Posted by AzBlueMeanie:
The artificial "fiscal cliff" austerity crisis is "a politically self-inflicted wound," as President Obama described it on Friday. This is not a true "crisis" but one manufactured by an ideologically extreme and dysfunctional Congress.
Nor is this about reducing the federal debt as Tea-Publicans claim. It is about preserving low tax rates for the über rich and preserving rising inequality for the privileged plutocracy in this "new gilded age." If Tea-Publicans were actually serious about reducing debt, they would support raising taxes on the über rich.
President Obama ran for office on protecting the middle-class, and preserving and strengthening social security and Medicare. Vice President Joe Biden explicitly said that social security was off the table. Obama won a mandate to allow tax rates to return to Clinton era levels on the über rich, .i.e., the top two percent. The Clinton era rates are not onerous.
In the course of negotiations over the "fiscal cliff" austerity crisis, President Obama unbelievably traded away his mandate on tax rates for the the über rich, and put "chained CPI" for calculating social security increases on the table. Both of these items should have been non-negotiable based upon the will of the voters in November and his mandate.
Some of the details being leaked to the press today on an eleventh-hour "deal" to avoid the the "fiscal cliff" austerity crisis, from Ezra Klein at the Washington Post, Why the White House thinks its winning the fiscal cliff:
The top tax rate rises to 39.6 percent for individuals making more
than $400,000 and families making more than $450,000. Capital gains and
dividends will be taxed at 20 percent with the same income thresholds.
The Personal Exemption Phaseout (PEP) is set at $250,000 and the
itemized deduction limitation (Pease) kicks in at $300,000. The AMT is
patched permanently. The estate tax would exempt estates up to $10
million and tax them at 40 percent above that.The various business tax credits — R&D, wind, etc — would be
extended through 2013, as would unemployment insurance. The stimulus tax
credits — namely, the expansions of the Earned Income Tax Credit, the
Child Tax Credit, and the college credit — would be extended for five
years, which is hugely important to the White House. The scheduled cuts
to doctors in Medicare would be averted through spending offsets that
neither side considers injurious.
The payroll tax "holiday" will expire as scheduled on January 1. The "deal" does not include a debt ceiling increase. Tea-Publicans want to to hold their hostage to extort demands from Americans next year.
As the [White House] sees it, it sets up a three-part deficit reduction process. Part
one came in 2011, when they agreed to the Budget Control Act, which
included more than a trillion dollars in discretionary spending cuts.
Part two will be this deal, which is $600 billion — and maybe a bit more
— in revenue. And part three is still to come, but any entitlement cuts
that Republicans want will have to be matched by revenues generated
through tax reform. If Republicans want $700 billion in further spending
cuts and the White House insists on $700 billion in tax reform, they’ll
end up with more revenue than in Obama’s final offer to House Speaker
John Boehner.
The sticking point today remains the sequestration, or automatic budget cuts. Tea-Publicans want a suspension of only three months, which would give them a second hostage at the very same time as the federal debt ceiling fight. Democrats reject this obvious cynical ploy.
One problem the White House is having is that their congressional allies
don’t see it the way they do. ”The direction they’re headed is just
absolutely the wrong direction for our country,” said Sen. Tom Harkin, a
Democrat from Iowa, on the Senate floor today. (As the White House sees it, they’re getting 85 percent or 90 percent of
the revenue from [the Senate] bill plus unemployment insurance plus the stimulus
tax credits plus the business extenders. And their bill is permanent,
and it might actually be able to pass the House.)
I have to agree with Senator Tom Harkin (D-Iowa), "no deal is better than a bad deal." Dem Sen. Harkin criticizes possible tax compromise in 'fiscal cliff' talks:
Sen. Tom Harkin (D-Iowa) criticized an emerging "fiscal cliff" deal
on Monday, arguing Democrats were giving up too much on tax rates for
the rich.
Harkin said "no deal is better than a bad deal" in
reference to an agreement that could extend tax rates for households
with annuals income under $450,000.
"This is one Democrat who doesn’t agree with that at all,” Harkin said.
“What
it looks like is, it looks like all of the tax things are going to be
made permanent, but all of the other things that the middle class in
America depend on is extended for one year, maybe two years. I think
that’s grossly unfair. Grossly unfair.”
Harkin argued Democrats were making permanent generous tax rates for
wealthier households even as, in return, they were only winning
temporary extensions of programs that would help the poor and middle
class, such as federal unemployment benefits.
* * *
“We’re going to lock in forever the idea that $450,000 a year is middle
class in America? Need I remind people that at $250,000 a year, that’s
the top 2 percent income earners in America?” Harkin said. “I know the
president keeps saying he wants to protect tax cuts for the middle class
— have we forgotten average income earners in America are making
$25,000, $30,000, $40,000, $60,000 a year?” he said. “That’s the real
middle class in America and they are the ones getting hammered now.”
* * *
Several liberals were critical of reports of these concessions,
arguing on social media that Democrats were giving up too much to get a
deal.
After his floor comments, Harkin stopped short of threatening to filibuster a deal.
"There
might be some extended debate," he told reporters after his floor
comments. He added that it is "not true" that Democrats have as a group
signed off on a $450,000 threshold or an estate tax status quo.
* * *
Some Democrats have argued their party would be better off letting
all of the Bush-era tax rates expire at the end of the year, and then
moving legislation to lower rates on the middle class after Jan. 1.
Harkin
said he would be fine with allowing all of the Bush-era tax cuts to
expire at the end of the night because then tax rates would return to
Clinton-era levels, which were in place when the economy was doing well.
“If
no deal is reached then on the tax side we go back to the taxes that
were enacted under Clinton,” Harkin said. “What’s so bad about that? It
worked pretty darn well. The economy was going well and we were paying
down the deficit and we’ll go back to that tomorrow.”
Paul Krugman captures my feelings today when he says President Obama is The World’s Worst Poker Player:
Many reports in the past hour or two suggesting that Obama is about
to cave on the fiscal cliff — water down his tax demands in return for
some minor Republican concessions — concessions that won’t involve
taking the debt ceiling off the table.
Let’s hope this is wrong.
Is
it really possible that Obama still doesn’t understand that every time
he does this — especially if it comes just a few days after stern
statements about how he won’t give it — it just reinforces the
Republican belief that he can always be bullied into submission? If he
cuts a bad deal on the fiscal cliff today, he more or less guarantees
that just a few weeks from now Republicans will go all out on using the
debt ceiling to extract more concessions.
Ezra Klein gets it exactly right: "But if, as Republicans believe and some Democrats fear, the White House
folds when confronted with the debt ceiling and agrees to big
entitlement cuts in return for few or no revenues, this deal will be
seen as the moment when the White House blinked and traded away the
guaranteed revenue of the fiscal cliff for a lowball offer from the GOP."
There appears to be bipartisan opposition to the "deal" under negotiation. It is not at all certain that there are the votes in either chamber of Congress to pass this bad deal today or New Year's Day. It's best to walk away and go cliff diving at midnight to reset the negotiations.