One Mil Should Not Become the New $250K!

May 24th, 2012 at 8:21 am

Whenever I do anything my 12-year old daughter finds embarrassing—which is pretty much whenever I do anything—she says, “Really, Dad?  Seriously??”

That was pretty much my reaction to House minority leader Rep Nancy Pelosi’s (D-CA) letter to Rep Boehner yesterday, wherein she mixed a very good idea with a very bad one.  Details here.

The good: 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.  In the interest of fiscal rectitude, there should come a time when we collect more revenue from non-wealthy families, but that should wait until their pretax incomes start doing better than they have over the past decade.

On the other hand, it is time to let the highend Bush tax cuts sunset—i.e., for households with incomes above $250K.  There’s a trillion in revenue up there, including interest savings on the debt.  The growth impacts of such a tax hike are minimal, as I stress here, and I seriously worry (seriously, Dad??) about these cuts becoming permanent if they’re once again extended.

The bad: But that’s not what leader Pelosi  suggested to Rep Boehner.  She moved the $250K threshold up to $1 million.  That is, she wrote:  “Democrats believe that tax cuts for those earning over a million dollars a year should expire…”

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.  True, there’s only a few percent—2-3%–above $250K, so that was already arbitrary and not so representative of the middle class, I suppose.  But again, really…seriously??

The White House, to their credit, came out swinging hard against the idea (link to come).   And Politico has the following, suggesting this is some kind of tactical move.

A Democratic source explained Pelosi’s move: if Republicans didn’t agree to her proposal, it would make it “clear they are standing with millionaires and endangering the economic security of the middle class.”

Too clever by half, IMHO.  This is a bad genie to let out of the bottle.

For the record, Leader Pelosi has been a wonderful force in the Congress and a stalwart fighter for progressive change.  But really, Nancy??  Seriously???

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12 comments in reply to "One Mil Should Not Become the New $250K!"

  1. Tom in MN says:

    And $250k is already too high. That won’t raise my taxes any and I can easily (and want to) pay more. A limit of $150k means someone making $250k is taxed an extra few percent on the $100k above $150k. If you are making $250k/yr and can’t afford a couple more grand in taxes then you have bigger problems than your taxes.

  2. rootless_e says:

    Why is it that Nancy Pelosi, one of the most effective Speakers of the House ever, gets absolutely no respect? Does it occur to any of the critics that Congresswomen Pelosi is not naive enough to believe that Boehner will agree on any cut? Pelosi is a tough bargainer and she’s putting Boehner in the tough spot of trying to justify to voters why people making over a million dollars a year should get a break. Anyone who thinks this is an argument over what the number should be needs a course in political negotiation 101.

    • pjr says:

      What rootless_e said, exactly. In addition, the reaction of liberals also is useful down the road. If the Dems really want what Obama has been consistently requesting since before he became President, they need to generate demand for it–Pelosi seems to have done a little of that.

    • gluon1 says:

      Just, so much, this, what rootless_e said. Or, as someone else said, Is Nancy Pelosi the only one who understands how to play this game?!

    • Alan in SF says:

      “Why is it that Nancy Pelosi, one of the most effective Speakers of the House ever, gets absolutely no respect?”

      Perhaps because she’s signed off on a whole slew of horrible measures and has yet to pass a piece of progressive legislation? Because she agreed to stifle single-payer advocacy for the promise of a public option, then surrendered on the public option? Because she whipped the caucus to support the absolutely pointless, incredibly wasteful Afghanistan escalation? Because she went to bat for the for-profit college loan ripoffs? Because she has never even pretended to represent her district (which I live in)? Other than that, can’t think of a reason.

      • rootless_e says:

        The progressive grievance against President Obama and Speaker Pelosi for not supporting single payer is enormously revealing. Dennis Kucinich supported single payer. He never polled up to 10% in the Democratic primaries. None of the three most supported candidates, Obama, Clinton, or Edwards endorsed single payer. And yet the President has been endlessly castigated by “progressives” for supporting the plan he promised to support and not adopting the program of a fringe candidate – a program that had no chance of becoming law. What this reveals is a sense of privilege and entitlement that has been pretty repellent.

  3. readerOfTeaLeaves says:

    Well, I find that if I can’t visualize something it is tough for me to make comparisons. I’m thinking of the ‘greatest hits’ graphs that Dr. Bernstein listed in a Dec 2011 blogpost, and three in particular seem relevant —

    Graph #4: “Effective Tax Rates on Wealthiest People Have Fallen Dramatically”

    #6: “Economic Downturn and Legacy of Bush Policies Drive Record Profits”

    #7: (personal fave) “Tax Cuts, Wars Account for Nearly Half of Public Debt by 2019”

    Off the top of my head, I can’t really visualize what any of these graphs would look like under Pelosi’s proposal, and I find the confusion unsettling. Any hope that CBPP might have the resources to provide comparison graphs…?

  4. Fred Donaldson says:

    Pelosi also recently remarked she would have voted for Simpson-Bowles – a draft of the two affluent chairmen that included hiking both Social Security retirement age and Medicare eligibility age – all at a time when 50-year-olds can’t get a job – let alone folks in their 60s (and what employer would want to add “those people” to their health insurance premium pool?).

    The strain of the job seems to be getting to Pelosi, and to many other so-called (by themselves) progressives, who don’t seem to hold true to things like Glass-Steagal, public option, single-payer, financial transaction tax, end the war – sorry, I am rambling and nashing my teeth, sort of like an old, tired American Motors driving experience.

  5. Adams says:

    “It’s also a weird bargaining strategy…” Get serious. Pre-compromise is a strategy that is copyrighted to the Obama administration and licensed to all Democrats. cf health care “reform.”

    • rootless_e says:

      It is not a negotiating strategy, one would have be shockingly naive to believe that Boehner can or will negotiate on this issue. It is an electoral strategy.

      Why progressives are so clueless is something I cannot speculate about.

  6. Stuart says:

    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.

  7. James Edwards says:

    I’m sure Pelosi knows two things. The first is that Boehner is not in control of his group and the other is that nothing will happen before the election. If Boehner calls her bluff, which he should, the radicals in his party will rebel and he won’t get the votes. The dems can rebel saying $1 Million is too high. So she is giving her side cover to not vote while at the same time forcing them to admit they are in the pocket of millionaires.