatalism: "Incoming House Majority Leader Eric Cantor (R-Va.) said on Bloomberg Television he was ready to instruct GOP members to vote down legislation Democrats plan to bring to the floor that would extend the expiring Bush-era tax cuts only for the middle class."

Now it looks like all the tax cuts will be extended, at least for the moment. But it's a baffling outcome. The structure of the situation favored -- and continues to favor -- the Democrats. No tax cuts pass without their support, and Republicans have previously admitted that their position isn't popular enough to prevail in a standoff. The only thing that's changed is that Republicans have realized Democrats aren't confident enough to enter a standoff. But it didn't have to be this way.

No, it didn't, but here we are, with the Republicans apparently having won by getting what they want, at least for now.

But don't the Democrats still have a chance to prevail -- at least politically? With yesterday's vote, they can now make the case more strongly than ever that Republicans oppose middle-class tax cuts and support tax cuts only when they're for the wealthy. Doesn't this reinforce the perception that the Republican Party is the party of plutocracy and greed? Can't Democrats use this vote against Republicans?

Ah, but they won't, because, as always, they're terrified of the Republicans and of being labelled the pro-tax party. And so they'll cave.

Because if nothing happens and all the Bush tax cuts expire, Republicans will say that the Democrats let them expire and thereby approved a tax increase for all Americans, appealing directly to the middle class even if their interests really lie with the wealthy.

Of course, it wouldn't really be a tax increase, it would be the restoration of pre-Bush sanity, and Democrats could respond by saying that they wanted to extend the tax cuts for the middle class (and, more specifically, for all income below $250,000, including for those who make more than that, that is, including for the rich) but that Republicans blocked them by demanding the extension of the highly unpopular tax cuts for the wealthy.

In other words, the substance of the matter aside, the Democrats could engage the Republicans politically -- and if the Republicans want to play politics, why shouldn't the Democrats?

Chait, alas, is right:

The fact is, blame for failing to extend the popular elements of the Bush tax cuts should be placed on Republicans. They're the ones who won't extend a bill like that without getting something (unpopular) in exchange. Instead, Democrats have simply assumed that they'll get stuck with the blame and there's nothing they can do about it.

I think the sense among liberals that Democratic leaders simply need to get tougher is generally overblown. It's usually not that simple. In this case, it really is. They took a strong hand and threw it away because they assumed in advance they can't win at politics.

Call it what you will -- it's fear, it's cowardice, it's ineptitude, it's losers behaving like losers. Even with a winning issue "handed to them on a jewel-encrusted platinum platter," as I put it the other day, Democrats -- and that includes the White House -- don't seem to have a clue.

Is it any wonder there was an enthusiasm gap in last month's elections?

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  • So the Republicans are holding America hostage by blocking the extension of the tax cut for the middle class and unemployment benefits. I agree this is a winning issue. I think what the Democrats are waiting for is for the Republicans to take control of the House so that they can frame the issues. How do they manage to walk without a limp given that they keep shooting themselves in the foot?

    By Blogger john horse, at 2:32 PM  

  • We knew they were going to cave in they always do. R’s said from the beginning if there is any reconciling it will come from the Dems.
    They think they are in charge and the Dems still don’t have the spine to deal with them. Come on, look at Reid and Obama, pitiful!

    By Blogger jmsjoin, at 4:33 PM  

  • somebody in the leadership didn't want to end the upper-tier tax breaks. let's be realistic here: the democrats can get things done when they have to. ineptitude is only part of the story here.

    By Anonymous teadoust, at 8:32 PM  

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