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Posted at 5:25 AM ET, 11/30/2010

Wonkbook: Dem compromise would extend 90% of Bush tax cuts; food-safety bill comes to vote; federal-pay freeze

By Ezra Klein


President Obama is meeting with the Republican congressional leadership today, but it's hard to imagine much progress being made at the powwow: Obama has already embraced the federal-pay freeze that the GOP was hoping to pass, congressional Democrats are not particularly close to consensus on the Bush tax cuts, and the air is thick with bad feeling after Republicans previously delayed the sit-down for "scheduling reasons." Someone in that room is going to have to be pretty charming to break through all that. I'm looking at you, Pete "Party Time" Rouse.

Perhaps more consequential at the moment are the Democrats' intra-party negotiations over the Bush tax cuts. House leadership is still looking to hold a standalone vote on the tax cuts for income under $250,000. But some in the Senate -- including Chuck Schumer, Bob Menendez, and Claire McCaskill -- are pushing a compromise that would extend $400 billion of the $700 billion in tax cuts for income above $250,000 by extending them for everyone making less than $1,000,000. So those struggling members of the middle class making between $250,001 and $999,999 will get their tax cuts, too, and Democrats will have extended about $3.6 trillion of the $4 trillion in Bush tax cuts, or 90 percent of the total.

If that's the ultimate agreement we see on the Bush tax cuts, it'll be worth taking a moment to appreciate how far Democrats have backslid on this issue since BIll Clinton. Clinton, of course, raised taxes in the face of large deficits. The Obama campaign, by contrast, swore not to raise taxes on any family making less than $250,000, and Democrats might now effectively raise that to $1,000,000. In setting up the expectation that taxes can't go up for anyone but millionaires, Democrats take most of them off the table. And given that Republicans have no interest in taxes, either, that basically removes them as a tool of fiscal policy going forward.

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A group of Democratic Senators are calling on Obama to extend the Bush tax cuts for all income below $1,000,000, reports Lori Montgomery: "Over the past few days, a growing number of lawmakers has publicly embraced the idea of extending expiring tax cuts for families making as much as $1 million a year. They include newly elected Sen. Joe Manchin (D-W.Va.), Sen. Robert Menendez (D-N.J.) and Sen. Claire McCaskill (D-Mo.), who argued on 'Fox News Sunday' that 'we should draw the line in the sand for millionaires.' The idea's chief proponent, Sen. Charles E. Schumer (D-N.Y.), said that raising the income threshold from $250,000, as Obama has proposed, has the potential to unite fractious Democrats behind a single strategy on the tax cuts, which are set to expire Dec. 31 unless Congress acts."

The $1 million earner tax cut compromise would add $400 billion to the deficit, writes Jonathan Cohn: "When this idea first surfaced a few weeks ago, I put that question to researchers at the Center on Budget and Policy Priorities. Using very rough, preliminary numbers, they concluded that the ten-year cost of extending tax cuts for incomes below $250,000 was $3.2 trillion and that the cost of extending cuts for incomes less than $1 million was $3.6 trillion. In other words, the higher threshold would cost an additional $400 billion over ten years. That's a lot of money, particularly at a time when, in theory, we're trying to come up with ways of improving the government's long-term finances."

Obama has proposed a two-year pay freeze for federal workers, report Lisa Rein and Perry Bacon: "The freeze, which must be approved by Congress, would be the first two-year halt to federal raises in modern history. With health insurance premiums for civil servants set to jump 7.2 percent on average next year and a federal transit subsidy to be cut by half Dec. 31, the plan will amount to a pay cut for many workers. But the freeze is a largely symbolic move to address a federal deficit that will top $1 trillion next year. It is estimated to save just $2 billion over the next year...The last freeze to federal pay came in 1986, and it was for one year. President Bill Clinton proposed skipping the 1994 raise but was rebuffed by Congress."

Is Obama getting out in front of worse cuts to the federal work force? Or just negotiating with himself?

House Republicans praised Obama's pay freeze while liberal groups attacked it:

The Senate will vote on food safety legislation today, reports Lyndsey Layton: "The Senate is expected to vote Tuesday on legislation that would revamp food safety, give significant new authority to the Food and Drug Administration and place new responsibilities on farmers and processors to keep food free from contamination. The Senate began debate on the measure Monday. A version of the bill easily passed in the House more than a year ago but has languished in the Senate. Majority Leader Harry M. Reid (D-Nev.) is pushing to get the bill passed before the lame-duck session ends in December. House leaders have indicated that the House would accept the Senate version, avoiding the need to reconcile the bills."

