One hundred and fifty years ago, President Abraham Lincoln issued the Emancipation Proclamation. In retrospect, it seems to have been somewhat more important than whatever the Senate was doing last night. While you probably want to know what is in the Senate deal, it’s important to remember that it isn’t law until the House passes it and the president signs it. One thing I don’t want to hear a lot of whining about is the $400,000/$450,000 top marginal rate. We are talking about a 4.6% tax cut on $250,000 of income, which amounts to $10,500. When you consider that Obama exchanged that for an extension of unemployment insurance and a whole host of tax credits that affect the middle class and working poor, it’s not a big concession at all. What’s more difficult to swallow is that the capital gains and dividends rate only went up to 20%. It’s a hike on top earners, but not enough of a hike for my tastes. On the other hand, the rich will have to deal with a Personal Exemption Phaseout (PEP) set at $250,000 and an itemized deduction limitation (Pease) set to $300,000. That is where Mitt Romney will feel the pinch. The deal also extends the Farm Bill, which avoids a massive spike in the price of milk. It permanently fixes the problem with the Alternative Minimum Tax not being indexed to inflation, and it solves the so-called Doc Fix for Medicare compensation to physicians (a long-time headache).
The Republicans think they can make another go of hostage-taking during the debate over the debt ceiling, but I discussed yesterday why the White House is not overly concerned about that. In any case, the deal establishes that a quarter of the cost of extending the sequester for two months will come from defense spending and that half will come from new revenues from a change in the tax-deferral of individual retirement accounts.
Please keep in mind that all but seven Republican senators just voted to raise taxes (the first Republicans to do so in over twenty years). The Republican holdouts were Chuck Grassley of Iowa, Mike Lee of Utah, Rand Paul of Kentucky, Marco Rubio of Florida, and Richard Shelby of Alabama (who voted against), and Mark Kirk of Illinois and Jim DeMint of South Carolina (who didn’t vote). That means that 40 Republican senators (minus those who are retiring) will have to defend their vote to raise taxes when facing reelection. We’ll see how many follow suit in the House.
When judging the merits of this deal, it is important to keep in mind all the people on the margins of our society who will not be paying eight dollars for a gallon of milk or face losing their unemployment check or the loss of their child tax credit or their college loan tax credit. Keep in mind that the president won an extension of tax credits for clean energy. Even if taxes did not go up as much as they should on the rich, they will pay more in income, capital gains, and dividend taxes, while losing significant opportunities to create tax write-offs for themselves through charitable giving. The Estate Tax also went up modestly.
Let’s see if Boehner can do his job.
Technically the Republicans can claim that they voted for a tax cut since taxes went up at midnight, but that also means that these are the Obama tax cuts and we will no longer speak of Bush tax cuts since those officially ended at midnight. I believe they’d like to blot out the name of Bush so that shouldn’t be a problem.
Happy New Year. Pork roast, today?
Anyway, what happened to earned benefits?
‘Earned benefits’ as in SS and Medicare?.
Nothing on the benefits front.
The 2% reduction in SS contributions ends, but then people were upset about that in the first place, because making Treasury whole again from general revenues was considered a Very Bad Thing.
The annual ‘doc fix’ prevents the annual threatened ~30% cut in Medicare reimbursements to practitioners.
Or are there particular tax credits, etc, you were looking for? Summary here.
Sounds like a decent deal. Am I supposed to feign poutrage still, or at least until the House votes?
Which of the taxes in the bill increased over the new baseline that occurred at midnight?
The Senate voted after midnight to provide cover for Republicans. That much is clear. And that is why the House will not vote until today.
Does Boehner have the 50% plus 1 vote to bring it to the floor? Does Boehner have enough Republicans and Pelosi enough Democrats to pass it?
There seems to be some “GOP sellout” talk among some conservatives in the Twitterverse and the blogosphere, but that is all from the rightwing. When do the Republicans closer to the Democratic position find the voice to denounce the hostage-taking? When does the Wall Street media fess up to the fact that the GOP’s political crusade is threatening the markets?
Look, in isolation this would be a not-terrible deal given the political realities. The trouble is, it can’t be considered in isolation, because it only kicks the can down the road for the pitiful period of 2 months, at which time the Dems will have none of the leverage that expiration of the Bush tax cuts had given them, and will face another attempt to hold the debt ceiling hostage (and at this point why would anyone believe Obama’s promise not to negotiate on that?) Nothing has been accomplished here except another step on the road to piecemeal adoption of the Ryan budget. But of course it’s bad form for progressives to point out this reality; all hail the great Democratic Party, the frog that positively enjoys being slowly boiled to death!
Exactly.
Just saying’
They always talk big like that before they collapse like a house of cards. You know the definition of insanity, BooMan?
I can’t recall them ever collapsing on anything, unless you are talking about the debt ceiling fiasco.
