To watch the news or open a newspaper (people still do the latter, right?) this week is to read about the GOP in “disarray,” its members cowed into raising taxes and shamed by one of their own for failing to provide desperately needed relief to victims of Hurricane Sandy. On the surface, this narrative carries some weight, after all, the last time taxes were raised with Republican votes, George H.W. Bush was President, we had not yet fought our first war with Iraq and nobody knew Kurt Cobain. Further, Governor Chris Christie’s insta-classic press conference, with his pungent barbs directed at House Speaker John Boehner certainly offered more ammunition for this thesis; however, scratch a few inches below that surface and a different reality is found.
Less than 2 months ago, Barack Obama won a no-doubt-about-it second term, easily dispatching Mitt Romney with a convincing 51%-47%, 332 electoral vote, election-was- called-a-whopping-12-minutes-later-than-2008, rout. Democrats added seats in the House and Senate and, but for redistricting done after 2010, likely would have regained control of the House, based on the fact they garnered hundreds of thousands more votes than Republicans nationwide. Obama, we were told, had the dual cudgel of tax cut expiration and the implementation of across the board spending cuts (sequestration) to bludgeon the GOP into submission. After all, if nothing was done, everyone’s taxes would go up and huge cuts to defense spending would also be triggered - outcomes anathema to the Republicans. Negotiating from this position of strength, the commentariat, left, center and right, all agreed Obama had a winning hand against a fractured, drifting-to-obscurity GOP. Since that time, the supposedly disarrayed opposition has done the following:
· Torpedoed, through a coordinated, deeply cynical (and largely false) smear campaign, any thought of the President appointing Susan Rice as Secretary of State;
· Created deep reservations about a Republican (yes, a Republican) being appointed as Secretary of Defense;
· Successfully negotiated the permanent extension of tax rates created under George W. Bush for 98.6% of Americans;
· Raised the estate tax threshold above what it was when Bush was President while simultaneously lowering the tax rate on same, effectively shielding 99.8% of all estates from any federal taxation;
· Watched Obama sign a five-year extension of a broad eavesdropping and wiretapping law implemented under George W. Bush;
· Allowed the Violence Against Women Act to expire; and
· Avoided having capital gains and dividends be taxed as ordinary income (up to 39.6%) and instead, permanently codified, even for people earning nearly a half-million dollars a year and up, at a maximum rate of 20%.
Did I mention these tax fixes were permanent? Something Bush himself, with a Republican Congress, could not do in 2001. In exchange for these enormous giveaways to the wealthiest Americans, the GOP “allowed” taxes to go up a whole 4.6 cents on the income you’ve earned after the first $400,000 if you’re single or $450,000 if you’re married. They also agreed to extend long-term unemployment insurance for a year and a bunch of tax credits that, in a prior life, would have been no brainers for things like college tuition and earned income (for the poor). Of course, these are only extended for 5 years, not permanently. And even then, the bill only passed in the House because more than 170 Democrats voted for it. Further, implicit in the fiscal cliff deal is the absorption of Republican theory that low taxation correlates to better economic outcomes, even though what actually does drive economic growth – investment, research and development, infrastructure improvement and educational commitment, were nowhere to be found in this deal. Of course, if this is pointed out, you’re being disloyal to the Democratic Party.
And now that this latest peril of Pauline has been averted, we move to the next cliffhanger – the debt ceiling, where a President who swore up and down that tax rates would not be lowered for people making more than $250,000 is now swearing up and down that he will not negotiate over the next increase that is needed to the debt ceiling. Of course, he said something similar in 2011 and wound up agreeing to $1 trillion in domestic spending cuts over 10 years, but now, we are expected to take his word that he really means what he says? By now, we should know that Obama is not apolitical, but hardly doctrinaire. Way back in 2009, at the zenith of his popularity, he passed a stimulus bill that was roughly 40% tax cuts in an effort to get Republican support (he got almost none). Then, when the Bush tax cuts were originally supposed to expire at the end of 2010, he agreed to extend all of them (a similar claim he would not extend them for those at the $250,000 level was made and jettisoned) for two years. A few months later, with an omnibus bill to fund the government languishing, he agreed to domestic spending cuts and then, that summer, agreed to a trillion dollars more in cuts as part of that aforementioned debt ceiling deal. So, the talking point that the fiscal cliff deal was a 43:1 new revenue to cuts deal is true on its face, but only if you ignore the lopsided cuts Obama has agreed to, the permanent enshrinement of Bush era tax rates on all but 1.4% of income earners, the essential elimination of the estate tax, modest pinch in dividends and capital gains and oh yeah, the precedent that has been set over and over that Republicans can take hostages and squeeze concessions out of the President.
