Democrats Can Lose Debt Fight, Win on Bush Tax Cuts: Ezra Klein
By Ezra Klein Jul 27, 2011 8:00 PM ET
Democrats are going to lose this one. Whatever deal emerges to raise the debt ceiling, we can be pretty sure it won’t include revenue, it won’t include stimulus, and it will let Republicans pocket a trillion dollars or more in cuts without offering anything to Democrats in return.
It’s difficult to see how it could end otherwise. Virtually no Democrats are willing to go past Aug. 2 without raising the debt ceiling. Plenty of Republicans are prepared to blow through the deadline. That’s not a dynamic that lends itself to a deal. That’s a dynamic that lends itself to a ransom.
Yet Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is -- nothing.
In fact, Democrats can just let the Republicans stop them from doing anything. Imagine that Obama and the Democrats simply adopt the recommendations of the Simpson-Bowles/Gang of Six deficit reduction plan -- tax reform that raises $2 trillion over 10 years and cuts rates for everyone. Republicans will almost certainly refuse any plan that raises any taxes on anyone. But if Republicans won’t budge, the Democrats can simply blame them for the gridlock that enables the Bush tax cuts to expire.
This scenario is the inverse of the current debt-ceiling debate, in which inaction will lead to an outcome -- a government default -- that Democrats can’t stomach and Republicans think they can. There is only one thing that could stand in the way of Democrats achieving their revenue goals on the last day of 2012: the Obama administration.
Republicans -- and even some Democrats -- think that the Obama administration lives to collect revenue. The truth is closer to the opposite. Senior administration aides view the expiration of the Bush tax cuts as less of an opportunity than a chore. About four-fifths of the cuts go to households making less than $250,000 a year, and they don’t want to raise taxes on those folks. They don’t like the politics of the issue, either. It’s an article of faith among Democratic strategists that debates on taxes inevitably favor Republicans, allowing Democrats to be hammered from the right and undermined from the left. Many Obama aides would prefer to avoid the debate, which they consider stale and intractable, altogether. They would rather focus on “win the future” issues like infrastructure, education and energy.
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