The recently passed “compromise” tax bill is a failure of nerve by the Republicans. They’re Chamberlainly leadership agree to 2 years of extension of current income tax rates, and gave up ground on the return of the death tax in return for a large social security tax reduction for one year.
(In a vaguely-related rant, I am so sick and tired of reporters not putting numbers in context. “This will cost taxpayers $50 billion. Ok, over how many years? What percentage of the relevant organization’s budget is this? How much does that come to per taxpayer? etc. The “2%” number being quoted about the payroll tax reduction is actually a big deal to most people–it’s likely to be a few thousand dollars extra for most families. It’s a reduction of your FICA deduction every paycheck by nearly a third. I use this example because knowing this would be of great interest to nearly everyone watching the nightly news. It’s not that the media doesn’t put numbers in context because talking more about numbers would be boring–it’s because they’re (1) apathetically ignorant–they don’t know and don’t want to know what the numbers mean and just report them to fill up time, (2) maliciously stupid–they don’t get economics and they don’t get how to make stories about economics interesting, unless it’s something concrete with a villain, like finding mis-priced items at a grocery store and cross-examining the manager about it, and (3) incurably lazy.)
Back to the tax bill.
Republicans should have demanded, among other things, a complete holiday from FICA taxes and lowering the long-term capital gains rate to zero in lieu of anymore “stimulus” money getting spent. A barely acceptable compromise would have been accepting the status quo on taxes as permanent, and then fighting for more later. Instead, they started from the position that keeping the status quo was wild-eyed right-wing radicalism. This is the establishment colluding, not compromising, to screw the rest of us. Obama needed to look like he was moving reluctantly to the center. The Republicans needed to look like they were getting something done. They colluded to create a shitty deal that raised taxes that nobody wants because what they really both wanted was drama to keep their bases interested and mollified as much as possible.
Both Republicans and Democrats pretended it would be disaster if the tax deal waited 2 weeks. Bullshit–think for 5 seconds about this. It would have been great for the Republicans to pledge to do it their way immediately in January. Can you imagine what would have happened to Obama and IRS power if paychecks had actually been reduced on Jan 15? No way would Obama have let the American people feel this pain, but he’d have looked like a dumbass having to order the IRS to back off.
What businesses want is economic predictability over the long run. The 2 year horizon on this compromise means that businesses will likely continue to “hoard” assets against a rainy day, and individuals with any sense will use their extra money to pay down debt and get pepared for bad times ahead. But the Democrats are already spinning this as the functional equivalent of another “stimulus,” so they can point and say, see, tax cuts didn’t help, did they? The extension of unemployment benefits will prevent at least a point or two drop in the unemployment rate.
I’m starting to really loathe Eric Cantor and Mitch McConnell (and, so far, kinda liking Boehner more than I expected to). I don’t believe for one half second that it was defeated because McConnell herded all the Senate Republicans into the locker room and yelled at them. It was because the RHINOs got so many angry communications from constituents that they ran screaming, and McConnell helped them with cover, just like he’s helping Obama: “I didn’t want to, but they made me do it!”
The Republican leadership in the Senate is still deliberately dragging their feet, temporizing and trying to protect the system from the people. Don’t think for a minute they’re on our side, and don’t let up the pressure on them.
Grassroots pressure is the only thing so far that’s made them behave this well. They’re trying to pretend that they’re going along voluntarily, but cautiously, and they’re increasingly refusing to acknowledge and minimizing the feedback they’re still getting loud and clear from us.
Keep on them. It’s working, even if they won’t admit it.