Have the Republicans in Congress painted themselves into a corner on taxes? They seem to be in the position of choosing between a number of courses of action, most of which would normally be seen as going against their principles. They may have dealt themselves a losing hand, to put it another way.
Metaphors aside, though, it's hard to see how Republicans are going to escape this dilemma. First, the history: President Barack Obama got a "tax holiday" declared, which cut everyone's payroll (Social Security) taxes by hundreds of dollars. The White House says this amounts to a $1,500 tax cut for an average family, while others use the metric of saving $1,000 for an average worker making $50,000 per year. By any measure, all year long all workers have been getting more money in their paychecks. This tax holiday is about to expire, at the end of this year.
What this means is that, if Congress does not act, taxes are going up substantially for "the 99 percent," starting with the first paycheck everyone gets in January. Republicans -- supposedly the party which never saw a tax cut it didn't love -- have the power to block this action.
Here's where their three losing choices come into play. The Democrats are going to move first, most likely in the Senate. Democrats are going to introduce an extension of the payroll tax holiday for next year, and pay for it with a small surcharge on people making over a million dollars a year. Taxes stay down for everyone not making a cool million, but millionaires will have to pay a tiny bit more, to put it another way.
Republicans can vote this down, if they wish. They will do so by decrying "raising taxes" on "job creators," but Democrats will be out there asking Republicans why they are in favor of a big tax hike on 99.9 percent of American workers, to keep millionaires' taxes low. The dichotomy will be stark: you're either for lower taxes on just about everybody, or you're for lower taxes on the richest of the rich. "Republicans are raising taxes on the middle class by over a thousand bucks a year!" will be the rallying cry for the Democrats. This is bad choice number one for Republicans.
Of course, the Republicans could go along with the Democrats. If enough frightened Republicans cross the aisle, the Democratic plan could pass both the Senate and the House by the Christmas break. The tax cut would be saved, and everyone could go home happy. Except, of course, for all the Republicans who just voted to raise taxes and therefore will be in Grover Norquist's doghouse forevermore. The Tea Party has already shown it is a force to be reckoned with in Republican primaries, and there will still be enough time (in most states) for a primary challenger to take on any apostate Republican senator or representative who "just voted to raise taxes." Bad choice number two for Republicans.
The third bad choice Republicans would have would be to introduce their own legislation which continued the payroll tax holiday, but didn't pay for it. Now, in normal times, this wouldn't be all that contentious. Running a short-term deficit for long-term benefits used to be voted through Congress all the time, even when Republicans were running the place. But these are not normal times, and so if Republicans take this route, then they leave themselves open to attacks from both Democrats and the Tea Party that they are for "increasing the deficit" or "deficit spending."
The only way around this conundrum for Republicans would be to introduce their own bill which extends the payroll tax cut but pays for it by cutting spending elsewhere. But this is going to be pretty tough for them to put together in the next week or so, because they'd have to make up over $100 billion in spending cuts over the next year -- not off in some ten-year distance. Finding that much to cut is going to hurt, to be blunt. It is impossible to cut that much from one year's federal budget without some serious pain. Democrats will likely point this out, and refuse to go along with this plan.
Which brings up a final choice, which is even worse for Republicans -- not doing anything. The effects of this will be immediate. Not only will everyone's taxes go up in January, but unemployment payments will also run out for 2 million people in that month alone (the secondary part of the bill). Democrats will not be shy about letting America know why their taxes are going up, either. It will be such delicious irony for Democrats to hammer Republicans with "Republicans just raised your taxes!" and "Republicans are trying to cause another recession for political reasons!" Which is why this option isn't even in the "bad" category for Republicans, it's truly in the "unthinkable" category.
Republicans have a tough decision to make. They can either fight for millionaires to have low taxes, and by doing so raise taxes on everyone else; fight to raise millionaires' taxes to redistribute this wealth downward; fight to raise the deficit and indulge in deficit spending; fight to slash funding by $100 billion next year for programs Americans like; or do nothing and be blamed for raising taxes.
Democrats, meanwhile, just have to make their case to the American people. Of course, being Democrats, they may fail at attempting to do so. But heading into this legislative tug-of-war, it certainly seems like Democrats have been dealt a much better hand than Republicans. If they do manage to get out there and explain what is going on to the American people in clear and forceful terms, Democrats will have a good shot at making some excellent political hay over the issue, and by doing so, force the Republican Party to splinter enough to get a bill passed by Christmas. Whatever happens, December is going to be an interesting month in Washington, that's for sure.
