Times Square, New York, N.Y. 1908. I don’t yearn for some foggy misremembered good old days, with the exception of the huge losses in our natural heritage; forests, trees, cleaner rivers and oceans. Traffic congestion would have been much easier to deal with in 1908, but the cars were awful contraptions and it took forever to take a long trip. Anyway, 2013 and 1908 makes interesting contrasts.
Times Square New York on a rainy day, 1943. The film The Human Comedy was apparently playing at the Astor theater that year. It was a comedy/drama starring Mickey Rooney, “Teenager Homer Macauley stays at home in small-town Ithaca to support his family, while his older brother Marcus prepares to go to war.” While Disney’s Saludos Amigos was playing at the Globe, in glorious technicolor.
Piles of snow on Broadway, New York c1905. I like the hatter sign that says they only have summer straw hats in stock, but will add some ear flaps for free.
— Tax rates will permanently rise to Clinton-era levels for families with income above $450,000 and individuals above $400,000. All income below the threshold will permanently be taxed at Bush-era rates.
— The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.)
— The estate tax will be set at 40 percent for those at the $450,000/$400,000 threshold, with a $5 million exemption. That threshold will be indexed to inflation, as a concession to Republicans and some Democrats in rural areas like Sen. Max Baucus (D-Mt.).
— The sequester will be delayed for two months. Half of the delay will be offset by discretionary cuts, split between defense and non-defense. The other half will be offset by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when they’re moved over.
— The pay freeze on members of Congress and all other federal civilian employees, which Obama had lifted this week, will be re-imposed, .
— The 2009 expansion of tax breaks for low-income Americans: the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit will be extended for five years.
— The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class.
— The deal will not address the debt-ceiling, and the payroll tax holiday will be allowed to expire.
— Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.
—The full package of temporary business tax breaks — benefiting everything from R&D and wind energy to race-car track owners — will be extended for another year.
— Scheduled cuts to doctors under Medicare would be avoided for a year through spending cuts that haven’t been specified.
— Federal unemployment insurance will be extended for another year, benefiting those unemployed for longer than 26 weeks. This $30 billion provision won’t be offset.
— A nine-month farm bill fix will be attached to the deal, Sen. Debbie Stabenow told reporters, averting the newly dubbed milk cliff.
This does not mean these tax rates/spending/spending cuts and other assorted provisions are law. The House must vote on the package. Those on the Democratic side of the debate who thinks this deal sucks may have new friends in the House tea baggers who could scuttle the whole deal. Greg Sargent makes the case that this is a good deal considering certain considerations. That might be why so many Senate Democrats got on board,
A White House ally spells out an alternative interpretation. Dems don’t necessarily believe going over the cliff will give them all that much more leverage in the talks next year. It’s been widely argued (by me and many others) that if we do go over the cliff, Dems can simply move to pass the Obama Tax Cuts For The Middle Class, forcing House Republicans to go along. But some Dems question whether House Republicans will feel the need to follow this script. Rather, the thinking goes, if Dems do that next year, the House GOP leadership can pass its own bill cutting taxes on all income up to, say, $500,000 or $600,000.
If the idea is that it’s easier for Republicans to support continuing tax cuts just on some income levels after they’ve all expired, such a bill (with $500,000 or $600,000 as the threshold) could pass the House. What’s more, some Congressional Democrats may feel like they have to support such a bill, too. And the worry is that if this is then kicked over to the Senate, then some Senate Dems may feel tempted to support it or at least negotiate around it, which could divide Senate Dems. After all, some of them have already voiced support for putting the income threshold at $500,000 or $1 million.
And so, the idea is that it’s better to lock in a deal on rates now, at, say, $450,000, extend unemployment benefits, and pocket those gains and continue the fight next year. Raising the income threshold is obviously not desirable, but Dems will have broken the decades-long GOP opposition to raising tax rates on the rich, pocketed hundreds of billions in revenues, made the tax code more progressive, and extended unemployment benefits — all without agreeing to any spending cuts yet.
In so doing, will Dems squander their leverage next year? I and others have argued that they would. But the alternate interpretation is that Republicans, even next year, after a cliff dive, won’t have their options as limited as we might hope — they might not have to support the $250,000 threshold, after all. And Dems may still retain leverage in another way, even with the rates locked in by a deal this year. Republicans will use the debt ceiling to extract spending cuts, but Dems might counter by demanding more revenues via tax reform that closes loopholes and deductions for the wealthy.