In any case, the politics of the thing are pretty obviously terrible for the Republicans. “Give us your Medicare benefits or we’ll tank the global economy and lose you your job and life’s savings” doesn’t seem to be a strong negotiating position.
Right back at you:
This doesn’t seem right. In the intervening two months the President will have an inauguration. Very high approval ratings. State of the Union address. My sense is that all this bluster was approved and planned weeks ago as is the 1:1 ratio of spending cuts vs. additional income from tax fixes (not rates) yet to come. And it won’t happen around the debt ceiling because the business community that Obama has been courting since re-election won’t have it. He’s isolating the bad actors (Tea Party people) and can make deals with everyone else. The rest is theater.
If Al Franken and Bernie Sanders can live with it, so can I, particular if Grover Norquist and his silly pledge are now irrelevant.
I’ll take the slight increase on capital gains taxes, but it’s galling that we still accord such preferential treatment to what used to be correctly called “unearned income.”
The GOP standard position is that unearned income should be taxed at zero, accompanied by a lot of mumbo-jumbo about ‘double taxation’ and ‘job creators’.
The rate just went up, by a third, on cap gains, and while it went down for most dividends, a lot of those are simply rolled over to buy more stock.
Could it be taxed at a higher rate? Yes.
Is there much of a case for distinguishing earned from unearned income? No.
But the distinction is embedded in the culture now, and there are a lot of Democrats in Congress, not just Republicans, who will fight like crazed weasels to keep it in the tax code. (Schumer, Carper, and everyone else from a FIRE-heavy state.)
This is easy stuff. The Democrats got 100% of their desired status quo. The Republicans got (at best) 85% of theirs, and 0% of anything on entitlements.
All you need to know. Wrap it up and put a bow on it.
Oh, and the GOP also learned that the President will do the unprecedented act of running a permanent campaign for his last four years as he drags out his token, doe-eyed, middle class muppets whenever he wants to demand the rich keep paying more and more taxes. Because it “isn’t fair for the burden to fall on our seniors and those who can least afford it.” Ha. Mysteriously, this all polls very well. Don’t start a class war you can’t win, GOP.
Again, you can’t wrap it up and put a bow on it, because in 2 months they’ll be back to the well again in a situation where the Dems have lost by far their best leverage.
This would only have been decent as a 2-year deal that included drama-free debt limit increases.
Just what do people like you and BooMan foresee happening in 2 months? I would sincerely like to see how you game that situation out. Believe me, I would LOVE to be wrong.
I need a little time to investigate details before I can give you a gamed-out prediction of how the debt ceiling will go.
However, the White House is convinced that the House will not put a bill on the table that raises $1.5 trillion in cuts to entitlements. And, if they do, it will be political suicide even in their gerrymandered districts. There will be more revenue, or the ceiling will be raised without offsets.
If that’s the best you can do, we’re in deep trouble.
Should I bother to respond to you, or not?
You express concern that the president will get rolled over the debt ceiling. I explain why they are not worried about it. You give glib answer.
Not if all you’ve got is BS about delusional White House “beliefs” (which have already been falsified by the previous debt-limit fiasco). If you haven’t figured out by now that the Teapublicans ARE that crazy, I really don’t know what to tell you.
The last fiasco was quite different in terms of what the GOP was demanding. This reminds me of when Poppy Bush finally had the opportunity to overturn Roe v. Wade and he punted with David Souter. The GOP says that they want cuts to Medicare, but not without the cover of a bipartisan deal. They will not pass a bill cutting $1.5 trillion in entitlement spending, and they will not be able to create that kind of take-or-leave-it hostage taking this time around.
I see no evidence that political suicide bothers a sufficient number of Republicans to matter–especially when it so often goes hand-in-hand with post-elected-office career advancement. You’re thinking logically. So is the White House. I very much hope you’re right.
Thanks for the post. On capital gains, reversion to old (Clinton) law would have been 20% as well (I think) so the cliff wasn’t going to generate more. Getting real reform on the abusively and scandalously low capital gains rate was always going to take tax code reform, which Repubs have as their number one agenda item. And Dems could have pushed for all these tax credit extensions in the deal as part of that reform.
The deal cements major losses of revenue from the estate tax, as reversion to old law would have been a return to 55%, with exemption for estates under $500,000. The plutocrats have a vastly better estate tax regime than if the cliff had occurred and we have now given up on that (old time) progressive front entirely. Paris Hilton and progeny are saved.
The deal is basically being widely defended by very creditable corners, all with the reservation that the proof will be in how the debt ceiling turns out 60 days from now. Obama very clearly wants to preserve the appearance that our government can still function and meet “deadlines” and is not in total dysfunction and collapse. He sees that as a very important aspect of this deal IMO. Looks like a lot of senators do, too. I doubt that the nation’s image is much of a concern to Boner’s radical clowns.
