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Posted at 2:05 PM ET, 12/14/2010

The logic -- and illogic -- of changing the tax deal

By Ezra Klein

pelosiestatedeal.JPG

It looks likely at this point that the House will vote to amend the estate tax in the tax deal. If the vote succeeds, there's somewhere between zero chance and no chance that Senate Republicans will accept it, particularly given that they can just wait until January and negotiate this out with a Republican House. Democrats will hammer them for holding the deal up on behalf of 6,000 estates, but Republicans don't seem terribly worried about being on the side of estate-tax repeal, and the polls back them up.

So why is House leadership allowing this?

Go back to my interview with Rep. Peter Welch, who has been quarterbacking the opposition to the deal in the House. The problem, he told me, wasn't so much the policy, but the process. President Obama had ducked the fight. Speaker Nancy Pelosi, Welch said, never did that. "She shows us that she’s doing everything possible to get our views into these bills." The way she got liberals in the House to vote for compromises like the health-care bill was to listen to their concerns, fight to get them in the law, and only after all other options were exhausted, come back and ask them to swallow their misgivings and cast that "aye."

That seems to be what's happening here: House Democrats will vote to amend the tax deal, even though it's impossible to imagine a substantially amended bill passing the Senate. Usually, that would mean the bill would just get bounced back to the House and the Democratic leadership could credibly say they'd done their best, but at this point, it's the compromise or nothing, and the compromise is better than nothing. The problem is that the House will have Democratic leadership for only another few weeks, and they're supposed to recess on this fairly soon.

If I were the White House, this would be my nightmare scenario: The House amends the deal, ticking off Republicans. That opens space for Republican critics of the deal -- who now include Rush Limbaugh, Mitt Romney, Sarah Palin and the largest tea party organization -- to argue that it's insane to negotiate with a Democratic House when there'll be a Republican House in two weeks. Senate Republicans, who are now looking for a way out of a deal that's unpopular with their base, throw up their hands and say we were open to negotiating, but if the president can't hold his own party on a deal he struck, it doesn't make sense to waste any more time on it, and we'll just figure this out in January when the new Congress is sworn in. At that point, talk radio and Fox News have spent weeks yelling about what a bad deal this is, and so the new Republican hardliners in the House demand more concessions. And no one really knows what happens next.

Photo credit: Brendan Smialowski/Getty.

By Ezra Klein  | December 14, 2010; 2:05 PM ET
Categories:  Polls  
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Comments

The House Democrats strategy reminds me of 'Dr. Strangelove.' "The Whole point of the Doomsday Machine is lost if you keep it a secret!" House Democrats should have brought this up DURING the negotiations in order to affect them. At this point, this is just pandering to the base.

Posted by: gobaers | December 14, 2010 2:29 PM | Report abuse

All the tax cuts should expire. As has been pointed out, in this case, doing NOTHING is the best option.

Posted by: nickthap | December 14, 2010 2:44 PM | Report abuse

And the Senate come January does....nothing?

Well, I see many would like that but somehow I suspect that ain't gonna happen.

The 'compromise' deserves to lose. Start over and see what happens next Congress.

Posted by: kindness1 | December 14, 2010 2:44 PM | Report abuse

don't try to get my hopes up.

but in january, the senate can repass the exact same version they already passed. then it will be the republican house who would either (A) have to pass the same thing or (B) have to be the crazies who are ruining everything.

Posted by: eggnogfool | December 14, 2010 2:51 PM | Report abuse

Ezra, with all due respect, it's only "impossible" that Senate Republicans would accept a minor House change to the estate tax when Washington pundits like yourself say it is and that becomes a self-perpetuating meme. It's doubtful that the estate tax giveaway is truly popular.

Posted by: jfung79 | December 14, 2010 2:54 PM | Report abuse

The only negotiating chip the House Dems have left is to allow the Bush tax cuts to expire by scuttling the Obama-GOP tax deal.

Yes, we will all have to pay more in taxes, but with middle and lower class incomes often reduced by the recession, the basis for the tax increase is reduced, leaving the upper 2% with no place to hide their "income". And the government will start to see a rise in tax receipts come January.

I say it's time to find out just how much of the government the GOP is will to hamstring or destroy to keep the super-rich and tea partiers happy.

Both sides have had 10 years to deal with this mess and just kept postponing it. It's been governance by avoidance.

Let the day of reckoning happen.

Posted by: tomcammarata | December 14, 2010 2:57 PM | Report abuse

jfung:

Doubtful that the estate tax is THAT much of a game changer. Deficit wise and economy wise it has almost no effect. Pure symbolism is all.

Pelosi and Obamma have different agendas since her base is completely safe, and his is questionable. Also this is her last real chance to exercise power before heading to the wilderness. Call it egoism on steroids.

