Political Animal


December 31, 2012 4:54 PM Not With A Bang But a Whimper

By Ed Kilgore

It appears the fiscal deal between the White House and Senate Republicans will stick. But since the House is not scheduling a vote for tonight no matter what the Senate does, making it certain those “fiscal cliff” countdown clocks hit zero, making a tax increase a tax cut, there’s no particular reason to expect the Senate to vote today, either.

And more significantly, the payroll tax cut that prevailed the last two years will expire for real, probably never to be seen again, and the “sequester” will apparently go into effect without even a temporary extension since the negotiators couldn’t agree on whether to offset the costs of a two-month delay.

The payroll tax inaction, BTW, means that it really won’t be possible for anyone to claim Washington avoided a middle-class tax increase by reaching a “tax deal.”

Beyond all that, as everyone is noting, the dynamics of the current deal, and its ultimate consequences, depend almost entirely on whether the White House and congressional Democrats hang very tough on the debt limit negotiations, and particularly Obama’s clear line today that additional revenues will have to accompany spending cuts in that deal. If Obama has in effect given away his leverage on taxes to secure relatively small GOP concessions on “stimulus” (the unemployment extension and the EITC, child care credit, tuition credit, and alternative energy credit extenders), it’s not a great deal. If he’s willing to go to the mats for a debt limit increase without big spending concessions, it might be acceptable to progressives.

The issue that’s still hanging out there right now is the immediate fate of the sequestrations, and their political significance is complex. On the one hand, if the sequestrations take effect, they could have a negative effect on the economy. On the other, taking them off the table even for a while could eliminate another leverage point for Obama, given how frantic most Republicans are to insulate the Pentagon and defense contractors from harm.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.


  • c u n d gulag on December 31, 2012 5:06 PM:


    How do you negotiate with Nihilists and Terrorists, who not only live for the anarcy they cause, but don't care if the hostages go down in flames with them?

    I want a civilized, sane, nation, again.
    Secession anyone?
    We can work out the exchange later, so that our Northern morons can move South and West, and the sane people in the South, can move North and to the coasts.

  • sjw on December 31, 2012 5:10 PM:

    As details have emerged in the course of the day, I've been saying to myself over and over, "Please God let this lousy last-minute deal fall through!"

    So is that it? Is it over? Are we (going) over, really and truly?

  • Celui on December 31, 2012 5:16 PM:

    So--the McConnell-led diatribe against Obama, made first during the President's initial months in office in 2009 are once again taking charge of the country. There isn't any impetus in these talks except to embarrass the President and the Democrats. There isn't any foresight given to making the nation's working men and women more able to provide for their families. Don't let these fanatics hide behind their misleading noise regarding Constitutional 'rights' and such. It's all hostage politics, all the time. The President and the Democrats have proposed numerous plans to move ahead, and the Republicans have each time found ways to destroy the nation's future. The continuing haranguing and wrangling won't end soon, because the intransigent GOTP factors don't care about anything except their own personal ideologies. Who the hell do these people pretend to represent? The very people they are consciously bankrupting? The poor they are punishing? The children who will be further deprived of needed resources? They've evidently forgotten that Lincoln and the Union did prevail during the Civil War. This kind of idiocy makes each of them a public fool and holds up the very concept of representative democracy to ridicule. Thanks, W.

  • rrk1 on December 31, 2012 5:37 PM:

    The best you can say for this orchestrated kabuki dance is that Obama didn't cave as much as many of us thought he would. Anyone who still thinks this guy has any guts should just shove that idea somewhere. He's a center-right corporatist, interested in pleasing the establishment, well, because he'll have a life after being president and he wants the establishment to take care of him. Just like the congress people and senators who become lobbyists after putting in their time "legislating" for us - better known as screwing us every chance they get.

    I voted for him holding my nose, but the stench is getting through.

  • jjm on December 31, 2012 5:47 PM:

    @rrk1 on December 31, 2012 5:37 PM: Your comment is really off base. If Obama is anything, he not a center right corporatist. He never even worked for a corporation, so what is he supposedly giving them here?

    He's letting the sequester go forward, thereby cutting money for the biggest corporate gougers of our nation -- military suppliers -- and he has won considerable concessions on unemployment, upping the tax not only on the rich but on capital gains. There are NO cuts to SS or Medicare. What more do you want from negotiating with the minority that hasn't got much between their ears?

    I don't recognize Obama in what you write, however crowd pleasing you think it is.

  • jjm on December 31, 2012 5:55 PM:

    From Suzy Khimm, Wonkblog: http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/31/five-facts-about-the-biden-mcconnell-deal/

    1. The working poor would benefit significantly from an extension of tax breaks for low-income families: The proposed deal includes a five-year extension of tax credits that Obama had expanded in the 2009 stimulus: The Earned Income Tax Credit was expanded to help more working poor, particularly those with big families; the Child Tax Credit was expanded to help the poorest Americans; and a more generous tax credit was given to families for college tuition.
    Republicans had been willing to support a return to 2001 levels for these tax breaks, which benefit more than 27 million Americans. But preserving Obamaís 2009 expansion on the Bush-era tax provisions means that 13 million low-income families would avoid an average $834 tax hike, according to the Center for Tax Justice.