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Richard (RJ) Eskow: The Long Game: Payroll Taxes, Hostage-Taking, and Social Security
Robert Creamer: Does GOP Really Want to Increase Taxes on the Middle Class?
Many studies have shown that temporary tax cuts don’t alter people’s spending habits because they make financial decisions based on their projected long-term income. http://eng.am/o2tLOH
America needs solutions that focus on the long-term like the Bowles-Simpson plan.
But those that believe in collectivism cannot just come out and say it. Why can't Obama, Pelosi, Boehner and the rest just come out and admit that Social Security is and always has been an inter-generational transfer of wealth? The phrase PONZI Scheme has gotten a bad name over the years, but I think it's time anyone entering the workforce should to look it up.
This should take all of 1.5 seconds (if that) of ANYONE's time, allowing everyone to move on to other things that are just as, if not more so, important.
Just tired of the Games.
I really think this is a likely course, considering the tactics that have been used recently. It's incredibly annoying because it flies in the face of how Congress should work: two groups compromising for the good of the People.
That's really just a tricky way of doing what I called "the third bad option," above, isn't it? Keep the tax cut, but don't pay for it -- that would be the outcome under your scenario, too, I believe.
-CW
In my opinion, that's a big difference.
What did Ronald Reagan do when he was faced with a recession in 1981-1982? He signed the largest tax history right in the middle of the recession (a tax hike that included raising marginal rates on corporations making over 1 million to 51%) and then passed a MASSIVE stimulus package through the defense department and infrastructure projects. He continued to raise taxes over and over again throughout his presidency as he increased defense spending to stimulate the economy.
It's funny how the GOP still tries to use the credo that the government doesn't create jobs, when that was exactly how most of the jobs were created under Reagan. (or does it not count when the government pays the private entity to hire people to do a job????).
Unfortunately, the GOP has somehow blacked out on most of Reagan's record and now finds itself stuck unable to
Um, exactly what were you clarifying, there? The bill Dems will push in the Senate specifically raises taxes only on those making over a million. Not $250K.
-CW
That is a very interesting take on it. You could very well be right. The amusing thing, to me, is that Grover Norquist has been exhibiting doublethink on the issue. Doing nothing and allowing the Bush tax cuts to expire, according to him, is "raising taxes." Doing nothing and allowing the SS tax cut to expire is, again according to him, "not raising taxes." Interesting squared circle, that....
-CW
Anyhow, I'm voting for the 4th option - do nothing. When there are multiple bad decisions and a room full of legislators, do nothing is always the safest prediction. More so during the Holidays, when do nothing is the National Pastime for anybody not working in retail. Worst option, easiest lift.
Do nothing will be disguised as something by blitzing the cable shows and maybe some direct marking. Flags will be waved, God will be invoked.
Well, thank you for the kind words! I am pleased that someone else shared my frustration with the MSM during the Libya campaign -- and their inability to provide a simple freakin' map during a war. What has wartime reporting come to, one wonders.
Anyway, I wouldn't bet on doing nothing, myself, because Harry Reid actually has a pretty good record of getting legislation passed in December, mostly by threatening to shorten congressional vacations. So we'll see... not saying it'll happen this time around, but there's more of a chance of it than you might ordinarily think, that's all.
-CW
A worker making 1 million a year or a worker making 30,000 a year?
Which would have a more beneficial effect on the economy?
Which increases consummer demand from tax cuts to people making less than 50,000 a year or tax cuts for people making 1 million a year.
The GOP method cut taxes for the rich ignore the consummer demand in the equation.
I have been wondering why Democrats don't latch onto the label of "demand side" economics, to counter the well-worn "supply side" mantra from the other side. You just made a perfect argument for this. Businesses expand (and hire more people) when demand goes up. Demand goes up when consumers have more money to spend. It's a pretty simple equation, and I am left wondering why I haven't seen any Democrats out there making this argument.
-CW
the reason is the demand side sounds to much like directed and Directed economies don't do well as you are picking winners and losers. Also most people don't like being told what to do. A better one would be consumer driven economy which is what works best.