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Lenny Goldberg Headshot

Progressives Should Not Complain About the Fiscal Cliff Deal

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As a survivor of many middle-of-the-night budget deals in the California legislature, where Republicans held the balance of power and the Democrats made some truly awful deals, I take issue with fellow progressives (e.g. MoveOn) that the fiscal cliff deal is a weak sell-out. In fact, it contains no really objectionable features, nothing of a qualitative nature that could be called a setback to progressive principles, and makes some major gains.

Start with the complaint that it doesn't tax the rich enough. In polling in California prior to taxing the rich, voters identified the wealthy at more like $500,000 than at $250,000. The agreement in the fiscal cliff at $400,000 is essentially congruent with the 1 percent. Since it's the 1 percent who have concentrated the millions and billions of income and assets in their hands, the fact that the deal does not increase tax rates on the professionals, managers, and business owners who make up the 250,000-450,000 category is hardly a violation of progressive principle.

The only reason we should care about not increasing rates on that group is if we were deficit hawks which, as Paul Krugman and others have definitively demonstrated, we most decidedly should not be. So while presumably longer-term fiscal stability means increasing taxes on the privileged as well as the rich, the short-term result of restoring the Clinton rates on the 1 percent is hardly a sell-out.

And there are many positives: the necessary extension of unemployment benefits, a permanent fix to the AMT (yay! we did this in California years ago), phasing out deductions for the privileged ($250,000), and various extensions of fair tax provisions (child credit, eitc particularly, plus tax forgiveness for homeowner short sales).

Could they have gotten more on the estate tax? I wish they had, and even more so on dividends and capital gains. But that gets to the issue of second-guessing the negotiations, which is easy to do but hard to really know without being there. Unfortunately far too many Democrats (going back to Clinton) have bought into the capital gains/capital formation theology and estate tax myths as well. In California, many bad deals occurred because Democrats pushed them, not because of caving to the Republicans. Perhaps, as the critics say, Obama and Biden are weak negotiators, but there are more than two sides to this table, and weakness on the Democrat side as well.

In any case, those complaints on rates and brackets are matters of degree rather than kind. We need to truly resist the qualitative changes such as increasing the Medicare eligibility age as a deep violation of progressive principles, as a capitulation to ideology of the right, and as stupid policy. But they didn't happen.

Maybe in the coming showdown, the strategy of a deal now and fighting again later will have proved to be faulty and the second-guessers right. But on the substance, progressives should not cry "sellout" when the rich have had a permanent tax increase and the unemployed and middle-class are protected. We should cry wolf only when the right-wing wolf is really at the door of the poor and the middle class.