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McConnell Tossing the Gauntlet on Debt, Taxes and the GOP’s dream of dismantling Social Security and Medicare

by Linda Beale

McConnell Tossing the Gauntlet on Debt, Taxes and the GOP’s dream of dismantling Social Security and Medicare

Pretty much as I predicted, Obama’s failure to go over the fiscal cliff–instead “negotiating” and settling for a half-assed deal that hardly got rid of any of the stupidities of the Bush tax cuts–convinced the Republicans that they can play their brinkmanship game on the debt ceiling debate yet again and perhaps finally get the Democrats to undo their own most significant programs of the last 100 years–Social Security and Medicare.

What we ought to be doing is cutting the military/defense and corporate welfare budgets.  And then increasing taxes–with (1) new layers of tax brackets and tax rates corresponding to our new levels of income inequality, so that multimillionaires are taxed at a higher rate than mere millionaires and billionaires are taxed higher than multimillionaires and (2), at the least, legislation to eliminate the farce of the so-called “carried interest: privileged compensation taxation for LBO managers, who get mostly preferential capital gains for their “services” in buying companies and loading them with debt that makes the managers but not the workers wealthy.

But the Democrats somehow still thought they would get some kind of credit, even from the staunchest of the right-wingers, for being “bipartisan” and working out a “deal” to avoid the “fiscal cliff.”  So they made the ridiculous Bush tax cuts permanent, except for those in the upper-upper crust making three times as much as anybody in the middle class.  And they made the estate tax cut even larger than it was–with a $5.2 million exemption (double for a couple) and only a 40% rate.  Inequality will continue to grow at accelerated rates.  And they extended the litany of truly egregiously stupid corporate tax breaks, like the bonus depreciation/expensing provisions that ultimately permit corporate multinational giants a NEGATIVE effective tax rate (read Cary Brown on the way noneconomic frontloading of expensing amounts to nontaxation under time value of money principles).

The GOP however is currently running deranged.  The party that purports to care about fiscal conservatism only wants to fund more military and make sure that vulnerable elderly don’t get as much in their Social Security checks and have to pay even more for their health care.  McConnell–the MINORITY leader in the Senate–has pronounced his party’s views on the matter:  “The tax issue is finished.”  Brian Knowlton, McConnell Takes Taxes Off the Table in New Talks, New York Times (Jan 6, 2013).

Folks, the stuff about the debt ceiling and the need to cut benefits under Social Security and Medicare is baloney.  The US government isn’t a family–it’s a sovereign regime .  We should learn from the Euro nations that are embroiled in a self-defeating austering regime that leaving citizens suffering while trying to toady to big business is a recipe for disaster.

President Obama had damn well better take Social Security and Medicare off the table as well as any corporate tax reductions.  Get rid of corporate loopholes and let corporate tax revenues INCREASE.  It is the only way left to try to re-balance an economy that is skewed in favor of the uber-rich and the multinational corporations and against ordinary Americans.  Oh, it would also help to move to single-payer single-provider health care and get profit-making out of what should be an important human right.
And are we “spending way too much” anyway, as McConnell declares?  Surely not, since we are only spending on things that the Congress has voted to spend on.  If McConnell wants to spend less, let him propose a spending cut and put it to the vote.  If it fails, then he should vote the taxes or borrowing needing to pay for the spending Congress has legislated.

So, just as my advice in the “fiscal cliff” debate was to go over the cliff, let the Bush tax cuts expire, and then put in place some decent cuts for the REAL middle class (those making less than $100,000 a year), my advice here is to go over the “sequester cliff” and let the across-the-board cuts, with the first real cuts to the military in decades, take place.  We should damp down our military zeal and start to put our money where it will build good schools, good colleges, good public transportation, and ultimately good jobs.
As for the debt ceiling, the best thing would be for the Senate to eliminate the filibuster rule (or at least make the right-wingers do a physical filibuster) and eliminate the debt ceiling.  It is an artifact of a different age, and is meaningless.  Think about this.

