Monday, September 13, 2010

The (Difficult) Route to No Tax Rate Increases

How do Republicans arrange for maintaining the Bush tax cuts for everyone when the Democrats want to raise rates for those earning more than $250,000? Impossible feat? Maybe not.

The key is to present the Democrats and the President with only two alternatives: either the Bush cuts are maintained across the board, or everyone sees their taxes go up. No in-between option of "cuts only for the middle class."

I suspect that Democrats would rather take cuts for everyone than the alternative of no cuts at all. Sure, their base of liberals would be furious that the "rich" are getting a tax cut, but the liberals are going to vote Democrat anyway. How many votes will they lose if November comes, the economy is still moribund, and there has been no action on preventing the largest tax increase on record to take effect come 2011?

So how do we get to the point where the Dems have only those two choices? The Republicans have to make Democrats think that they are willing to accept a stalemate -- no tax cuts for anyone. The rational fear of an impasse, given my assumption above that the cost of no tax cut is really high for the Democrats, will make them accept the less desirable alternative of cuts for everyone.

How do Republicans credibly signal to Democrats their willingness to accept a stalemate?

Ironically, I think John Boehner might be off to a good start with these words:
In a pre-taped interview to appear on CBS' "Face the Nation" Sunday, Republican House Minority Leader John Boehner said that, if approving a bill to extend breaks for middle class income Americans were "the only option," he would support it.

To make the threat of opposing "cuts only for the middle class" credible, the Republicans need to establish a public record that they could point to in their defense, if the end result is a logjam and all tax rates go up. This is what Boehner said -- he will not oppose a middle class-only cut. And the White House jumped on his statement, giving it even more publicity and authenticity. So now the Republicans are on record for not opposing a cut only for the middle class. Clearly if we don't get that, it will be the Democrats' fault!

Of course, now the Republicans do have to work for the whole package, cuts for everyone. They need to play chicken, holding off any vote for as long as possible, making the Dems more and more nervous that there will be too little support for cuts only for the middle class. Tell them that there would be enough votes for an across the board maintenance of the Bush cuts, but that the middle class only option looks like it will fail...

Still a long shot, but I can see the road-- well, a small path -- to victory on this one.

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