issue: Tax

How a Wireless Tax Bill Can Spread Holiday Cheer

Posted on by The Progressive Policy Institute

Most of us would be lost without our cell phones, tablets, and other wireless devices.  We rely on them so much it’s hard to imagine how we could function without 24 hour access to Twitter, Facebook, and email. That means we are willing to pay up each month – for the service connection charge, one-size-fits-all data access plan, and all the taxes and fees that go with it.

And all of the wireless taxes and fees that go with it certainly add up – to about 17.2 percent of our monthly bill according to a new report by Scott Mackey. That’s up from 16.3 percent in 2010, a 5.5 percent increase in just two years.  Not a very festive thought during the holiday season.

But there is one tax bill currently in Congress that may spread some holiday cheer just yet. The Wireless Tax Fairness Act, if passed, would provide a five-year reprieve on any tax increases for our wireless service.  That means no new state or local government wireless taxes through 2018.

A five-year reprieve on wireless taxes would of let us keep more of our money to spend on other things, like an increase in income and payroll taxes after the fiscal cliff. Or on the next iPhone, since it will be obsolete by the time our eligible discount-for-contract-renewal-once-every-two-years comes up (and who wants to wait that long?). Continue reading “How a Wireless Tax Bill Can Spread Holiday Cheer” →

Why Obama Dropped His $250,000 Tax Target

Posted on by The Progressive Policy Institute

Writing for The Wall Street Journal, PPI President Will Marshall explains why Obama should show some flexibility now and set the stage for a more comprehensive tax overhaul in 2013:

Barack Obama is under pressure from his left flank to break House Republicans on the wheel of higher marginal tax rates, but he is showing flexibility in negotiations with Speaker John Boehner. This is wise. By settling for something less than unconditional surrender, the president could get a deal that will avoid plunging the U.S. economy into austerity and set the stage for a historic tax overhaul next year.

So how do we get there from here? The first step is to resolve the dispute that has snagged the fiscal-cliff talks—how to raise taxes on the rich. To the horror of tea party purists, Mr. Boehner has acceded to higher tax rates on millionaires. Obama countered on Monday by proposing higher rates on households making $400,000 or more, and he lowered his overall revenue goal to $1.2 trillion from $1.6 trillion.

The president has the edge here. If Republicans refuse to accept higher rates for any wealthy taxpayers, there will be no deal. Then tax rates will rise for all Americans, and Republicans will be blamed for driving the economy off the cliff.

Read the piece at The Wall Street Journal.

Will Marshall on Obama’s Fiscal Cliff Policy

Posted on by The Progressive Policy Institute

Writing for Politico‘s Arena , PPI President Will Marshall discuses Obama’s fiscal cliff policy:

President Obama holds the whip hand on taxes.

He campaigned and won on the explicit promise of raising tax rates on the wealthiest two percent of Americans. It’s the closet thing to a mandate the 2012 elections produced. And polls make it clear that the public will blame Republicans if there’s no deal and we go off the cliff.

Deal or no deal, tax rates on the rich are going up. Unless they have a political death wish, Republicans can no longer hold the Norquist line.  So they’d be wise to negotiate with the president, angling for a top rate lower than the default rate of 39.6, in return for a promise to revisit the issue next year in the context of comprehensive tax reform. The more lawmakers succeed next year in broadening the tax base – by closing tax loopholes and preferences – the stronger argument they can make for lowering tax rates.

Read it at Politico.

 

 

Washington Insiders Tackle ‘Fiscal Cliff’ Policy Solutions

Posted on by The Progressive Policy Institute

Will Marshall was a panelist at the Fix The Debt policy conference on Tuesday, Dec. 4, discussing two of the biggest issues surrounding federal budget deficits and the national debt – tax reform and healthcare

The panel called on Pres. Obama and Congress to tackle the nation’s budget problems.  The group proposed fiscal policies for entitlements, discretionary spending and raising additional revenues.

Maya MacGuineas, head of the Washington-based Committee for a Responsible Federal Budget, provided introductory remarks and then Peter Cook, Bloomberg News, moderated discussions with leading corporate CEOs, top federal and state politicians along with advocacy groups and former World Bank President Robert Zoellick.

Watch the panel here.

 

 

Obama Counts Capital Gains

Posted on by The Progressive Policy Institute

The Herald Scotland quotes PPI President Will Marshall on Obama’s tax strategy for his second term:

It was a very close race and it showed a country that’s still very divided,” said Will Marshall, president of the Progressive Policy Institute. “But I think that the president does have a specific mandate for an end to tax breaks for the rich.”

Read the entire article here.

Why Romney’s Medicare Taxes Are So Low

Posted on by The Progressive Policy Institute

As the presidential candidates debate the fate of Medicare, it’s worth noting a very simple fact: Mitt Romney paid only 0.07% of his income in Medicare taxes in 2010. By comparison, the typical American worker paid 1.45% of his or her income in Medicare taxes plus an equal amount paid by the employer. In other words, Romney’s Medicare tax rate was about one-fortieth of the norm.

