As we brace for losing the battle to protect our social programs from drastic cuts, with no revenues, and no stimulus, all the drama seems to boil down to where we will come out between the Boehner Bill, with $1 trillion in "entitlement reform,'with a second debt-ceiling vote prior to the 2012 election, or the Reid bill, which will try to get Republicans to give us a larger debt-ceiling increase to take us through the 2012 elections, in return for a much larger cuts of around $2.5 trillion in cuts to be determined by a super committee, later.
Either way, the GOP wins this round of the debates about how to achieve a balanced budget, and the question of what is the optimal size of government. Those of us who favored returning tax rates on the richest 2% to pre-Bush tax cut levels, reducing military expenses to Clinton era level, and stimulating our economy, jobs, and tax revenues with a Kenseyian fiscal stimulus have lost.
Erza Klein urges Democrats to take solace in the fact that the Bush tax cut extensions automatically run out at the end of 2012. The burden of changing this has to got through both Houses of Congress and the White House,
Democrats are going to lose this one. ... Yet Democrats will have their turn. On Dec. 31, 2012, three weeks before the end of President Barack Obama’s current term in office, the Bush tax cuts expire. Income tax rates will return to their Clinton-era levels. That amounts to a $3.6 trillion tax increase over 10 years, three or four times the $800 billion to $1.2 trillion in revenue increases that Obama and Speaker John Boehner were kicking around. And all Democrats need to do to secure that deal is -- nothing.
... Imagine that Obama and the Democrats simply adopt the recommendations of the Simpson-Bowles/Gang of Six deficit reduction plan -- tax reform that raises $2 trillion over 10 years and cuts rates for everyone. ...if Republicans won’t budge, the Democrats can simply blame them for the gridlock that enables the Bush tax cuts to expire. ...
There is only one thing that could stand in the way of Democrats achieving their revenue goals on the last day of 2012: the Obama administration.
President Obama's concern is that about 80% of the Bush tax cuts to households earning less than $$250,000, and he promised no tax "increases" for this group.
Obama even offered Boehner a deal in which the Bush tax cuts would be extended right now,
It’s true that 2013 is not an ideal time for a large tax increase. Nor is it an ideal time for huge spending cuts. So the question isn’t whether increasing taxes on the middle class is the perfect policy, but whether it’s better policy than reducing Social Security checks and infrastructure investment. And not just in 2013. What happens to the Bush tax cuts may define the limits of the possible in public policy for a long time to come.
But if Republicans can keep taxes from rising, deficits will continue to mount, and something like the Ryan budget will become inevitable. A world in which the two parties can’t agree on tax increases but can agree on spending cuts is one in which the government eventually shrinks dramatically. Republicans understand this. Do Democrats?
What we are really arguing about what the should be the size of the US government. It is currently around 25% of GDP, which is less than most European governments and includes Social Security, Medicare, government pensions, pensions, military expenditures, regulatory agencies, and all government services, and aid to states for things such as Medicaid, and education.
Here is a comparison of US tax rates to other nations. Notice we are well under the EODC average.
MSNBC is announcing that John Boehner has had to delay their vote tonight due to lack of votes. I think Reid should use this opportunity to put up a clean debt-ceiling bill now, suggesting the rest is too complicated to do under this time frame.