But I have to wonder how many people really think that this 2013 New Year’s circus demonstrates that our system is still operating. Looks like it’s on life support to me and can no longer breathe on its own. We’ll see if Boner’s Boneheads want to preserve the appearance of animation in the corpse, or if they want the world to see the reality of the situation—that we are at the mercy of “conservative” crazies. Boner will have to rely on the Pelosi Dems to preserve the appearance, of course. And just when in hell does this Great Do-Nothing Repub Congress ever adjourn?
About the estate tax — this isn’t about protecting plutocrats but about farmers, which is why it’s important to Republican senators. If you think about the major asset for a farmer, it’s land, which would have to be sold off to pay the taxes if there weren’t a big exclusion. I agree that it’s good tax policy in that respect to have the $5,000,000 baseline.
If this deal passes the house it will be a major shift. The Hastert rule will have been broken. Tax bills CAN emanate from the Senate. Republican can be divided. And the fringe is the fringe and will eventually either come around or leave. Time for them to feel useless rather than the middle-ground republicans who have felt like partisanship in Washington is a reason to abandon hope and their jobs.
The GOP view seems premised on what they think they can get political cover for TODAY. This ignores the progressive direction the election demonstrated; a waning TParty voice; and a country now talking about the “C” word compromise instead of the “C” word Constitution.
This fight has cost them political capital they didn’t have to spend.
Not recognizing that the Country is looking to take care of its own and bring Defense spending down to a reasoned level will put them entirely out of sync in 2014.
I’m not going to be surprised if Obama becomes addicted to playing hardball and the debt ceiling debate will crush the R’s. Just sayin.
Btw, cudos to Biden, he’s demonstrated he’s in his element leading the unleadable.
They’re in safe gerrymandered seats. The only political capital they care about is insurance against a primary challenge from their right.
And what if those primaries are a challenge from the left in their own party because the electorate has moved in that direction?
If you think the Republican primary electorate is moving to the left, you really need to pay better attention.
I’m not sure how Obama plays hardball when the fundamentals are the same:
The Republicans will refuse to raise the debt ceiling. People will hate them. They will continue to refuse. Obama will give them what they want, because the alternative is a recession and the Republican House feels about a recession the way the progressive left feels about the fiscal cliff. Better to avoid one, but in many ways a good thing.
The consequences of Republican hostage-taking will be a) no recession (because Obama, sensibly, does as he’s told) and b) the advancement of Republican goals, even as they only hold a small majority in one branch of government.
How else does this play out? Obama shows them polls revealing that–shocker!–the American people want them to raise the debt ceiling? They don’t care. And ‘not caring’ is their superpower. And Obama does care. That is his Kryptonite. Unless he pulls out a grillion dollar coin, which he would find more unseemly than, oh, holding the economy hostage, how does he “crush” them on this one?
Not so sure the fundamentals haven’t evolved. Senators declining Grover’s pledge and today they voted for a tax increase very thinly veiled by a tic toc. Even Grover knows that his pledge was broken and the Party’s #1 reason for existence was just compromised by its members.
Well, it’s not the Senate that’s the problem, this time.
Do you think the House Republicans won’t refuse to raise the debt ceiling? Or do you think Obama will be more willing to default than they are?
If I’m a Republican, of course I’ll refuse to raise the debt ceiling until I get right-wing goodies, because I know, with 100% confidence, that Obama gives more of a shit than I do. Obama will absolutely not let the economy collapse. He just won’t. So why wouldn’t I leverage that? Especially when there’s really no downside: I threaten, he concedes, I win.
The Estate Tax rate went up, but it’s also pegged to inflation now. I’m curious to see the CBO scoring on this deal to see how much of the benefit went to the top 2%. (Comparing this legislation to letting all the tax cuts expire, thus viewing it as a tax cut). I’ll be less upset if it turns out to be very little.
You can spray perfume on this deal as much as you want but right now I think it’s a pile of shit. You’ll see why in two months when Obama folds on massive spending cuts. Higher Medicare eligibility age and chained CPI, here we come!
Pelosi must be getting pushback. Biden is coming to the caucus meeting to twist arms.
I read the deal COMPLETELY differently. Obama knew all along that Boehner couldn’t pass this — how could he not? The whole point was to embarrass him and the tea party caucus in the House to turn up the pressure to break them both. The optics of this couldn’t be better for the President or worse for the House. It’s a huge tactical victory, but the strategic goal is still to be won.
MOT on dkos is getting all kind of attention for his little rant. I don’t have the strength to go in there and offer an alternative view.
but I guess you saw this
http://www.dailykos.com/story/2013/01/01/1175341/-Obama-s-Deal-From-a-poor-Person-s-Perspective
[didn’t read MOT, thanks for your precis]
Thanks! I saw but hadn’t read that, afraid of what it might contain.
I found it very interesting and in line with conversation over here in the pond