How did he manage this trick? The key is that investment income, which made up 97% of Romney’s total income in 2010, is not subject to payroll taxes that pay for Medicare or Social Security. That means he only paid Medicare taxes on his speaking and directing fees. If Romney had paid the full Medicare tax rate on all of his income, he would have paid about $628,000. Instead he paid $15,908.

Oddly enough, despite his relatively meager contribution, Mitt is also likely eligible for free Medicare coverage. Current Medicare rules stipulate that as long as he paid into the system for 10 years, he can still receive full coverage.

Because Romney is self-employed, he is paying both the employer and employee shares of the Medicare tax. We therefore compared his tax rate to the combined employer-employee rate for wage and salary workers (2.9% for Medicare taxes). And because he is self-employed Romney got to deduct a portion of his Medicare taxes to calculate his adjusted total income for tax purposes.

A new 3.8% Medicare tax on investment income for high income Americans, scheduled to go into effect in 2013 as part of healthcare reform, would dramatically boost the Medicare taxes paid by people with Romney-like returns. However, there are efforts underway in Congress to get it repealed.

In Slump, Localities Resort to Excise Taxes

Posted on by The Progressive Policy Institute

Nobody likes excise taxes—those annoying extra costs people notice only because of how narrow and random they are. They show up on hotel bills and cell phone bills. They are added on to the cost of alcohol, gasoline, and cigarettes. And the list keeps growing. For example, in 2010, Newark, New Jersey, imposed a 5% tax on rental cars while Baltimore imposed a 2-cent per bottle tax on soda.

New data from the Census Bureau shows just how much local governments relied on in-creases in excise taxes to fill budget holes during the recession. PPI calculates that excise tax revenues collected by local governments—not including gas or tobacco—increased 5.2% from 2007 to 2009, compared to a decline of 8.1% in national retail spending by consumers, including restaurants. Even when you add in gas and tobacco, excise tax revenues rose by 4.5% during the recession, while local government general sales tax revenues went up 1.6% and national output (GDP) declined by 0.6%.

The large growth in excise taxes relative to the drop in retail sales shows that during a time when incomes were down, local government turned to these narrow, selective taxes imposed on consumers to make up the balance. For example, two tourist meccas, Las Vegas and New York City, raised hotel room taxes in 2009.

While the data reported in the chart applies only to local governments, state govern-ments also looked to excise taxes to solve their financial woes. In fact, 22 states raised excise taxes on tobacco, alcohol, or motor fuel in 2008 and 2009, with 24 states enacting other types of excise tax increases during the same period.

Download the report:1.2012-Carew_In-Slump-Localities-Resort-to-Excise-Taxes

Why Obama Needs to Cut and Invest

Posted on by The Progressive Policy Institute

This article is part of a a series of international responses to Policy Network‘s discussion paper In the black Labour: Why fiscal conservatism and social justice go hand-in-hand.

To most Americans, fiscal responsibility is a question of political morality. If Democrats allow the debate to be framed as a choice between more deficit spending and debt reduction, they lose

Much to the perplexity of US liberals, the politics of debt reduction dominated Washington in 2010, despite a faltering economic recovery.

No one was more incensed by the seeming illogic of this than Paul Krugman. The influential New York Times columnist railed often against “premature austerity” and urged President Obama instead to open the spigots of federal spending. It was the standard Keynesian prescription, but it betrayed a political tin ear. To a public alarmed by large-scale public borrowing and spending, it sounded like throwing good money after bad.

After 2007, US budget deficits ballooned as the Bush and Obama administrations spent heavily to bail out the big banks (plus insurance and auto companies) and counter the worst recession since the 1930s. The federal deficit, $469 billion in 2008, zoomed to an eye-popping $1.3 trillion in 2011. Coming on top of the Bush tax cuts and two costly wars, this emergency spending pushed the US national debt over 70% of GDP.

Had this torrent of spending – reinforced by generous doses of monetary “easing” – unlocked business investment and cut the jobless rate, all might have been forgiven. But it didn’t, and public apprehension about exploding debts amid a jobless recovery rose steadily, reaching a crescendo in the 2010 elections. Republicans swept House races and, lashed on by the Tea Party, stormed into Washington determined to cut government down to size.

Thus 2011 became a year of fiscal brinkmanship. First the government was almost shut down last spring when budget talks broke down. Then came the summer showdown over raising the debt ceiling, which ended when Obama blinked and agreed to GOP demands for spending cuts rather than let America default on its debts for the first time ever. In the fall, a bipartisan “supercommittee” that was granted extraordinary powers to rein in deficits failed to reach agreement, triggering automatic domestic spending cuts in 2013.

Despite such nips and tucks, US leaders thrice failed to come to grips with the structural causes of America’s debt crisis: tax revenues well below historic norms, and the rapid growth of public health and pension costs as the baby boomers throng into retirement. This ensures that the debate over how to control the national debt – $15 trillion and growing – will be front and centre in the 2012 presidential election.