Like Greg I am not endorsing this reasoning only that it was rational decision considering the possible unforeseen consequences down the road. I see negotiating a little differently than the White House. In no way do I think this was a sell-out ( Bernie Saunders (I-VT) perhaps the most progressive senator in the Senate, voted for the package, though progressive Tom Harkin (D-Iowa) did not) only that they should have started out with a proposal that included starting the repeal of the Bush tax cuts at $125k, say starting at a one percent increase scaling upward until those rate equaled the Clinton rates at $200k for individuals, and I would have never put any Medicare cuts on the table. Though this package has not become law it is a red-letter day when you can get 42 conservatives to vote for a tax increase, while also extending spending without any offset in cuts ( some spending cuts have been sequestered for two months).
Since I heard the news late last night I’ve had some time to settle into the details, immediate consequences and some reason to be concerned about that semester and the renewal of the debt ceiling. So it’s always good to visit our friendly, clam and somewhat reassuring liberal uncle Paul Krugman. There always seems to be that person in the family or group of friends that knows whether you really got a good deal, Krugman is the nation’s go to guy on fiscal deals,
The bad news is that the deal falls short on making up for the revenue lost due to the Bush tax cuts. Here, though, it’s important to put the numbers in perspective. Obama wasn’t going to let all the Bush tax cuts go away in any case; only the high-end cuts were on the table. Getting all of those ended would have yielded something like $800 billion; he actually got around $600 billion. How big a difference does that make?
Well, the CBO estimates cumulative potential GDP over the next decade at $208 trillion.So the difference between what Obama got and what he arguably should have gotten is around 0.1 percent of potential GDP. That’s not crucial, to say the least.
And on the principle of the thing, you could say that Democrats held their ground on the essentials — no cuts in benefits — while Republicans have just voted for a tax increase for the first time in decades.
So why the bad taste in progressives’ mouths? It has less to do with where Obama ended up than with how he got there. He kept drawing lines in the sand, then erasing them and retreating to a new position. And his evident desire to have a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.
If Obama stands his ground in that confrontation, this deal won’t look bad in retrospect. If he doesn’t, yesterday will be seen as the day he began throwing away his presidency and the hopes of everyone who supported him.
For another perspective try Robert Reich who thinks Democrats and Obama got rolled. Lousy Deal on the Edge of the Cliff
The deal emerging from the Senate is a lousy one. Let me count the ways:
1. Republicans haven’t conceded anything on the debt ceiling, so over the next two months – as the Treasury runs out of tricks to avoid a default – Republicans are likely to do exactly what they did before, which is to hold their votes on raising the ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security.
2. The deal makes tax cuts for the rich permanent (extending the Bush tax cuts for incomes up to $400,000 if filing singly and $450,000 if jointly) while extending refundable tax credits for the poor (child tax credit, enlarged EITC, and tuition tax credit) for only five years. There’s absolutely no justification for this asymmetry.
The two things Uncle Paul and Uncle Robert have in common is the fear that no doubt many of us have. That President Obama, who drew a line in the sand on the $200k/250k threshold, negotiated that away. While we can acknowledge he got unemployment benefits for it and a reasonable tax increase on investment income for the top 10%. he has still given the impression he will not negotiate as hard as he could. If he lets Mad Dog McConnell(R-KY) hold the budget hostage over the debt ceiling to get spending cuts, it is not like we should have all voted for Mr. 47%, but Obama will leave a legacy, a financial burden on the middle-class and working poor that could last fifty years. It should be noted that the Obama payroll tax cut was allowed to expire. Those were tax cuts for working Americans who Paul Ryan and Michelle Bachmann think do not have “skin” in the game. As some might remember that tax cut was passed as part of the original stimulus in 2009. The cut gave the average family (2 adults and one child) an extra $80 dollars a month. Though it also meant that much less was paying for their Social Security and Medicare entitlements. In the long run it is probably best that those families swallow that small loss in income so they’ll have those benefits when they need them.
This should make everyone smile, if not feel better. David Brooks doesn’t like the deal, Another Fiscal Flop
Over the course of the 20th century, America built its welfare state. It was, by and large, a great achievement, expanding opportunity and security for millions. Unfortunately, as the population aged and health care costs surged, it became unaffordable.
On a fairly regular basis conservatives develop a new catch phrase and repeat it to the point of nausea. Buy the new whole grain bread, it contains 5% more saw dust than the old bread. Brooks puts in the new phrase, practically a chant at this point, it became unaffordable, we just cannot afford health care for seniors anymore, maybe we could rustle enough Social Security to buy a sleeping bag for seniors so they’ll be warm living under the bridge, but otherwise tough luck, too bad. Some conservatives – Bush 43, Hank Paulson, Mitch McConnell, Paul Ryan and scores of others found hundreds of billions to bail out Wall Street. They found a trillion and counting to invade and rebuild Iraq. Brooks is selling that obnoxious failed medicine called austerity. It is literally not working anywhere in the world. Countries that are practicing the more extreme version of it are dragging down the world economy. Brooks makes a six figure salary for foisting this load of rotten garbage on America. He better damn well love this country. He is making a great living as a know-nothing conman.