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Mashup interlude: Destiny's Child's "Independent Woman, Part I" vs. Fugazi's "Waiting Room".

Still to come: The House is still planning a tax cut vote this week; the Senate failed to change a provision of health care reform affecting small businesses; the Supreme Court will rule on the constitutionality of public campaign financing; climate negotiations are considering emissions other than carbon dioxide; and a motion sensor that lets you play Super Mario Bros. just by walking.


The House will likely still vote on extending some of the Bush tax cuts this week, reports Brian Beutler: "House Democrats are likely to hold a vote later this week on a tax plan that would allow the Bush tax cuts for high-income earners to expire at the end of the year, according to multiple aides...Through last week's congressional recess, neither House nor Senate Dem leaders had the votes to pass a plan like this, and leaders in both chambers were signaling pretty clearly that the coming vote will be both a symbolic political statement about GOP priorities, and a starting point for a negotiated compromise with Republicans and conservative members of their own party."

The Club for Growth has started intervening in committee chairmanship races, reports Simmi Aujla: "Another conservative group is jumping into committee chairmen races, backing Rep. Jack Kingston (R-Ga.) for chair of the Appropriations panel. The Club for Growth endorsed Kingston on Monday, backing him over appropriations veterans Jerry Lewis (R-Calif.) and Hal Rogers (R-Ky.). Rogers’ said last week he would work more closely with Club for Growth and other conservative groups to look for places to cut spending. The announcement comes the day before Kingston, Lewis and Rogers will pitch themselves to the steering committee."

The White House is considering a new think tank report on corporate tax reform, reports James Politi: "The Hamilton Project and Center for American Progress (Cap) will argue US companies should no longer be taxed on foreign earnings. At the same time, however, they would no longer be able to take tax deductions on the costs of doing business overseas and interest payments on money borrowed from banks located outside the US...The proposal, which is being examined by White House officials, seeks to marry two seemingly conflicting aims of corporate tax reform: to encourage investment in the US and discourage 'offshoring', while bolstering the competitiveness of US companies with large international operations."

Gaming interlude: A motion sensor that lets you move Mario in Super Mario Bros. by moving in real life.

Health Care

The Senate failed to pass a fix to health care reform's small business tax provision, reports Carl Hulse: "The Senate on Monday failed to repeal an unpopular element of the health care overhaul even though Democrats and Republicans agreed it needed to be jettisoned to prevent businesses from being saddled with undue tax paperwork. Caught in a partisan dispute over how to proceed with eliminating new tax reporting rules, the Senate twice was unable to reach an agreed-upon threshold of 67 votes to eliminate a provision that critics have seized on to illustrate the failings of the health care legislation championed by Democrats."

Congress has passed a doc fix lasting until the January 1:

Health care reform's cuts to Medicare Advantage are being implemented without controversy, reports Amy Goldstein: "One of the most significant savings envisioned in the new health- care law - limiting payments to the private health plans that cover 11 million older Americans under Medicare - is, so far, bringing little of the turbulence that the insurance industry and many Republicans predicted. The law, which sets in motion the broadest changes to the U.S. health-care system in decades, will hold down the amount of money the government gives to Medicare Advantage plans, which are available to patients who prefer a managed-care version of the program. The savings is forecast to amount to $145 billion by the end of the decade."

Medicaid' long term care coverage is in need of reform, writes Howard Gleckman:

The Senate is expanding an investigation of minimal health insurance plans, reports Janet Adamy: "What started as a probe into McDonald's Corp.'s insurance plan for store workers is expanding into broad scrutiny of 'mini-med' policies that could ensnare large mini-med carriers including Aetna Inc. and Cigna Corp...In a hearing scheduled for Wednesday, Senate Democrats plan to detail how restaurants, pet-store outlets and hair salons are offering workers health-insurance policies with low caps on annual benefit payouts that leave workers footing the bill for care, according to the Senate aide."

