We have seen this movie before. A contrived crisis causes a rush to a vote before any legislator or the public has time to read and understand a bill which will have a profound effect on the nation for years if not decades.
That’s what happened in the middle of the night early this morning.
The choice presented was handing Obama what his aides are calling the single biggest policy achievement in decades — breaking Republicans’ tax rate pledge — or raising taxes on the “middle class.”
Rather than raising revenue through economic growth, revenue will be raised through growth of marginal tax rates. Of course, the “rich” (many of whom are your local business owners and professionals) will change their habits because when you add up higher marginal rates, caps on deductions, Medicare taxes, and state income taxes, that last marginal dollar is becoming hardly worth earning.
The headline a year from now will be that the tax increases on the “rich” did not generate the expected revenue. Obama has positioned the debate so that the answer to the tax revenue shortfall will be more taxes. That is his great achievement.
This fiasco is the product of a false choice between “going off the cliff” or tax increases without spending cuts or entitlement reform.
I saw this coming when I proposed on December 6, and repeatedly since then, the Christmas Plan (aka Plan C):
If a deal which tackles deficits from both revenue and spending can be reached this month, great.
If not, pass a 90 day extension of current tax rates and whatever else is needed to postpone the “cliff,” and go home for Christmas to give time for a Grand Bargain which puts Democratic sacred cows on the table.
Let Harry Reid refuse to bring it to a vote, and Obama refuse to sign it. Their inaction will be the reason for taxes rising for everyone.
I saw that decoupling tax increases from spending cuts and entitlement reform would result in what we now have, where we give up on taxes but get nothing in return. We no longer have bargaining power because we have nothing left to give except even more taxes. We shot our wad on a fiscal three-card monte game.
Plan C did nothing more than maintain the status quo until all issues were addressed as part of a “grand bargain” type agreement in which Democratic sacred cows were on the table.
Plan C did not force either side to concede anything. Indeed, if passed now, Plan C would not rule out that part of the eventual deal on taxes may be what just passed the Senate … but at least we’d get something in return.
Even people (like me) who are against any tax increases could live with some tax increase if it were part of a deal which actually put the country on a proper fiscal road and substantially addressed our spending problem. Let both sides sacrifice their principles, if either side does.
It’s not to late for the House to reject a piecemeal approach. The House should mark-up the Senate bill to reflect Plan C and send it back to the Senate.
We’re going to have a debt ceiling and spending fight anyway in two months, let everything be on the table when it happens.