A huge battle is shaping up in Congress over extending the Bush tax cuts, with Obama wanting to extend only the middle class cuts and Republicans wanting to extend all of them, including those for persons making over $250,000 in taxable income (which would add $700 billion to the deficit over 10 years, negating any claim that the GOP is serious about the deficit).
Obama should call the GOP’s bluff and agree to an extension of all the tax cuts permanently—but with a catch.
The president should propose new and higher marginal rates on incomes over $1 million, $5 million, $10 million, and $100 million, with the highest rate at 49% (so that the federal government never gets more than half). In addition, all stock options should be counted as income so that hedge fund managers don’t get to pay low capital gains rates on their compensation. Not only would this be a political winner—wide majorities believe the ultra rich should pay higher taxes, even Republicans—but it is likely (I haven’t done the math yet) that the additional tax revenue would more than offset the revenue lost by extending all the Bush cuts.
Making a bold move like this would put Republicans between a rock and a hard place. Obama would be giving them what they want—permanent extension of all the Bush cuts—but only in exchange for new marginal rates that make a ton of sense: it’s insane that a billionaire pays the same marginal rate as someone making a few hundred thousand. If the Republicans refused, Obama could go back to his original proposal, point out that he offered a reasonable compromise (one that would’ve reduced the deficit and improved the tax structure), and that Republicans killed the deal. I see no downside to this whatsoever.
On healthcare, calling the Republicans’ bluff will be a little trickier and take time, but it could turn out to be just as effective. Republicans lied egregiously about the actual contents of the healthcare legislation—with their talk about “death panels”, socialism, and a government takeover—but most of the specific provisions are popular with the public (e.g., allowing for pre-existing conditions, banning rescissions, eliminating lifetime caps, preventative care without co-pays, and allowing children up to age 26 to remain on their parents’ policies). The individual mandate is the most controversial part of the bill, but it’s the glue that keeps everything together: without it, there is no way the private insurance companies will be able to afford the additional regulations mandating and expanding coverage.
Republicans will never be able to revoke the popular provisions of the bill—and if they truly threaten the individual mandate, the insurance companies will be up in arms. So again, call their bluff: dare them to remove the individual mandate, and come up with the money to pay for the additional services that Americans want and have now been promised. The Republicans will fold. The only alternative is a public option, or true socialized medicine. (Keep in mind that Obamacare relies almost exclusively on private insurance. This was once a Republican idea, put into effect in Massachusetts under then-governor Mitt Romney and proposed in the Senate under former GOP presidential candidate Bob Dole.)
Governing is far more difficult than campaigning, especially when your base consists largely of people looking to vent their frustrations instead of thinking about how to solve problems. Now that the GOP has to actually govern, it’s time to expose their inconsistencies and contradictions and move forward with a serious progressive agenda. For Obama and the Democratic leadership, the only thing standing in the way is timidity.
Jason Scorse