Domestic Policy

The Supreme Court will consider the constitutionality of public financing of campaigns, reports Robert Barnes: "The Supreme Court will again review government efforts to regulate campaign spending, agreeing to consider an Arizona law that distributes subsidies to publicly funded candidates who face big-spending opponents. The decision was not a surprise, as justices in June had blocked a portion of the state's 12-year-old Clean Elections program, which authorizes public money for state candidates who bypass most private fundraising. The court stopped the state from providing 'matching funds' to those candidates, which become available when political opponents or outside groups spend in excess of state limits."

Michael Bloomberg's pick to run NYC schools has been approved:

Rep. Luis Gutierrez has positioned himself as immigrants' top advocate in Congress, writes Arian Campo-Flores: "Gutierrez, 56, is the most passionate, tireless, and nettlesome voice in Congress on immigration matters. He’s a constant presence at rallies and on TV, defending the undocumented and railing against xenophobia. It’s no surprise that a recent Pew Hispanic Center survey ranked him the second-most-important Latino leader in the country, after Supreme Court Justice Sonia Sotomayor...While many admire his tenacity and credit him with keeping immigration reform alive, others, including members of the Obama administration, believe his confrontational style can be counterproductive."

The administration's college graduation plan can be made bipartisan, writes Tom Kean:

Sisyphean struggle interlude: A car tries and fails to stay in a driveway.


The Cancun climate conference is focusing on reducing non-CO2 emissions, reports Juliet Eilperin: "Many policymakers and business leaders have come to see the most basic method of slowing global warming- cutting carbon dioxide emissions through a binding treaty - as elusive for now. They are turning their attention instead toward a more achievable goal: curbing other greenhouse gases that are warming the planet. As the annual meeting of the United Nations Framework Convention on Climate Change kicked off Monday in Cancun, Mexico, with the aim of laying the groundwork for a future pact, many experts focused on more immediate cuts in industrial chemicals, soot and methane, all of which contribute to short-term warming."

Three Obama administration officials will attend the Cancun conference, reports Darren Samuelsohn: "Energy Secretary Steven Chu, Agriculture Secretary Tom Vilsack and White House Council on Environmental Quality Chairman Nancy Sutley will be going to the Mexico summit as the U.N.-led talks draw to their close, according to a State Department spokesman. The three Obama administration officials are expected to be in Mexico for one day each, appearing at events underscoring their department’s work, the spokesman said. For Chu, that means low-carbon energy technologies. Vilsack will cover efforts to reduce greenhouse gasses via avoided deforestation. And Sutley is scheduled to discuss adaptation."

Energy secretary Steven Chu has launched a defense of federal energy research spending:

The EPA is increasing the required amount of ethanol in the gasoline supply, report Robin Bravender and Darren Samuelsohn: "Responding to a congressional mandate, the Environmental Protection Agency will require that 13.95 billion gallons of transportation fuel comes from renewable sources in 2011, or about 8 percent of domestic gasoline and diesel supplies...EPA is facing a congressional requirement to raise the volume of renewable fuel each year with the aim of reaching 36 billion gallons in 2022. Meanwhile, Energy Secretary Steven Chu on Monday said that the future of transportation fuels shouldn't involve ethanol, the gasoline additive that historically has received billions of dollars in federal subsidies."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.

By Ezra Klein  | November 30, 2010; 5:25 AM ET
Categories:  Wonkbook  
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Next: The political psychology of Mitch McConnell -- and the rest of us


Will the two-year federal pay freeze apply to Congress?

Posted by: patinlaurel | November 30, 2010 6:56 AM | Report abuse

How many decades will pass before we see good news?

The goofballs we keep electing just keep making the hole deeper.

Posted by: lauren2010 | November 30, 2010 7:19 AM | Report abuse

Pay freezes, non-extension of unemployment benefits, proposed cuts in Social Security, etc. ARE taxes on the middle and working classes. In this respect, the Democrat "compromise" compromises the average American in favor of the wealthy, as usual. People who are making $30k/year are tired of hearing those with $250k/year salaries moaning that they are not wealthy. If you are making a quarter of a million dollars every single year and you are not wealthy, then you are a foolish idiot who has squandered his wealth, and you don't deserve a tax cut.