1) we have spending bills that require us to spend X dollars
2) we have tax bills that only raise X-Y dollars.
3) we have a governmental obligation to pay the X dollars that we spend to those who provide the goods and services amounting to X dollars.
4) Therefore we have a governmental obligation to borrow the Y dollars that we don’t raise with taxes.
cross popsted with ataxingmatter

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Eh. I’ve changed my mind. [UPDATED, twice!]

I want to remove the post I posted this afternoon called “Harry Reid Throws Down the Gauntlet In Front of … Obama.  Hurray.”  I think Reid has done exactly that, and I think he’ll play a much larger role in the debt ceiling debate and other fiscal-policy debates going forward, as will the other Dem senators.  Obama will have to get Reid’s approval before he caves on anything major.  And I don’t think Reid will approve of any major cave.  So it doesn’t matter that much whether Obama wants to cave.  What matters is the extent to which Reid will let him cave.  

The main point of my post was to say that the pol/pundit/news-analysis crowd seems to have missed this.  But in my post, I also said I’m glad that the agreement was reached, and gave my reasons why I thought it was better than going over the cliff.  I said I was concerned about the effect of failing to extend unemployment insurance, and some other things.  And, although I didn’t say this in my post, I think Boehner would not have allowed an up-or-down vote on the $250,000 income-tax-hike floor, so some compromise probably would have come about then anyway.

But I’ve changed my mind–or, rather, I’m just not sure–that going over the cliff would not have gotten a better result on the Bush tax cuts.  So … apologies to my hero. I agree with Paul Krugman, after all. 
Whew. A return to normalcy.

That said, I don’t think this deal is the end on the issue of the permanence of the Bush tax hikes.  I think that during the upcoming debt ceiling controversy, the public will come to realize that important expenditures will have to be cut, or the deficit reduced less, because of the loss of revenue as a result of the failure to end those tax cuts except for those with incomes above $450,000, and the failure to lower the estate tax floor (a real travesty).  

But while Obama can’t seem to articulate this with any specificity or clarity, others–including Elizabeth Warren–in the new Senate will, I think.  The public is paying attention.  And Obama is no longer the only Democratic game in town.  A recognition of this is what’s been missing from most of the commentary and analysis.  But the next two years, and the 2014 campaign, will be playing out on a Dem-policy home field.  The Republicans lost the home-field advantage when they lost the election.  

To borrow a line from Ann Romney, it’s our turn now.
Should I leave the earlier post, or remove it, readers?


UPDATE:  Oh, no! I’ve changed my mind again!  I just read Matthew Yglesias’s take on all this, and he agrees with my first post.  (Okay, my first post agrees with his take; he posted first.)  And he’s completely convinced me that I was right the first time.

So, now the question is: Should I remove this post?  OMG.  This cliff thing is really stressing me out.

The good news, now that I’ve changed my mind again, is that Yglesias thinks Krugman agrees with my first post, not my second one.


SECOND UPDATE: Wow. A consensus is developing. I was right the first time!

Seriously, E. J. Dionne posted the definitive column on this. He’s right. This is a significant start to a progressive future. That was my immediate reaction. And it’s my final one.

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Harry Reid Throws Down the Gauntlet In Front of … Obama. Hurray. [UPDATED]

Obama pushed forward despite strong reservations expressed by top congressional Democrats — especially Reid — who privately described it as a “bad deal” that would increase Republican leverage in future budget fights. …

Reid figured Democrats could get a more favorable agreement if they waited. When Reid saw an offer that Obama had considered pitching to McConnell on Sunday, which included provisions opposed by Senate Democrats, the majority leader crumpled up the document and tossed it into the burning fireplace of his Capitol office.

The fiscal cliff deal that almost wasn’t, John Bresnahan, Carrie Budoff Brown, Manu Raju and Jake Sherman, Politico, today (H/T Josh Voorhees, Slate)

I’m happy with the ‘cliff’ deal.  That’s because it’s only a start. Here’s what I mean:*

Although he’s been strongly criticized by many liberals for caving on the $250,000 floor for a raise in the income tax rates after saying repeatedly that that was a ‘must’ for him, Obama was, in my opinion, right to sign off on the ultimate deal, in which the rate for incomes above $450,000 will rise to 39.6%–not the earlier-discussed possible compromise of 37% for incomes above $250,000–and in which capital gains taxes also will rise, to 20% for that same group.  