Posted by: 54465446 | December 14, 2010 2:59 PM | Report abuse

@54465446:

it's only 'symbolic' if you plan on caving after your gesture gets shot down. which may be the case. $25 billion or whatever is a lot of money.

Posted by: eggnogfool | December 14, 2010 3:08 PM | Report abuse

It looks to me like Democrats are about to complete an amazing achievement: Failing once by pandering too far to the right before the election (by being afraid to hold a vote on taxes), and failing a second time by pandering too far to the left and thus killing a better deal than they would ever expect to get in the lame duck.

The ultimate result will be a more conservative outcome on taxes than either side could ever have imagined. Brilliant job!

Posted by: vvf2 | December 14, 2010 3:15 PM | Report abuse

If the Dems nix this deal, and they continue showing similar spine in the future, then perhaps their preferences will be taken into account the next time a big deal comes along. And compared to the deals that will be coming round soon, this current tax deal is small potatoes.

For example, the best way for Dems to grow a spine and win leverage in the coming debate over the coming austerity measures (as well as the coming redesign of the entire tax code) is for Dems to nix this deal now and to be gleeful and joyful about their victory, even if some of them lose favor with some voters.

If the Dems cave-in now and support this deal, they can no longer claim they care about deficits or long-term viability of SS. They will be seen as being even more weak than before and will not be equal players in any future debates or negotiations.

So, as Obama continues to act as a moderate Republican, the Dems only hope of reasserting themselves into important issues in the future is to nix or amend this deal now.

Posted by: lauren2010 | December 14, 2010 3:33 PM | Report abuse

"For example, the best way for Dems to grow a spine and win leverage in the coming debate over the coming austerity measures (as well as the coming redesign of the entire tax code) is for Dems to nix this deal now and to be gleeful and joyful about their victory, even if some of them lose favor with some voters."

what a disturbing statement.
may G-d help president obama, in light of what he has to work with, and the leaders and citizens who have taken leave of their senses,
and all of those people on the bitter edge, who will be even more severely compromised, in the "real world,"if this deal is "nixed by gleeful democrats."

what part of other people's immediate suffering makes you "gleeful and joyful" by the way?

Posted by: jkaren | December 14, 2010 4:02 PM | Report abuse

parts of the left are becoming as toxic as the birthers,
in my opinion.


i still think that the democrats who fight constantly against barack obama, are the result of disappointed hillary supporters who still subconsciously wish to weaken his presidency, as revenge for his winning.
they will hold the whole country hostage for this.
i sincerely believe that a lot of what we see, is this truth, playing itself out, with a thousand paper cuts.

Posted by: jkaren | December 14, 2010 4:16 PM | Report abuse

@jkaren:
I think the idea is that there needs to be some short term pain if you're going to get the public to understand just how dangerous a game the GOP is (and has been) playing.
.
The Dems have folded like cheap suits too many times over the last 4 years and now want to show some 'spine' and stop something...anything. The fact that this deal gives money to the rich becomes the focal point.
.
I don't like the deal, but after not taking these votes before the election and waiting until time is running out, well they don't have much choice. Given the circumstance it's not a bad deal, but that doesn't make it a 'good' deal either.

Posted by: rpixley220 | December 14, 2010 4:22 PM | Report abuse

lauren wrote:

"For example, the best way for Dems to grow a spine and win leverage in the coming debate over the coming austerity measures (as well as the coming redesign of the entire tax code) is for Dems to nix this deal now and to be gleeful and joyful about their victory,.

Neither of those things are going to happen. There is NO appettite for austerity and no votes for tax reform.

Posted by: 54465446 | December 14, 2010 4:27 PM | Report abuse

For a typical middle class family, if the Bush cuts expire we're talking about a 3% increase in the marginal rate. It's a pretty small amount of money, which is why the Bush tax cuts were such a scam in the first place.
Let them expire, and then explain the math.

Posted by: tl_houston | December 14, 2010 4:50 PM | Report abuse

I think there is some value in the House Democrats' opposition, provided two things happen as a result: 1) they manage to highlight the fact that Republicans are willing to scuttle a middle class tax cut in favor of a tax cut for the richest dead people the world has ever known, and 2) some kind of compromise deal ultimately passes. Unfortunately, the (poor) quality of "Democratic messaging" (itself an oxymoron) means that #1 probably will not happen, and any serious attempt to make it happen will probably derail #2.

Posted by: dollarwatcher | December 14, 2010 5:02 PM | Report abuse

Here's what should happen if the Senate Republicans refuse to change the deal because House Democrats don't like it: no bill.

When the DEMOCRATIC Senate takes office, they should agree to vote for the same bill they voted before, nothing else. That was the post-election compromise, nothing has changed to demand further concessions.