The public’s top priorities are jobs and reviving US competitiveness. But fiscal discipline also matters to most voters, especially the moderates and independents who hold the balance in close races. Only by embracing both goals can progressives forge an electoral majority in 2012. If Obama and the Democrats allow the fiscal debate to be framed as a choice between more deficit spending or debt reduction, they lose. If instead they champion fiscal restraint and focus the debate on the fairest and most growth-friendly way to achieve it, they can win.

That’s because Republicans have painted themselves in a corner by refusing to raise any new tax revenue to help solve the debt crisis. Americans don’t relish paying higher taxes, but they do want their elected leaders to work together to solve the country’s problems. House Republicans have repeatedly put their anti-tax dogma before their responsibility to govern, and have seen their public approval ratings tumble as a result.

In contrast, Obama appears eminently reasonable in calling for “shared sacrifice”, which in practice means reducing the debt with a mix of spending cuts and tax revenues. He has also put Republicans on the defensive for opposing tax hikes on the rich, even to pay for tax relief for working families.

But Obama can’t let his own party off the hook, either. If Republicans are in denial about the need for higher revenues, Democrats have yet to get serious about the other side of the fiscal equation – slowing the unsustainable cost growth of the big “entitlement” programmes: Medicare, Medicaid and Social Security. Washington has promised more to future retirees than it can afford to pay; the government recently put the funding gap at $34 trillion, many times larger than the entire US economy.

There’s nothing “progressive” about denying hard fiscal facts, yet many liberals cling to the habit of opposing any cuts in future benefits – even for wealthy Americans – as a breach of faith, if not a plot to kill social insurance in America. Not only is this stance blind to demographic and budget realities, it’s morally dubious as well.

If benefits for the elderly are deemed untouchable, then Congress will have to either raise taxes on everyone, including working families, or cut domestic spending to the bone, or both. Domestic spending (including defence) has already borne the brunt of the spending cuts agreed to last year. It is only 12% of the budget, but it includes all the key public investments progressives should be for – in infrastructure, education and workforce skills, science and technology – not to mention public health and safety and measures to alleviate poverty. To shield entitlements from cuts is, in effect, to give priority to retirees’ consumption over strategic investments in a more prosperous and equitable society.

There is little mystery over what it will take to solve America’s debt crisis. President Obama’s own Fiscal Commission says $4 trillion in debt reduction over the next decade is necessary to stabilise the national debt at around 60% of GDP. Hitting that ambitious target will require a political “grand bargain” in which Republicans accept increased tax revenues, and Democrats agree to trim benefits for affluent retirees in the future. Unfortunately, Obama’s reluctance to endorse his Commission’s blueprint has left his own party as well as the public in doubt about the depth of his commitment to fiscal stabilisation.

As the presidential race begins in earnest, Obama will come under growing pressure to offer bigger and more specific ideas for spurring economic growth and shrinking the national debt. He needs a concrete plan for restoring fiscal responsibility gradually, through a combination of tax and entitlement reform, while also boosting public investment. Properly sequenced, a “cut and invest” approach can attenuate the dilemma Krugman and others point to – the collision between the stimulative effect of public spending (and tax cuts) and the contractionary impact of fiscal retrenchment.

Adopting a 10-year framework for debt reduction will reassure nervous investors that Washington is determined to get its borrowing under control and protect the nation’s credit. By cutting debt service payments, it will redirect public spending from consumption to productive investment. It will reduce America’s dependence on foreign lenders (especially China) and rebuild the nation’s “fiscal reserve” so that it can borrow to meet future emergencies or downturns without plunging into Greek-style levels of debt.

The economic case for providing certainty about debt reduction is compelling. But most Americans don’t wear green eyeshades; for them, fiscal responsibility is a question of political morality. They see the nation’s runaway debt as emblematic of a corrupt political class that doles out slices of the public weal to privileged interests and rent-seekers in return for campaign contributions. The image of a bloated state that lives beyond its means powerfully buttresses the anti-government populism that resonates not only with Tea Partiers but also with the independent voters that progressives need to win back this year.

The good news for Obama is that the demands of economic growth and fiscal rectitude point in the same direction – away from America’s old economic model of debt-fueled consumption, towards a new progressive growth strategy based on higher levels of investment, faster innovation and expanded production.

Photo credit: Andrew.Speight

Newt Gingrich’s Tax Plan Is a Giveaway to America’s Global Elite

Posted on by The Progressive Policy Institute

The Atlantic “It starts very simply: Taxes, lower taxes.”

That was the first line of Newt Gingrich’s explanation of how he would create jobs, given at the December 10 Republican debate in Iowa. Gingrich talked about his desire to end the capital gains tax and cut the corporate income tax to 12.5%. In addition, Gingrich has proposed a 15% flat tax as an option for all Americans, going further than the 20% flat tax advocated by Rick Perry.

On one level, Gingrich’s intense focus on lower taxes fits current dogma in the Republican party, which puts tax cuts above almost everything else. He is playing to the conservative base, as a way of counteracting some of his other personal liabilities.

