Wednesday, September 29, 2010

The rich will get their tax cut

If a cable news camera crew were to show up at my door and ask me to go on the record with my prediction regarding the fate of cuts, this is what I would say. The rich are going to get what they want. The Bush tax cuts will be extended. Maybe there will be a little tinkering for PR purposes, but the essence of it will be unchanged. The only real uncertainty I see at this point is whether the tax cuts will be made permanent or merely extended for another decade. The extension will then balloon the deficit giving Republicans and Blue Dogs the cover they need to seriously start dismantling the social safety net.

Why do I think the give-away to the rich will be continued? The decision by Senate Democrats not to go forward with the smaller tax cut package is what makes it inevitable. I see it like this: If the Democrats stand up and pass the smaller package before the election, it will be almost impossible for the next Congress to pass a second tax cut just for the rich. The smaller tax cut gives everyone a cut, even the rich. All income up to a quarter million is covered by the cut. Having given the rich one tax cut, it will be an uphill battle for Republicans and Blue Dogs to argue that the rich deserve a second tax cut. However, if the Democrats cave--as they are doing--and pass nothing before the end of the term, then they face the reality of the tax cut bill being written in a congress with a larger Republican contingent, possibly even a Republican majority in the House. The next Congress simply will not pass a tax cut bill that does not include a give away to the rich.

I do see two possible ways this scenario could be avoided, but the odds of either happening are vanishingly small. One, is that the balance of power stays about the same in both houses. This then is followed by the Democrats suddenly getting orders of magnitude better at playing the PR game, announcing that the game will be the smalled cuts package or no cuts at all, and forcing the Republicans and Blue Dogs to blink first. The other way is that the Democrats push it through during the lame duck session, which would require them to overcome all of the procedural hurdles that the Republicans would throw at them. These are both so unlikely that I feel safe ignoring them.

To me, it's that simple. If the Democrats pass the smaller package before the end of the term, it will be almost impossible for the next Congress to pass a second package just for the rich. If they do not pass it now, it will be almost impossible not to give the rich their bigger cut. The Democrats have mismanaged this issue from the beginning. Now, through inaction, they appear to have decided to completely cave in to the Republicans/Blue Dog position. They do this despite knowing the disastrous long term consequences this decision will have. And they wonder why the base is having trouble ginning up any enthusiasm this fall.

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