Posted by: killingMother | November 30, 2010 8:30 AM | Report abuse

Pay freezes, non-extension of unemployment benefits, proposed cuts in Social Security, etc. ARE taxes on the middle and working classes. In this respect, the Democrat "compromise" compromises the average American in favor of the wealthy, as usual. People who are making $30k/year are tired of hearing those with $250k/year salaries moaning that they are not wealthy. If you are making a quarter of a million dollars every single year and you are not wealthy, then you are a foolish idiot who has squandered his wealth, and you don't deserve a tax cut.

Posted by: killingMother | November 30, 2010 8:31 AM | Report abuse

It's interesting that Obama feels Gutierrez is too confrontational. What about Boner & McConnell - are they too confrontational?

Most Dems would say that Obama hasn't been nearly confrontational enough.

So far, James Carville is spot on in his assessment about the Prez' (lack of) b@lls. It would be nice to see Obama fight instead of cave, get angry instead of pontificate, and stop giving away political gifts to the GOP without getting anything in return.

It does no good to be right if you're weak. You can't negotiate with a bully.

Posted by: nyskinsdiehard | November 30, 2010 9:50 AM | Report abuse

Failure to extend all the tax cuts would subtract 1 percentage point from growth in the gross domestic product, according to an estimate released in November by Barclays Capital, reducing projected growth in 2011 from 2.8 percent to 1.8 percent, with “sharply lower growth” in the first quarter.

Posted by: krazen1211 | November 30, 2010 9:58 AM | Report abuse

in what world do pundits live in that a pay freeze is seen as a cut. A freeze means no standard increase. I guess if you've become accustomed to being handed regular increases annually without question then maybe in some warped way you can consider it a cut but not in today's world. Not when many in the private sector are having to work harder for the same or less. The left leaning blogs misleading statements on this subject have sunk them to a new low.

As far as the mini-med argument goes the Senate Dems (I firmly expect Sen. Rockefeller to be leading the assault) need to understand that these plans cannot offer the full benefits that they want them to without increasing premiums to levels these people can't afford. 1 + 1 still equals 2. Until we get to 2014 and these people are heavily subsidized by our tax dollars this is the only option.

Posted by: visionbrkr | November 30, 2010 9:58 AM | Report abuse

This is just insanity. Let everyone's taxes go up, no one will even notice. People aren't even aware they got another deficit bustin' tax cut last year.

Extending 90% of the tax cuts is giving Grover Norquist and his fellow fanatical travelers 90% of what they want.

We have to stop governing to please these nutjobs. They want to destroy the nation's finances, just to get a small piece of Social Security (an incredibly popular program). And, we continue to run the country in a manner that will please them!

Anyone else see a problem with that?

This is nuts, and I cannot believe how weak this Admin is. Weak, weak, weak.

Posted by: rat-raceparent | November 30, 2010 11:18 AM | Report abuse

This is one of the first articles that actually gives mention to the elephant in the room.
All the talk is about whether we can afford the $700 billion for the $250K and up tax cuts. Answer, we can't.
HOWEVER, what is almost never mentioned is the sub $250K tax cuts will cost $3.3 TRILLION dollars. If we can't afford 700 billion, 3 trillion seems a bit higher than we can afford.
It would be reasonable to argue that the 3 trillion sub $250OK cut would be beneficial enough to offset its cost, but then the $700 billion becomes harder to oppose. CBO has clearly stated that tax cuts are the *least* effective way to stimulate the economy; which last I check what everybody professes to want to do.
I do think it might be overkill to try and spend 3 trillion on unemployment benefits, but since those are apparently not worth fighting for we'll end up with tax cuts that don't help enough that we can't afford.

Posted by: rpixley220 | November 30, 2010 5:06 PM | Report abuse

"This is just insanity. Let everyone's taxes go up, no one will even notice.
People aren't even aware they got another deficit bustin' tax cut last year."

They will certainly notice. It will increase the tax bill for a family of five earning $45,000/yr by ~$2,500 (rather, it will take a small tax refund and turn it into a liability).

"We have to stop governing to please these nutjobs. They want to destroy the nation's finances, just to get a small piece of Social Security (an incredibly popular program). And, we continue to run the country in a manner that will please them!"

Social Security is really inefficient. Most young workers today will earn a negative return on Social Security, particularly if benefits are cut and/or the retirement age is increased.

The Iraq War was popular at one point too, but that didn't make it a good idea.

Posted by: justin84 | November 30, 2010 6:12 PM | Report abuse

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