If enacted in their entirety, Gingrich’s proposed changes would turn the U.S. tax system from progressive to regressive. Someone earning $40,000 in wages could pay a higher tax rate than another person who made $400,000 a year in capital gains.

This shift from progressive to regressive is not acceptable, of course. The tax system should be a tool for reducing the stresses of inequality in the economy, not increasing it. That’s especially true now, coming out of such a devastating recession where so many American are unemployed or underemployed.

Read the full article at the Atlantic.

Wingnut Watch: Supercommittee Failure and the Gingrich Surge

Posted on by The Progressive Policy Institute

The official failure of the congressional “supercommittee” came and went without much hand-wringing in Wingnut World; indeed, the prevailing sentiment was quiet satisfaction that Republicans had not “caved” by accepting tax increases as part of any deficit reduction package. It was all a reminder that most conservative activists are not, as advertised, obsessed with reducing deficits or debts, but only with deficits and debts as a lever to obtain a vast reduction in the size and scope of the federal government, and the elimination of progressive taxation. For the most part, the very same people wearing tricorner hats and wailing about the terrible burden we are placing on our grandchildren were just a few years ago agreeing with Dick Cheney’s casual assertion that deficits did not actually matter at all.

It is interesting that throughout the Kabuki Theater of the supercommittee’s “negotiations,” the GOP’s congressional leadership came to largely accept the Tea Party fundamental rejection of any compromise between the two parties’ very different concepts of the deficit problem. From the get-go, Democrats were offering both non-defense-discretionary and entitlement cuts in exchange for restoring tax rates for the very wealthy to levels a bit closer to (though still lower than) their historic position. The maximum Republican offer was to engage in some small-change loophole closing accompanied by an actual lowering of the top rates in incomes, plus extension of the Bush tax cuts to infinity. Conservatives are perfectly happy to let an on-paper “sequestration” of spending take place, with the expectation that a Republican victory in 2012 will put them in a position to brush aside the defense cuts so authorized and then go after their federal spending targets with a real vengeance.

The GOP presidential candidates have offered two opportunities during the last week for wingnuts of a particular flavor to assess their views and character. The much-awaited Thanksgiving Family Forum in Des Moines was perhaps the first candidate forum of the cycle in which no one even pretended to set aside cultural issues in favor of an obsessive focus on the economy or the federal budget. The format, involving not a debate but a serial interrogation of candidates by focus group master Frank Luntz, was explicitly aimed at getting to each contender’s “worldview,” the classic Christian Right buzzword for one’s willingness to subordinate any and all secular considerations and choose positions on the issues of the day via a conservative-literalist interpretation of the Bible (i.e., one in which phantom references to abortion are somehow found everywhere, and Jesus’ many injunctions to social activism are treated as demands for private charity rather than redistributive efforts by government).

According to The Iowa Republican’s Craig Robinson in his assessment of the event, Rick Santorum, Michele Bachmann and Rick Perry were the only candidates who succeeded in articulating a “biblical worldview” under Luntz’s questioning. Newt Gingrich got secular media attention for his Archie Bunkerish “take a bath and get a job” shot at the dirty hippies of OWS, but inside the megachurch where the event was held, the star was probably Santorum, whose slim presidential hopes strictly depend on Iowa social conservatives adopting him as their candidate much as they united around Mike Huckabee in 2008.

It is interesting that immediately after the event, Rick Perry joined Santorum and Bachmann as the only candidates willing to sign the radical “marriage vow” pledge document released back in July by the FAMiLY Leader organization, the primary sponsor of the Thanksgiving Family Forum. This makes him eligible for an endorsement by FL and its would-be kingmaking founder, Bob Vander Plaats.  It appears a battle has been going on for some time in Iowa’s influential social conservative circles between those wanting to get behind a “true believer” like Santorum or Bachmann and those preferring to give a crucial boost to acceptable if less fervent candidates like Perry or Gingrich. The outcome of this internal debate, which was apparently discussed in a private “summit” meeting on Monday, will play a very important role in shaping the endgame of the Iowa caucus contest—as will the decision by Mitt Romney as to whether or not he will fully commit to an Iowa campaign (he is opening a shiny new HQ in Des Moines, which some observers are interpreting as an “all-in” gesture).

Without question, it became abundantly clear during the last week that the “Gingrich surge” in the nomination contest is real, or at least as real as earlier booms for Bachmann, Perry and Cain. The last five big national polls of Republicans (PPP, Fox, USAToday/Gallup, Quinnipiac and CNN) have all showed Gingrich in the lead. The big question is whether and when his rivals choose to unleash a massive attack on the former Speaker based on their bulging oppo research files featuring whole decades of flip-flops, gaffes, failures and personal “issues.”

Interestingly, though, Gingrich may have already opened the door to suspicious wingnut scrutiny without any overt encouragement from his rivals. During the last week’s second major multi-candidate event, the CNN/AEI/Heritage “national security” debate last night, Gingrich may have ignored the lessons of the Perry campaign by risking his own moment of heresy on the hot-button issue of immigration, calling for a Selective Service model whereby some undocumented workers with exemplary records could obtain legal permanent status if not citizenship. He was immediately rapped by Romney and Bachmann for supporting “amnesty.”  We’ll soon see if Newt’s long identification with the conservative movement and his more recent savagery towards “secular socialists” will give him protection from such attacks, or if his signature vice of hubris is once again about to smite him now that he’s finally become a viable candidate for president.

