When one uses the term "bazaar", it brings forth the image of a Mideast market place where the buyer and seller haggle back and forth over the price of a whatever. That's what is going on these days in Washington as President Obama and congressional Democrats haggle with the GOP leadership over what can be accomplished during the remaining days of this special session of Congress. From the vantage point of this blogger, it certainly appears that the Republicans are driving a hard bargain and are likely to get close to the price they want.
The GOP edge came with the election victories a month ago with the new Congress starting in January shifting to Republican control of the House and a diminished Democratic majority in the Senate. The Republicans were further aided on Tuesday when Obama did something of a mea culpa (to the chagrin of this blogger) when he said that maybe in the past he hadn't reached out to the GOP legislators as much as he should have. All of this means the Democrats have to salvage what they can from their agenda within boundaries set by the Republicans.
Returning to the bazaar analogy, there are actually two levels of haggling. One is which specific pieces of legislation can be considered in the short time remaining in the special session. And, two, haggling over the specifics for each of the pieces that may be passed. The GOP leadership has already taken level one haggling one step further in saying that nothing else will be considered until there is final agreement about the Bush tax cuts and, in the absence of any appropriations, continued funding of the government. So whatever legislation the Democrats want is being held hostage until the Republicans get what they want. The Republicans have so completely taken over agenda setting that it's hard to believe Democrats control the Congress.
Other big issues for Obama and the Democrats are: 1) extension of benefits for about 2 million unemployed workers whose checks stopped on November 30 or will stop on December 31; and 2) Senate ratification of the nuclear arms reduction treaty with Russia. Obama and many of his congressional supporters would also like to repeal the Don't Ask Don't Tell (DADT) policy on military recruiting and Senate Majority Leader Harry Reid keeps making utterances about passing immigration reform legislation this year. The reality is that neither repeal of DADT nor immigration reform will go anywhere. Now for a look at the partisan haggling at level two, the specifics of items that have better prospects.
Political posturing over the tax issues has been going on for months. The very costly income tax cuts enacted under George W. Bush are due to expire on December 31. Obama and a majority of congressional Democrats had originally taken a strong position on retaining middle income cuts but against continuing tax cuts for households earning above $250,000 a year. The end game, being played on Republican terms, now seems to have gotten down to simply how long to extend the cuts for all income brackets--1, 2, or 3 years. While the upper income cuts have been the featured aspect of the tax issue, there are some other tax matters still unresolved and it remains to be seen if these might become a part of any tax package. It's difficult to imagine that a tax bill can make its way through Congress without efforts to turn it into a Christmas tree ('tis the season) for other pet tax-related ideas.
Although it may be too big to deal with in the short time remaining, one involves another tax treatment of the wealthy -- the estate tax. Prior to this year the federal estate tax exempted $3.5 million of an estate with anything above that taxed at 45 percent. For 2010 there has been no federal estate tax at all but beginning on January 1, the exemption drops to $1 million and the rate goes up to 55 percent. It is difficult to believe that the GOP will leave it at that. Either they will try to squeeze a better deal for the wealthy into the current income tax negotiations, or it will certainly be a priority in the new Congress. Perhaps the estate tax will be part of the haggling, something to be bargained over in exchange for extension of unemployment benefits where a big issue is how to pay for it -- add the $12+ billion to the deficit (Democrats) or cut spending by an equal amount (Republicans).
That leaves the arms reduction agreement, on Obama's "must" list, which appeared to be dead about two weeks ago when GOP Senator John Kyl, a key player on the issue, said the treaty should be held over until next year. In the past few days, however, prospects have improved for action this year as more Republicans seem to be shifting toward ratification during the special session as the Obama administration moved to allay their stated concerns over nuclear weapon modernization and development of an anti-missile system.
In sum, the haggling is still going on but the bazaar will soon be closing and buyer and seller are being forced to come to a final price. And that price seems to clearly favor the Republicans because when the bazaar reopens in January, the political balance between the hagglers will have changed significantly.
Yesterday, I think it was, the Post had a piece by Boehner and McConnell stating what they claimed "the voters" want. Several times they declare the voters want all citizens to keep the Bush tax cuts. How they manage to divine this message is beyond me but they have succeeded often by making something seem true by simply repeating it often and in chorus--a tactic the Democrats are far less skilled in. I wonder why the $250,000 cut-off mark seems sacrosanct. Couldn't they compromise on $3 or 4 or 500,000 rather than or in addition to a temporary extension of 1 or 2 or 3 years? It seems totally hypocritical to deny extending unemployment benefits, which do directly benefit the economy and retain jobs (because of the spending of those benefits, which keeps other people in their jobs) on the basis of further increasing the deficit, while demanding continued tax cuts for the rich, which will increase the deficit even more.
ReplyDeleteYour blog leads me to speculate that Kyle and company's objection to START may be a clever empty quid invented to get a pro quo on taxes for the rich out of the Democrats.
And according to a Pew Research poll* done right after the election, the Boehner-McConnell claim that "voters" want the tax cuts to continue for everyone is patently false. Among all voters, only 39% think the cuts should continue for everyone, including rich people. It's only a majority of REPUBLICAN voters who favor the wealthiest Americans retaining their tax cuts. We are left to conclude that McConnell and Boehner use the term "voters" to mean only those who vote Republican.
ReplyDelete*http://pewresearch.org/pubs/1789/2010-midterm-elections-exit-poll-analysis
Believe it was Hitler who said if you tell a lie big enough, loud enough, and often enough, people will believe it. That is what the Republicans have been doing for the last two years in attacking the stimulus package and the health care reform. To make that more contemporary, just keep pumping out what John Boehner calls "chicken crap". Also, and both parties do it, if they win big enough, they claim a mandate to do this or that or whatever it is they want to do.
