Ezra Klein - Why did the Democrats falter on the tax cuts?

Posted at 10:22 AM ET, 12/ 2/2010

Why did the Democrats falter on the tax cuts?

By Ezra Klein

This post by Greg Sargent contains some wise words on the psychology of the Democrats:

At risk of overgeneralizing, the problem isn't that Dems aren't capable of winning an argument. It's that they don't think they're capable of winning a protracted political standoff, even on an issue where the public is on their side, once Republicans start going on the attack. They seem to set their goal early on at salvaging a compromise, rather than going for the win. As a result, they tend to telegraph weakness at the outset, sending a clear message that they'll essentially give Republicans what they want as long as they can figure out a way to call it a compromise.

It's very important to realize how strong of a hand Democrats had -- and to some degree, have -- on the Bush tax cuts. Right or wrong, the Democrats' original position on this was that the tax cuts for income under $250,000 should be extended, and the tax cuts for income over $250,000 should expire. The public agrees: 49 percent share the Democrats' position, 14 percent want all the tax cuts to go, and 34 percent want to see all the tax cuts extended. Put another way, 63 percent of Americans don't want the tax cuts for the rich extended.

The GOP understood this just fine: Back in July, Rep. Dave Camp, then the ranking Republican on the House Ways and Means Committee, admitted that his party couldn't hold tax cuts for the middle class hostage in order to secure tax cuts for the rich. "I'll probably vote for it myself," he said of the Democrats' proposal. In September, John Boehner joined him. "If the only option I have is to vote for some of those tax reductions," he told Bob Schieffer, "I'll vote for it."

Democrats, it seemed, had won this one. They had the popular position, the president's veto pen and control of the Congress. But they simply refused to carry the ball over the goal line. Instead, they began negotiating with themselves, talking about millionaires' brackets and short-term extensions. Republicans noticed the Democrats' disarray and lost their fatalism: "Incoming House Majority Leader Eric Cantor (R-Va.) said on Bloomberg Television he was ready to instruct GOP members to vote down legislation Democrats plan to bring to the floor that would extend the expiring Bush-era tax cuts only for the middle class."

Now it looks like all the tax cuts will be extended, at least for the moment. But it's a baffling outcome. The structure of the situation favored -- and continues to favor -- the Democrats. No tax cuts pass without their support, and Republicans have previously admitted that their position isn't popular enough to prevail in a standoff. The only thing that's changed is that Republicans have realized Democrats aren't confident enough to enter a standoff. But it didn't have to be this way. Think back to early this week, when the president announced the federal pay freeze. "The hard truth is that getting this deficit under control is going to require broad sacrifice," he said. "And that sacrifice must be shared by the employees of the federal government." Here's what he could've said next:

It also must be shared by those among us who've prospered most in recent years. Even before the financial crisis, middle-class incomes had stagnated. But the incomes of the wealthiest Americans hadn't. Similarly, America's upper class has recovered from the crisis much quicker than the working class. There's nothing wrong with that: The country depends on the ingenuity and resourcefulness of its most successful citizens. But in a time of high deficits and belt tightening, it makes $700 billion in tax cuts that go solely to the top 2% an unreasonable expense. Those tax cuts were passed in a time of surplus, and now we're in a time of deficits. As our situation changes, so must our policy. I will veto any bill that extends those tax breaks.

He not only could've said it, he could've stuck to it. But he didn't. Instead, Jack Lew and Tim Geithner are now supposed to negotiate out a deal, and the White House will be blamed for the inevitable concessions and disappointments it includes. I'm not against deal-making, of course, and I've regularly defended the administration's pragmatic concessions. But there are times when you can get more at the negotiating table, and times when you can get more by declaring that there's simply nothing to negotiate. This was the latter.

Photo credit: Melina Mara/The Washington Post.

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