I suspect that a huge factor in Obama’s preference for this deal rather than going over the cliff and forcing an up-or-down House vote on the rate rise on incomes above $250,000 was the issue of the expiration of extended unemployment-compensation benefits for about two million people, the loss of which, whether for a few weeks or permanently, would have been devastating for the people affected and surely would not have helped the economy.  Extension of those benefits may well have been a casualty even of a successful post-cliff bill lowering the floor for the rise in income tax rates.  So might the Earned Income Tax Credit, which of course benefits members of the 47% who Mitt Romney and many other Republican politicians do not think it’s their job to worry about.

So I disagree, for once, with my beloved ideological alter ego, Paul Krugman that it might have been preferable to go over the cliff, even for a few weeks, since little economic damage would have resulted during that brief period.  The damage would have been acute to quite a number of people, if not to the economy as a whole.  That’s important.

Which is not to say that it was reason enough to give away the store.  Which, if the Politico account is accurate, apparently was, as of Sunday, what Obama wanted to do–until Harry Reid reminded him that Senate Democrats would not rubber-stamp his proposal and that approval by the Senate Democrats was as important as approval by the House.  Reid presumably told Obama that he (Reid) would not allow a giveaway bill to be brought to the Senate floor.  Just as Boehner could deny a floor vote on the bill in the House, Reid could do the same in the Senate.  And he would do exactly that on a giveaway of the type that Obama has a habit of offering.  

Among all the commentary about winners and losers from the events and the outcome, there’s been little mention of Reid.  I agree with the consensus about who, among those mentioned in the particular article, won and who lost.  I certainly agree that Biden is a big winner.  I think he’ll be playing a larger role in negotiations and communication with Congress, and that’s good thing.  But I think the negotiations and communications will be with Reid as much as with McConnell and Boehner.  And that’s a really good thing.

For that reason–Harry Reid’s and the other Senate Democrats’ increased importance in negotiations on major fiscal deals–but only for that reason, I don’t share the deep fear that Krugman and many other liberals have right now that Obama will largely hand the advantage to the Republicans.  He may try, just as he did suddenly two weeks ago, when days after saying he wouldn’t budge from the $250,000 tax-rate-increase floor, he spontaneously offered a $400,000 floor and (apparently) a reduced cost of living adjustment for Social Security–which, given his propensity to negotiate with himself rather than requiring the Republicans to negotiate with him, was viewed, by the Republicans and everyone else, as maybe just his opening offer.  

That is the fear: that he will try.  But, slow as he is in picking up on political winds, whether it’s the commandeering by the right of the rhetoric and agenda on economic stimulus issues and national healthcare reform, or, now, anti-rightwing fiscal policy, and respectively responding to or employing those winds, this time he won’t have the luxury of not noticing that Reid and the other Senate Dems are, now, post-election, going to use their enhanced power.  

Krugman ends his blog post today by saying:

Maybe this time will be different. Maybe the Treasury is secretly preparing to invoke the 14th amendment, or issue a trillion-dollar platinum coin, or direct that the whole budget gap be taken out of spending dear to Republicans. But I have to say that I now expect Obama to cave on the ceiling; and so, of course, do the Republicans, which means that the crisis is going to happen.

The only thing that might save this situation is the fact that Obama has to be aware just how much is now riding on his willingness to finally stand up for his side; if he doesn’t, nobody will ever trust him again, and he will go down in history as the wimp who threw it all away.

But even that may not be enough. I guess we’ll see.

I don’t think it matters whether that is enough.  Because it is enough that the post-election power has shifted, to a meaningful extent, from the House Republicans to the Senate Democrats.  They will not dictate the terms.  But neither will the House Republicans, however willing Obama still is to let them.  And the shots Obama calls will be as much with Harry Reid in mind as with John Boehner in mind.  Reid, I trust, will insist.  The Republicans do hold some of the cards in the upcoming debt ceiling game.  Just not enough of the cards to run the table against Harry Reid.

*I added the italicized, boldfaced sentences in light of the comments to this post as originally published.

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