Saturday, May 26, 2012

A comment on Pelosi's million-dollar-a-year middle class.

A quick word on Nancy Pelosi’s recent letter to John Boehner on the subject of the Bush tax cuts.  In it she suggested that Boehner and the Republicans should agree to allow those cuts to expire for the wealthy and continue them for the less-than-wealthy, which is the proposal they have rejected in the past.  But she sweetened the deal that Obama has been proposing by suggesting that the definition of wealthy could be raised to include only those whose annual income is over $1 million. 

Jared Bernstein, in his blog,  offered a big endorsement of the basic idea of extending them for the middle class and lower and ending them for the rich, but objected to the change in the dividing line.  In other words, he endorsed the straight Obama position on this.  Bernstein said:

“Congress should vote now to extend the Bush tax cuts on the middle class but not those on upper income households.  There is no political constituency against this extension—it is not contested ground.”

But about the move from $250K to $1 million:

“That is a very big, very bad deal.  It’s also a weird bargaining strategy, but I’ll leave that to the game theorists.  Fiscally, it loses something like 40% of the revenue according to the (indispensable) Citizens for Tax Justice—CTJ also points out that about half the benefits of this higher threshold accrue to—wait for it—millionaires, who would, under this plan, pay the lower Bush rates on their earnings from $250K-1mil.

But it also redefines “middle class” in this debate as going up to $1 million.  There is less than one-half of one-percent of American households with incomes above that threshold.”

Some guy named “Stuart” posted a response in Bernstein’s blog,  and since he probably can’t say it any better here than he did there, here’s the quote:

“Just for the record, there is a constituency—possibly a constituency of one—which believes that Obama and Pelosi and every other Democrat should stop trying to extend the Bush tax cuts for anyone. This lonely constituency is for simply letting all of the Bush tax cuts expire. That’s not because we have no sympathy with the working class, or that we don’t understand the negative consequences for the economy; it’s that letting the tax cuts expire is the only option that is really possible, because it’s the only option that doesn’t require some cooperation from Republicans.

The Republicans will never, ever compromise on this, and they will never, ever accept an extension of only a portion of the sacred Bush tax cuts. The idea that somehow we can divide the Bush tax cuts into segments, no matter where you put the dividing line, is a dead issue, a non-starter, deceased, demised, passed on, expired and gone to meet its maker, it has joined the choir invisible. I think we need to admit that even though its plumage is still beautiful, it’s an ex-idea.

So Obama should explain to Boehner that he understands that no compromise is possible, and so the whole question of extending the Bush tax cuts has been taken off the table, that he will simply let them all expire on schedule—then he should propose an Obama tax cut that makes sense. That way the Republicans have nothing to bargain with, or for, or against. They either vote for a tax cut or they vote against it.”

Yeah.  Exactly. 

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