ReplyDeleteIt has been my belief for some time that the Democrats should have set the income mark at $1 million so they could accurately say that the GOP only cares about millionaires. Also, if you live in cities like New York, Washington, San Francisco, or Boston, $250,000 is hardly an income of the rich. Instead Obama and the Dems simply based the issue on current income brackets instead of creating a new bracket at $1 million.
I don't read the Kyl stand on the weapons treaty the same way. There is more than enough Republican togetherness to get close to what they want on taxes. Believe he was just using his position on the Foreign Relations committee to flex his muscles and make his contribution to setting the Republic agenda for the special session, as well as getting some things he wanted into weapons modernization.
On your second comment, a poll also found that 44 percent were in favor of increased taxes for those above $250,000.
One of the truisms of politics is that the vast majority of people don;t cast their vote based on one or two issues, or even issues at all. Rather, they have a "feeling" about a candidate and the general political and economic environment and vote accordingly. That's why the Tea Party was so successful in shaping public opinion; they just packaged the rhetoric.
Wow Charley, you beat me to the punch in your comment. I want to know who came up with $250,000 and why? I was wondering why that would be considered to be "rich". My comment was going to be that everything is relative and that $250,000 wouldn't go very far if you're living in California, New York, Chicago - i.e. high cost of living areas (this is where you beat me to the punch). And how does whoever set the amount know that that is "rich". What about families with a mortgage, car payments, and kids heading to or already in college? And maybe they're also helping to support extended family. What about small businesses that are using that $250,000 to support their own families, plus pay employees, plus trying to put enough money back into their own business to keep it going? Yes, this is leading into the small business aspect, but it is the small businesses that keep a lot of people employed so it doesn't make much sense to me to increase taxes on them in the middle of a bad recession with high unemployment.
ReplyDeleteWhy does a slight eax increase cost you $200 and a substantial tax cut save you thirty cents? -- Peg Bracken
addendum - and what about those same people above who have all the above expenses and also need to try to save some of that income for their retirement, as lets face it, how much confidence can we have in social security in the long run.
ReplyDeleteBelieve you can make the case for having a $1 million bracket based on high cost of living in some areas, as well as a general case that $250,000 does not put one in the rich class. But some of the costs you mention are costs of choice, such as the price of the car you choose and the payments, and the college you send your kids to. As to small business, that seems to be in a different category since the tax brackets being fought over are for personal income tax, not for small businesses which have their own set of rules about re-investment, tax breaks for hiring new workers, etc.
ReplyDeletePart of your addendum fits the general statement above. Putting aside money for retirement adds to the problem of trying to define the rich at $250,000. Putting money into a 401k definitely cuts the takehome pay and thus is a cost akin to the high price of housing in the NYC area. Contributions to a 401k are flexible, but putting in too little certainly can jeopardize future retirement. As to social security, it's a "who knows" except to say that it will probably always be there but the amount one will get it always uncertain.
Good points about what is considered rich, depending on the cost of living in the region and other obligations. I think the $250,000 comes from the statistic that 1% of American households earn at least that much, so the tax would apply only to that percentage.*
ReplyDeleteSomewhere between 1-2% of small business owners earn that much, yet Boehner/McConnell (BM) say that not extending the tax cuts for small business owners in that 250K bracket would affect a preposterous "50% of small business income."** Who was it that said, "You are entitled to your own opinions but not your own facts.?"
Further, 3/4 of small businesses (defined as having fewer than 500 employees) have NO employees.*** And 20% of small businesses are organized in such a way that the owners pay corporate rather than individual income taxes.**** So it's actually a very small fraction of small business owners (those who 1. have employees, 2. are not organized to pay corporate taxes, and 3. earn over $250,000 per household) who would be so affected by not extending the top level tax cut that they would reduce their payrolls.
*http://en.wikipedia.org/wiki/Affluence_in_the_United_States
**http://wonkroom.thinkprogress.org/2010/08/03/mcconnell-bush-small/
***http://www.census.gov/epcd/www/smallbus.html
****http://www.factcheck.org/elections-2008/mccains_small-business_bunk.html
Thje cost of living in different areas makes a lot of sense as to why $250 wouldn't be that much. If they're doing $200K for a single person though, how come it isn't $400K for a couple? Cuples would make out better getting divorced. I agree with the retirement savings in the comments. A buddy of mine works for a large company that stopped doing retirement. He said that the pensions of yesterday and the retirement companies pay is disappearing. Your retirement will be what you save in your $401K and what ever social security will be in the future.
ReplyDeleteGuess the logic of not doubling the $200,000 is that a couple still has one mortgage, one electric bill, etc. The idea of getting divorced to double the income level is akin to the logic of some older people on social security. If a spouse dies and you have a new boy/girl friend, just live together rather than get married so you can retain both social security checks as is. Don't believe that would apply, however, if both are drawing their social security based on their own work histories.
ReplyDeleteThe 401k was certainly a boon for employers. Prior to 401k, the dominant form of retirement was the defined "benefit" plan, whereby you got retirement pay from the employer based on earnings, your contributions (if any), and length of service (with some other provisions like being based on earnings for last three years before retirement). Then along came 401k and it shifted to defined "contributions" where your retirement income is based primarily on what you invest in your 401k stock account, plus any (if any)contributions the employer may make to that account. And, of course, how much you get a retirement time is based on what what your investments may be worth at the time. As a result of 401k, the number of companies with defined benefits plan has dropped significantly. And, of course, a further wrinkle for some is whether or not your company went into bankruptcy, like United Airlines, and turned defined retirement benefits over to the federal government which limits how much it will pay. So, United pilots who were big earners saw their pensions drop greatly when they started getting their checks from the feds.