Once again the White House cut a deal and once again we liberals are outraged at Obama's cave, capitulation, poker fold, Jedi mind-fail. I understand the frustration. It can be difficult to watch your political leader compromise on a core position like the $250,000 threshold for tax rates.
But I think everybody is ignoring a few aspects of the fiscal curb negotiations: 1) we got more in the deal then you may think; and 2) even if we had went over the fiscal curb, taxes going up only for incomes above $250,000 was never guaranteed. Follow me above the orange symbol thingy and I'll tell you why.
1) First, I think it's important to look at how far the Republicans caved. At the beginning of this they wanted the Bush tax cuts to remain intact completely, plus dramatic changes to Medicare, Medicaid and Social Security, essentially gutting the social safety net. Then it was tax hikes only on incomes above $1 million, but only in exchange over an increase in the Medicare age, chained CPI for Social Security, and other changes to Medicaid. Then in the negotiations between Reid and McConnell, it was tax hikes only on income above $650,000 and chained CPI for Social Security. Then in McConnell's last offer to Biden, it was tax hikes only for income above $550,000. Finally, the Republicans agreed to tax hikes of incomes above $450,000 with no changes whatsoever to entitlements and no promises whatsoever to how big the spending cuts will be in 2 months. The White House got the Republicans to agree to $600 billion in new revenue over the next 10 years in exchange for nothing, when less than 2 weeks ago the Republicans would only agree to $800 in new revenue if it included the essential dismantling of our entitlement programs. That looks like some pretty good negotiating to me.
Then look at how far the White House moved. They went from $250,000 to $450,000 for tax hikes, and moved the estate tax from 45% to 40%. That's it. In exchange for that small movement, the White House got a permanent AMT fix; another year of tax credits for alternative energy (a huge job creator & win for the environment); 5 year extension of the EITC, Child Tax Credit, & American Opportunity Tax Credit; limits on tax exemptions & deductions for incomes above $250,000; the Medicare "doc fix" for another year; another year of unemployment insurance that will not be offset; a 9-month farm bill fix that will keep milk prices from rising; and a 2-month delay in the spending part of the fiscal curb. Also like I said before, no guarantees or promises of how big the spending cuts will be, or of any changes to entitlement programs. Plus, there is nothing stopping the President from including tax hikes on incomes between $250,000-$450,000 in the negotiations in 2 months.
2) As everyone knows, all tax rates were going to go up if we went over the fiscal curb. The liberal blogosphere fantasy was that by going over the fiscal curb, Democrats would be in a very strong position and the President could just send a bill to Congress cutting taxes for those making less than $250,000, effectively raising taxes on the top 2%. The idea was that Republicans wouldn't dare vote against this tax cut and thus we would finally get the higher taxes on the rich that we have been wanting and needing since Obama's election.
But here's the part that everybody seemed to forget or ignore: Republicans still control the House in January. The Republicans would not have just simply agreed to the new tax cuts of incomes under $250,000. That is a fantasy that we liberals believed in that was never going to come true. Instead, the first thing House Republicans would have done with the tax cut bill would have been to amend it, raising the income threshold to $800,000 or $1 million or even $5 million. So the Senate would have passed a bill cutting taxes for those making less than $250,000, and the House would have passed a bill cutting taxes for everyone under a much higher threshold. So we would have been in the exact same boat we have been in for the past 2 months, albeit with tax cuts rather than tax hikes: with the Democrats negotiating with the Republicans over the income threshold.
In this circumstance, if a bill came to the Senate from the House with a tax cut threshold at say $600,000, and the Democrats don't have 60 votes to amend it down to $250,000, what are the Dems' options? They can either vote for it or let taxes go up on everybody, including the middle class. And as we all know, the Democrats are the only people in D.C. who give a damn about the middle class. Republicans don't give a damn about the middle class. All they care about is the tax cuts on the upper income levels. So in that situation, the Democrats would probably vote for the higher income threshold bill rather than allow all tax rates to go up. This would give us even less new tax revenue than the current deal gives us.
Overall, I think we are letting the perfect be the enemy of the very good. I think this deal is a good deal: we pocket $600 billion in new tax revenue without giving up a dime in spending cuts or entitlement changes. And there is nothing stopping us from going after another $200-400 billion in the next round of negotiating.