The reality is that House Republicans can't claim a more solid mandate than Senate Democrats can. So, if House Dems are to be blamed for "over-reaching" and "creating a tax hike," then the same is true of House Republicans if they try to change the compromise deal to make it more conservative to make their base happy.

I mean, if the House wants to kill the compromise TWICE and "raise taxes," then by all means, let Republicans do that. Senate Democrats should not change their position. There's nothing to negotiate here. It was a fair compromise in December, it's a fair compromise in January.

Don't give in on this. Nothing changes on New Year's Day.

Posted by: theorajones1 | December 14, 2010 5:09 PM | Report abuse

Let the whole thing die. Reasons:
No estate tax cut.
No payroll tax cut (i.e., no cut to social security funding),
No payroll tax cut for the wealthy (right now, Making Work Pay tax credit goes mostly to those making less than $75,000 and phases out at $250,000), AND
No extension of Bush tax cuts for the rich.

Posted by: johnwilliamson1 | December 14, 2010 5:26 PM | Report abuse

"For a typical middle class family, if the Bush cuts expire we're talking about a 3% increase in the marginal rate. It's a pretty small amount of money, which is why the Bush tax cuts were such a scam in the first place.
Let them expire, and then explain the math."

http://www.mytaxburden.org/

I put in a head of household earning $39,000/yr with two kids, paying $1,500 in state and local taxes and $5,800 in child care expenses.

The Bush Tax Cuts expire: $3,520 in taxes
Compromise Plan: $758
Dem Plan: $1,538

But hey, $230/mo is chump change for a single parent earning $39,000/yr.

I tried a married couple, each earning $30,000/yr ($60k for the household), 3 kids, $4k in state/local taxes.

Bush Tax Cuts expire: $7,868
Compromise: $4,025
Dem Plan: $5,225

Surely blowing up the compromise in order to end the tax cuts for the rich is worth $3,800/yr for a family of five earning $60,000/yr.

Posted by: justin84 | December 14, 2010 6:02 PM | Report abuse

Jkaren

I am all for helping average Americans, but not by embracing the status quo and chipping away at SS in order to help pay for tax cuts for the wealthy.

Your theory about disaffected Hillary supporters is naive and ignores the fact Obama ran on the idea not to build more debt by helping the wealthy.

If this deal succeeds, a day after unemployment benefits expire and the GOP refuses to extend them even though high end tax rates are still reduced, you are going to wonder how such a bad deal was accepted by the dems.

Posted by: lauren2010 | December 14, 2010 6:10 PM | Report abuse

Just say no to the radical leftist agenda.

I can't wait to see what glorious things we can do with redistricting.

Posted by: krazen1211 | December 14, 2010 6:18 PM | Report abuse

@justin:

after previewing things on your tax web site.

i would really miss the child tax credit. other than that, i'd rather every provision in the bill died.

Posted by: eggnogfool | December 14, 2010 8:02 PM | Report abuse

I believe Ezra had been unnecessarily worried on this one:

http://thehill.com/homenews/house/133569-liberals-giving-up-fight-on-tax-package

It is bit annoying also that Ezra has been behind the curve here and crying wolf where none has been there from start. Any common reader of the situation would have known that when Pelosi never uttered words with total opposition to the deal, House Dems would follow the suite. Politically it was impossible to oppose / derail this deal. What are you talking, Ezra?

All wastage of ink & reporting here.

Posted by: umesh409 | December 14, 2010 8:30 PM | Report abuse

Well, basically, the House can screw the president, AGAIN, so their fee fees will improve OR they can be adults & shutup & take it because the president tried to get them to VOTE on this since last July BEFORE the election. Several attempts were made & this was all documented at TPM blog which begged them to vote before the election. They act like this never happened & it makes me furious how much lying & reinvention of History the Hard left is doing. Basically, they put THEIR president in a box by waiting until the Legislature & Executive Branches had no power. Now they demand renogiation in weakness after the Legislature LET THE ESTATE TAX EXPIRE LAST YR. to ZERO. let's see 0% VS 35% tax rate. Easy decision! Truly despicable!

Posted by: carolerae48 | December 15, 2010 4:38 AM | Report abuse

That republicans and their supporters have the gall to claim that the upper 1% deserve a continued tax cut, in the greatest recession since the great depression is truly breath taking. Millionaires whining about paying taxes in said great recession while middle and lower middle class people are visiting food pantries, or trying to avoid being homeless or attempting to hold onto a precarious job is truly the definition of arrogance and I hope the upper 1% chickens come home to roost with the equivalent of pitch forks......-SOON!!!!! They may think they can't be touched but they could be proven very wrong...

Posted by: ontour17 | December 15, 2010 11:46 PM | Report abuse

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