Wingnut Watch: End-of-the-Year Standoff

Posted on by The Progressive Policy Institute

The end of the calendar year always means an assortment of “temporary” policies are approaching expiration, including some (e.g., upward revision of reimbursement rates for Medicare providers, and a “patch” to avoid imposition of the Alternative Minimum Tax on new classes of taxpayers) that happen every year. And then there are other expiring provisions central to the Obama administration’s efforts to deal with the recession, most notably unemployment benefits for the long-term unemployed, and last year’s major “stimulus” measure, a temporary Social Security payroll tax cut.

With the collapse of the deficit reduction supercommittee and an uncertain future ahead for the “automatic sequestrations” of spending that are supposed to subsequently occur, leaders in both parties are especially sensitive at the moment about taking steps on either the spending or revenue side of the budget ledger that add to deficits. But some of the “fixes” mentioned above are political musts, while others are highly popular or scratch particular ideological itches. It will be interesting to see whether conservative activists wind up taking a hard line against deficit increasing measures, and indeed, against any cooperation with Democrats so long as their own demands for “entitlement reform” and high-end tax cuts are ignored.

The payroll tax cut is an especially difficult subject for conservatives. While it will be easy for them to reject Senate Democratic proposals to pay for an extension of the cut with a surtax on millionaires, it is certainly possible, as Senate Republican leader Mitch McConnell has acknowledged, to “pay for” this tax cut with spending cuts, perhaps even some that Democrats would consider supporting.

Some conservatives, however, view any deal with Democrats on this and any other fiscal issues as a deal with the devil. One of McConnell’s deputies, Sen. John Kyl, has argued that the payroll tax cut hasn’t boosted the economy (i.e., it is not targeted to “job creators,” the wealthy) and should be subordinated to tax cut ideas that supposedly do. In an argument that is getting echoed across Wingnut World, RedState regular Daniel Horowitz suggests that GOPers make any payroll tax cut extension conditional on a major restructuring of Social Security, which of course ain’t happening.

Since virtually all the end-of-year measures under discussion will boost the budget deficit, and there are limited noncontroversial “offsets” available (mainly “distribution” of new savings attributed to the drawdown of troops in Iraq and Afghanistan), the key question will be which ones conservatives choose to pick a fight over and which ones slide quietly past the furor on unrecorded voice votes and last-minute agreements. If congressional Republicans seem to be acting in too accommodating a manner, it would not be surprising to see GOP presidential candidates using them as foils for their own claims to the “true conservative” vote as the January 3 Iowa caucuses grow ever nearer.

For the umpteenth consecutive week, the presidential contest remained full of surprises and volatility. Herman Cain’s campaign, already losing steam after his poor handling of both sexual harassment/assault allegations and the most recent debates, took perhaps a terminal blow from a new, credible-sounding allegation (made, interestingly enough, via a local Fox station in Atlanta, not some precinct of the “liberal media”) of a long-term adulterous affair. While Cain is again denying he did anything wrong, conservatives are not rushing to his defense this time, and the general feeling is that his campaign is done.

If Cain actually withdraws, it has long been assumed he would endorse Mitt Romney. But as a new analysis by Public Policy Polling showed, Cain’s supporters are very, very likely to move virtually en masse to Newt Gingrich, whose star continued to rise last week. His big news was an endorsement by the New Hampshire (formerly Manchester) Union-Leader, that sturdy right-wing warhorse of GOP politics. This step immediately makes Gingrich the most formidable rival to Mitt Romney in the Granite State: the Union-Leader does not simply endorse and ignore candidates; it can now be expected to undertake a virtually-daily bombardment of front-page editorials defending its candidate and treating his intraparty opponents (particularly Romney) as godless liberal RINOs.

But the impact of the endorsement goes far beyond New Hampshire, given the Union-Leader’s reputation for the most abrasive sort of wingnuttery. It materially helps him solidify his reputation for conservative ideological regularity, which is about to be brought into serious question by all the other campaigns, which are doubtless sorting through their bulging oppo research files on the talkative former Speaker, trying to decide which lines of attack are most lethal.

So far the he’s-not-a-true-conservative attack on Gingrich has been largely limited to his new, dangerous positioning on immigration, unveiled in a recent debate. Gingrich has been quick to stress that his proposal for a “path to legalization” for some undocumented workers does not involve citizenship, and denies its beneficiaries any government benefits whatsoever. But Iowa’s highly influential nativist champion Steve King has already branded Newt’s plan with the scarlet A-word of “amnesty,” and Michele Bachmann is trying to draw a new line in the sand suggesting that true conservatives favor deportation of every single “illegal.”