    2. The estate tax provision would benefit a very small number of people and an even smaller number of small businesses and family farms: Neither party wanted the estate tax to return to Clinton-era rates of 55 percent, but Democrats wanted to set it at 45 percent while Republicans wanted the keep the current rate of 35 percent. The proposed deal splits the difference by setting it at 40 percent and gives Republicans the higher exemption threshold of $5 million (Dems wanted it to revert to $3.5 million). Republicans and Democrats from rural districts were pushing for a more generous estate tax to avoid punishing family farms, among other things. But keeping the high $5 million exemption means that almost no small businesses at all will be subject to the estate tax: The Tax Policy Center estimates that only 40 small businesses and family farms would have paid any estate tax at all in 2012 with the $5 million exemption.

    3. Businesses would continue to benefit from specially targeted tax breaks, including ones that support clean energy: The package also includes a one-year extension of the entire package of ďtax extenders.Ē Some of these were almost inevitably going to be extended: The R&D credit, for instance, has already been renewed 14 times since it was first introduced in 1981. But Obama has also managed to include others that benefit wind production and other clean energy sources, which Republicans oppose. Others are more obscure tax breaks like the NASCAR loophole, which benefits race car track owners.

    4. The Alternative Minimum Tax would be permanently fixed to avoid burdening middle-class families: Like the doc fix, the so-called AMT patch is meant to fix a structural flaw in the tax code to avoid the unintended consequences of an old law. The AMT was passed in 1982 to ensure that wealthy Americans didnít use tax loopholes to avoid paying income taxes, but it didnít include an adjustment for inflation, so itís been patched as years have gone by. The proposal aims to fix this problem permanently, which would come at a major cost. A 10-year patch alone costs $1.9 trillion, according to the White Houseís budget office. The cost wonít count toward the proposalís price tag, as a patch is in the current policy baseline.

    5. Capital gains and dividends would be taxed at 20 percent for families with income above $450,000: Boehner and Obama had already agreed to let taxes on capital gains rise from 15 to 20 percent weeks earlier for high-income Americans. Setting the dividend tax rate at 20 percent, however, is a significant concession to Republicans: Obama, in his most recent budget, proposed taxing dividends like ordinary income, with a top rate of 39.6 percent, as itís scheduled to revert to after Dec. 31.

  • ajp on December 31, 2012 6:07 PM:

    It might help to point out that the 2012 tax year income thresholds for the top marginal rate (the infamous Bush-era 35%) are $390,500 for single taxpayers and $396,450 for married taxpayers. The various estimates of the 2013 inflation-indexed increase I found put the threshold at about $398,000. Increasing those thresholds to $400,000 and $450,000, while not ideal, isn't exactly giving away the store.

  • Hue on December 31, 2012 6:10 PM:

    We know people who will be devastated when federal unemployment benefits stop. In severe winter weather.
    What should have been--was no one in the House of Representatives or Senate should be receiving paychecks or benefits as this debacle reached Jan. 1st.
    And pay for your own way home. Moochers to the max.
    You bungled this.
    Republicans--we're talking to you.
    You don't know how to govern, nor do you want to


  • emjayay on December 31, 2012 6:23 PM:

    Thanks for the informative comments, ajp.

    Taxing capital gains and dividends at a lower rate than other income was a terribe idea from any standpoint. There is no economic reason for it, even if (or maybe particularly) you are a conservative classical economics Chicago school kind of guy. It not only distorts economic incentives, but has resulted in a huge stealing of national income from everyone in the country who is not in a Wall Street related job. And the fact that a Wall Streeter can make a ton of money now is probably not unrelated to CEO's sub-CEO's making way more than they used to. And no doubt a whole lot of other economic distortions that aren't occuring to me at the moment.

    And (sorry, I'm sure there are proper terms for these two general factors) it has resulted in smart ambitious people being highly incentivised to be finance majors instead of scientists, engineers, social scientists, etc.

  • emjayay on December 31, 2012 6:29 PM:

    Sorry about the typos. Once again, unlike in the ancient historic WM format, the last time I tried Preview it was worthless.

  • David Martin on December 31, 2012 10:12 PM:

    Democrats are hoping for tax increases as part of a deal on the Debt Limit?? The tentative Financial Cliff deal leaves them with no leverage, and they'll accept whatever House Republicans demand.

    The second Obama administration will mostly be reduced to caretaker status, shutting down domestic programs for lack of funds.

  • Midland on December 31, 2012 11:04 PM:

    Interesting. The deal preserves some of what Obama wants preserved, while setting up another debate two months down the road, without giving away any particular amount of leverage. The Republicans have two months to cook in their current stew of public contempt, and then they get to climb back into the cooking pot for another few weeks of public scalding. Meanwhile, the Dems need to get that filibuster thing fixed.

    Nice to check in back at the Washington Monthly and find the comments haven't changed. Still half the entries doing nothing but spew venom at Obama and the Democrats, regardless of the outcome of events, without a word of criticism for the Republicans.

  • derBear on January 01, 2013 12:59 AM:

    I trust the republicans to do exactly what they always do. I do not trust the president to do the right thing for the liberal agenda because he is a center-right politician. Sorry, just can't bring myself to call the man a democrat, certainly not one in the same company as LBJ or FDR.