Thursday, December 22, 2011
Today President Obama succeeded in neutralizing the Republicans' greatest weapon--their claim that they are always for reducing taxes, while the Democrats are always for raising taxes. President Reagan taught the Republican Party back in 1981 that they score more political points by bragging about cutting taxes, than by balancing the budget. When Democrats promised in the 1980's to raise taxes again, they got nowhere politically. And when the elder George Bush broke his famous promise to impose no new taxes, he was never forgiven by much of the Republican Party, and was defeated for re-election. Bill Clinton bucked this trend and somehow got away with raising taxes, probably because of the robust economy during his presidency, and also perhaps because he paid lip service to the Republican ideology of shrinking government. Then the younger Bush, who was personally scarred by watching what happened when his father raised taxes, made it his administration's first priority to put in place even more irresponsible tax cuts than Reagan ever dreamed of, accompanied by giant new federal programs that were not paid for. It became pretty difficult to justify those policies after they led to the worst recession in our time in 2008.
You might have thought that the public would be receptive to another Clinton-like tax increase after Obama took office. But Obama's team decided that the last thing our disastrously weak economy needed was a tax increase, and instead proposed even more tax cuts. The only tax increase they were willing to allow would fall on people making over $250,000 per year. If these policies were intended as a political trap, the Republicans fell right into it. At the end of last year, Senate Republicans filibustered against an extension of the Bush tax cuts for the middle class only, forcing all of the Bush tax cuts to be extended for two years if the Democrats wanted to maintain them for the middle class. People were starting to get the idea that the Republicans were more interested in protecting the wealthy and powerful than they were in anything else.
But now we can see that the Democrats' most brilliant move in last year's showdown was getting a one year reduction in payroll taxes. That set up another showdown this year, when this time it was the Obama tax cuts that were set to expire at the end of this year. Since these were the Democrats' cuts, the Republicans fell into opposition to extending them, and the Democrats could play the Republicans' game of last year to much better effect. Suddenly it was the Democrats demanding an extension of some very popular tax cuts, while the Republicans were stalling. What we learned during this battle over extending the payroll tax cut holiday was that while the Republicans care very deeply about reducing the marginal tax rate for the very wealthy, they don't care so much about payroll taxes, which are paid by ordinary working people. First they insisted that these payroll tax cuts be paid for (and not by offsetting tax increases for the wealthy). Funny how you never heard about how the Bush tax cuts which predominantly benefit the wealthy, need to be paid for. Then the Republicans demanded additional concessions, like speedy action on an oil pipeline. This week President Obama called their bluff, and the House Republican leadership caved.
It could be that the administration's ultimate strategy is to get Americans to recognize, first, that people don't really want to reduce the federal budget all that much once they realize that eliminating the deficit by spending cuts alone would mean drastic reductions in defense and Medicare and a lot of other programs that people need and want. Second, people are starting to get the idea that if we want to reduce the deficit and also reduce inequality, we are ultimately going to have to raise some taxes. But unlike the Clinton-era tax increases, this time the American people will be demanding that we raise most of that revenue from those most able to afford it. These demands are already getting more vocal, and should increase during next year's election campaign. Republicans may no longer have a credible answer to these demands, now that they have proven just how reluctant they were to preserve tax breaks when those breaks mainly benefited the middle class.