At this point, the presidential contest appears to be something of a race between Gingrich and his past words and deeds. There is a small window between now and the period immediately before and after Christmas (when something of a truce is imposed) when his opponents can try to bury him as a flip-flopper, an inveterate bipartisan, and a guy whose personal life (not just his marriages and divorces, but his finances) has been less than godly. If they don’t get their act together to do so, he’s looking very strong in Iowa, and even if he loses to Romney in New Hampshire, Gingrich is currently sporting large polling leads in South Carolina and Florida. Particularly for those candidates (Perry, Bachmann, Santorum; Ron Paul is in something of a class by himself) still hoping to seize the mantle of the true-conservative-challenger-to-Romney after Iowa, it’s getting close to desperation time.

Photo credit: FNS/cc

Wingnut Watch: End-of-the-Year Standoff

Posted on by The Progressive Policy Institute

Senator KylThe end of the calendar year always means an assortment of “temporary” policies are approaching expiration, including some (e.g., upward revision of reimbursement rates for Medicare providers, and a “patch” to avoid imposition of the Alternative Minimum Tax on new classes of taxpayers) that happen every year. And then there are other expiring provisions central to the Obama administration’s efforts to deal with the recession, most notably unemployment benefits for the long-term unemployed, and last year’s major “stimulus” measure, a temporary Social Security payroll tax cut.

With the collapse of the deficit reduction supercommittee and an uncertain future ahead for the “automatic sequestrations” of spending that are supposed to subsequently occur, leaders in both parties are especially sensitive at the moment about taking steps on either the spending or revenue side of the budget ledger that add to deficits. But some of the “fixes” mentioned above are political musts, while others are highly popular or scratch particular ideological itches. It will be interesting to see whether conservative activists wind up taking a hard line against deficit increasing measures, and indeed, against any cooperation with Democrats so long as their own demands for “entitlement reform” and high-end tax cuts are ignored.

The payroll tax cut is an especially difficult subject for conservatives. While it will be easy for them to reject Senate Democratic proposals to pay for an extension of the cut with a surtax on millionaires, it is certainly possible, as Senate Republican leader Mitch McConnell has acknowledged, to “pay for” this tax cut with spending cuts, perhaps even some that Democrats would consider supporting.

Some conservatives, however, view any deal with Democrats on this and any other fiscal issues as a deal with the devil. One of McConnell’s deputies, Sen. John Kyl, has argued that the payroll tax cut hasn’t boosted the economy (i.e., it is not targeted to “job creators,” the wealthy) and should be subordinated to tax cut ideas that supposedly do. In an argument that is getting echoed across Wingnut World, RedState regular Daniel Horowitz suggests that GOPers make any payroll tax cut extension conditional on a major restructuring of Social Security, which of course ain’t happening.

Since virtually all the end-of-year measures under discussion will boost the budget deficit, and there are limited noncontroversial “offsets” available (mainly “distribution” of new savings attributed to the drawdown of troops in Iraq and Afghanistan), the key question will be which ones conservatives choose to pick a fight over and which ones slide quietly past the furor on unrecorded voice votes and last-minute agreements. If congressional Republicans seem to be acting in too accommodating a manner, it would not be surprising to see GOP presidential candidates using them as foils for their own claims to the “true conservative” vote as the January 3 Iowa caucuses grow ever nearer.

For the umpteenth consecutive week, the presidential contest remained full of surprises and volatility. Herman Cain’s campaign, already losing steam after his poor handling of both sexual harassment/assault allegations and the most recent debates, took perhaps a terminal blow from a new, credible-sounding allegation (made, interestingly enough, via a local Fox station in Atlanta, not some precinct of the “liberal media”) of a long-term adulterous affair. While Cain is again denying he did anything wrong, conservatives are not rushing to his defense this time, and the general feeling is that his campaign is done.

If Cain actually withdraws, it has long been assumed he would endorse Mitt Romney. But as a new analysis by Public Policy Polling showed, Cain’s supporters are very, very likely to move virtually en masse to Newt Gingrich, whose star continued to rise last week. His big news was an endorsement by the New Hampshire (formerly Manchester) Union-Leader, that sturdy right-wing warhorse of GOP politics. This step immediately makes Gingrich the most formidable rival to Mitt Romney in the Granite State: the Union-Leader does not simply endorse and ignore candidates; it can now be expected to undertake a virtually-daily bombardment of front-page editorials defending its candidate and treating his intraparty opponents (particularly Romney) as godless liberal RINOs.

But the impact of the endorsement goes far beyond New Hampshire, given the Union-Leader’s reputation for the most abrasive sort of wingnuttery. It materially helps him solidify his reputation for conservative ideological regularity, which is about to be brought into serious question by all the other campaigns, which are doubtless sorting through their bulging oppo research files on the talkative former Speaker, trying to decide which lines of attack are most lethal.

So far the he’s-not-a-true-conservative attack on Gingrich has been largely limited to his new, dangerous positioning on immigration, unveiled in a recent debate. Gingrich has been quick to stress that his proposal for a “path to legalization” for some undocumented workers does not involve citizenship, and denies its beneficiaries any government benefits whatsoever. But Iowa’s highly influential nativist champion Steve King has already branded Newt’s plan with the scarlet A-word of “amnesty,” and Michele Bachmann is trying to draw a new line in the sand suggesting that true conservatives favor deportation of every single “illegal.”