Moreover, each negotiation with Republicans has resulted in Democratic sacred cows being put on the bargaining table. At various times, Obama has floated the idea of raising the Medicare eligibility age (2011 debt ceiling), changing the way Social Security benefits are calculated, (the so called “chained CPI) so that future benefits would be cut (2011 debt ceiling, 2012 fiscal cliff) and reducing spending in areas of non-defense discretionary spending (all of the above). Meanwhile, the supposed Republican orthodoxy that taxes must never be raised on anyone is somehow elevated to this same exalted status and accorded the same sanctity in the media, never mind the fact that the tax burden faced by the wealthy has been, for the last decade, at 1920s level low and wealth has been redistributed in their favor in ways unseen since those halcyon days while the true middle class and poor have slid backwards.
It is not just Obama’s willingness to put these programs on the table that is distressing, but the concession to the Republican point of view that so-called entitlements must be cut to put our fiscal house in order. Republican proposals for social welfare disproportionately harm the weakest in our society and at a time in their lives when they can ill afford to have their modest retirements affected, something Democrats, once upon a time, cared about. Instead, of playing on the Republican side of the field, Obama and the Democrats should be fighting for ideas that are progressive and have the attendant benefit of actually solving the problem. For example, economists will tell you that raising or eliminating the cap at which employees are taxed on Social Security (FICA) would extend the solvency of the program for 75 years or more. On the other hand, raising the eligibility age for Medicare would save very little while leaving people between age 65 and 67 to the predations of the private insurance market. Instead, why not lower the eligibility age for Medicare but require a greater premium be paid, in a way not different than those who accept a smaller benefit from Social Security if they begin collecting it before their full retirement age. Other ideas, like allowing Medicare to bargain for prescription drugs, encouraging outcome based, as opposed to treatment based, payment and more aggressively going after fraud and abuse will wring far greater savings out of the program and have the more important benefit of improving it.
It is also disappointing to see the President both buy into the belief that we have a deficit crisis while at the same time acceding to policies that do not provide the most stimulative bang for the buck. If one considers that three “stimulus” laws have been enacted (2009 Recovery Act, 2010 tax cut extension, 2012 fiscal cliff deal), nearly half of the first, and almost all of the second and third agreements went to cutting taxes or extending tax credits, an outcome most Republicans would have happily accepted had you told them this would happen the day Obama was sworn into office. Aside from unemployment extensions, which I will concede, are stimulative, the only meaningful “stimulus” was in the 2009 deal, and much of that – aid to states, infrastructure spending, and green tech investment, has been spent out. In addition, the temporary payroll tax cut was allowed to expire, which will result in a tax increase this year on all workers. Expanding employment would go a long way toward addressing any near-term budgetary concerns we have, but time after time, these ideas end up on the cutting room floor in the negotiations the White House engages in with Congress.
Of course, few want to listen to those who point out that our current budget deficit is largely a consequence of the 2008 Great Recession (as recently as the end of Fiscal Year 2008, the federal budget deficit was $472 billion, less than half its current amount) because doing so would require that stimulus be directed not to across the board tax cuts, but to messier policy arguments involving mortgage loan forgiveness, research and development grants, massive public works projects and other efforts that are now verboten. Instead, more cuts to essential services are targeted. The lack of pushback on the reality of the non-discretionary domestic budget is particularly galling. As a share of the budget, these agencies comprise a smaller percentage of the overall budget than at any time in the last 60 years, and even if you literally defunded all of them, you still would not close the current budget deficit, but you would ensure that a lot of rotten food was eaten, a lot of potential terrorist activity was not investigated and a lot of roads never got repaired. Meanwhile, major pieces of legislation in areas like transportation and agriculture are now routinely slowed, blocked and extended for short durations of time instead of approved overwhelmingly (and for 5 years as they once were) and, at least in the Senate, appointments are slowed or blocked altogether, resulting in gaps at the top of many Cabinet agencies and a dearth of federal judges not seen when Republicans control the White House.
Frustration with the President is misread as disloyalty – it is not. It is the result of head scratching as to why a fiscal cliff deal that required 2/3rds of the Democratic caucus in the House to get through was so tilted in favor of permanent tax cuts and did not include infrastructure spending (something Obama initially requested), an extension of the payroll tax cut (which, now lapsed, will mitigate the effect of the permanent extension of the current tax rates), or other policies that would more directly benefit the economy. It is the realization that Republicans have succeeded in getting Democrats to do their policy bidding for them, even as they sit on the sidelines and lob hand grenades about slow job growth and exploding deficit and debt. It is mystification at why the President and Democratic leaders in Congress have bought into the idea of deficit reduction in social programs that benefit the poor, elderly and infirm. It is the lack of understanding why a man who just became the first Democrat since FDR to win two terms with more than 51% of the vote in both of his elections seems so reluctant to utilize the power that the country is willing to give him to solve our problems and so eager to compromise well past halfway with an opposition that has spent the last four years maligning him. If this is the GOP in disarray, I would hate to see what they look like when they are winning.