At this point, the presidential contest appears to be something of a race between Gingrich and his past words and deeds. There is a small window between now and the period immediately before and after Christmas (when something of a truce is imposed) when his opponents can try to bury him as a flip-flopper, an inveterate bipartisan, and a guy whose personal life (not just his marriages and divorces, but his finances) has been less than godly. If they don’t get their act together to do so, he’s looking very strong in Iowa, and even if he loses to Romney in New Hampshire, Gingrich is currently sporting large polling leads in South Carolina and Florida. Particularly for those candidates (Perry, Bachmann, Santorum; Ron Paul is in something of a class by himself) still hoping to seize the mantle of the true-conservative-challenger-to-Romney after Iowa, it’s getting close to desperation time.

Photo credit: FNS/cc

Supercommittee Puts GOP on Spot

Posted on by The Progressive Policy Institute

Is the supercommittee President Obama’s revenge?

After last summer’s showdown over raising the debt ceiling, Obama was roundly criticized for agreeing to a deficit-reduction deal that was all spending cuts and no tax hikes. Democrats, disconsolate over this seeming capitulation to House Republicans, saw it as the low-water mark of his presidency.

Yet the deal also created the bipartisan supercommittee, which was charged with finding at least $1.2 trillion (over 10 years) in additional cuts by Nov. 23. The supercommittee has a strong incentive to succeed, since its failure will trigger an automatic, equivalent cut in domestic and defense spending.

Now, as the supercommittee spars over dueling Democratic and Republican plans for meeting the target, Republicans are on the hot seat.

Democrats this week reportedly proposed a $3 trillion package over the next decade, including $1.2 trillion in revenue increases. Republicans came back with a smaller counteroffer of $2.2 trillion. The reason, of course, is that the GOP’s anti-tax fanaticism prevents it from matching the Democrats’ debt-reduction plan without proposing truly punishing cuts in federal spending.

The Republicans claim their package includes revenues ($640 billion worth) but much of it seems to come not from actual changes in the tax code, but from increased fees and co-pays in Medicare. The rest is supply side fairy dust—around $200 billion from the higher growth supposed to be generated by future tax reform.

The upshot is that Democrats now look like they are more serious about getting the nation’s debt under control, and in a way that spreads the pain of fiscal retrenchment more equitably. Republicans look like their top priority isn’t restoring fiscal discipline, but shielding the wealthy from higher taxes.

If they refuse to deal on taxes, they’ll likely be blamed for the supercommittee’s failure and subsequent trigger of automatic spending cuts. The GOP may not care about slashing domestic spending—even though it includes critical public investments in science and technology, infrastructure and education—but they do care about defense spending, which would take a whopping, half-trillion-dollar hit.

Of course, Republicans could offer a minimum bid of $1.2 trillion in spending cuts to avoid across-the-board cuts, and call it a day. Supercommittee Democrats, however, shouldn’t let them off the hook without substantial concessions on taxes. Democrats don’t want to trigger big domestic and defense spending cuts either, but it’s better to force the issue of GOP intransigence on taxes now than during the debt ceiling debate, when America stood on the brink of default.

Even if the supercommittee does its job and approves a bipartisan debt reduction plan by Thanksgiving, it’s by no means clear that Congress will pass it. Members of Congress hate nothing more than being “shut out of the process,” and many bridle at the idea of delegating power to 12 supercommittee members to craft a massive plan and present it for an up or down vote.

Complaining that he has “no stake” in the outcome, Democratic Rep. Henry Waxman added, “I find it an outrageous process, that 12 people could rewrite the laws of the United States and come up with ideas just setting there and getting into some mood that might influence them at the moment.”

Over on the right, there’s little love for the supercommmittee. Nothing is more predictable than that Tea Party zealots will rise in righteous condemnation of any plan that includes higher tax revenues, thus breaking the party of Lincoln’s solemn covenant with anti-tax gadfly Grover Norquist.

More favorable are congressional moderates, whose main concern is that the supercommittee won’t go far enough. Nearly 100 Members from both parties signed a letter urging the supercommittee to cut $4 trillion over the next decade, the amount most budget experts believe is necessary to stabilize the debt. For pain-averse lawmakers, the logic of “going big” and not having to keep repeating these excruciating political battles over spending and taxes is pretty compelling.

If the supercommittee fails, the economic and political consequences won’t be pretty. Fresh evidence that the nation’s political leaders are incapable of coming to grips with the debt crisis will no doubt cause the markets to nosedive, and could even lead ratings agencies like Standard & Poor to downgrade the nation’s credit again. This could cast a pall over the economy, just as it’s finally showing some signs of life.

Worst of all, it would deepen the public’s already explosive anger at Washington. A mere nine percent of the voters approve of the job Congress is doing, and 89 percent say they don’t trust the government to do the right thing. By going big on debt reduction, Congress could start earning back that trust.

Photo credit: DonkeyHotey

Wingnut Watch: Flat Tax Fanatacism

Posted on by The Progressive Policy Institute

Plans to reduce the taxes of wealthy “job creators” remained on the minds of conservatives this last week, with Rick Perry harnessing the reboot of his floundering presidential campaign to a “flat tax” proposal that’s really an alternative maximum tax for people currently in the higher brackets. In an effort to get conservative voters to think about everything and anything other than immigration policy in considering him, Perry nestled his tax plan in a larger package that includes total suspension of federal regulations for a period of time, uninhibited exploitation of fossil fuel resources, and a balanced budget constitutional amendment that includes a permanent limitation on spending as a percentage of GDP (this last item is an item beloved of SC Sen.–and Wingnut Generalissimo–Jim DeMint, whose endorsement Perry would surely love to secure prior to next January’s Palmetto State primary).

Perry’s tax plan and the optional nature of its rates raise a lot of questions, but its shape-shifting features are politically convenient, particularly as compared to Herman Cain’s 9-9-9 proposal, with its unambiguously regressive thrust and its reliance on an unpopular national sales tax. With Newt Gingrich also hawking a flat tax scheme, the conquest of the Republican Party by cranky tax schemers is now very far advanced.

More generally, the GOP presidential contest is revolving around the broadly shared expectation that the campaign of Herman Cain, who now actually leads Mitt Romney in a plurality of national polls, and is attracting three and four times as much support as Rick Perry, will soon collapse. Cain added to that expectation last week with an unforced error of considerable magnitude: a rambling series of remarks in an interview by CNN’s Piers Morgan suggesting the candidate thinks of abortion as a private matter in which government should not interfere. By the time Cain realized his mistake and reiterated his position favoring a ban on all abortions without exception, a lot of damage had been done to his reputation for competence and ideological reliability, particularly among the social issues activists who exert disproportionate power in the Iowa Caucuses. Iowa social conservative kingmaker Bob Vander Plaats summed up the general impression by saying Cain was beginning to sound like the John Kerry of 2004 (not a compliment). It probably wasn’t a coincidence that Cain’s long streak of wowing conservative audiences at joint candidate events came to a decided end in Iowa over the weekend, when he was distinctly underwhelming in a speech to the annual banquet of Ralph Reed’s Faith and Freedom Coalition.

With Cain’s support levels in Iowa (and other states) already being called into question because of his lack of organization in the state and his low number of visits, it remains to be seen who would benefit from a theoretical Cain collapse. While many observers think the situation in Iowa is ripe for Mitt Romney to swoop in and score a knockout blow over a divided conservative opposition, he’s not exactly showing signs of doing so (he skipped the FFC event, for example, even though he had just made his first brief visit to Iowa since April). Perry is definitely plotting an Iowa comeback, beginning TV ads this week and spending time on such potentially productive activities as a pheasant-hunting jaunt with congressman Steve King, perhaps the only political figure with the power to absolve Perry from his heresies on immigration policy.

You’d think the potential vacuum on the Right would provide an opening for a comeback by Rep. Michele Bachmann, the winner of the August Iowa GOP Straw Poll. But Bachmann’s campaign is visibly struggling, and attracting media attention only for such negative developments as the mass resignation of her NH staff.

Rick Santorum continues to seek to outflank the field on social issues (Cain’s abortion gaffe was a major gift to him), and is totally devoted to an Iowa-centric campaign that will eventually take him to all 99 counties in that state. But the only also-run candidate showing forward momentum in polls in Iowa, or indeed in other early states, is none other than Newt Gingrich, whose strategy of using candidate debates to show off his policy chops and attack the moderators has lifted him ahead of Perry in most surveys. Gingrich and Cain recently accepted a Texas Tea Party invitation to hold a “Lincoln-Douglas”-style one-on-one debate in the Lone Star State next month. Texas is hardly a competitive state so long as Perry is running, and isn’t an early state, either, so this debate decision has reinforced suspicions that both Gingrich and Cain are “business plan candidates” who are in the race to promote their books and television careers rather than to secure the nomination.

But it is clear there will remain for the immediate future strong demand for a “true conservative” candidate who can keep Mitt Romney from running away with the nomination. Just yesterday Romney provoked fresh outrage from conservatives by refusing to take sides in the red-hot Ohio referendum on Gov. John Kasich’s legislation to cripple public-sector unions, SB 5. Romney was almost immediately forced to recant, but that step, of course, simply reinforced his reputation as a flip-flopper.

When you add it all up—Perry’s terrible mispositioning on immigration, Cain’s sloppy campaigning and unnecessary abortion gaffe, and Romney’s incurable tin ear for conservative sensibilities—this is a presidential candidate field with an abundant ability to take a bold step forward onto a garden rake. Like a football game decided by the “turnover margin,” the GOP nomination could ultimately go to the candidate who manages to go for a few crucial weeks at a time without coughing up the ball.

Photo Credit: Mays Business School

Wingnut Watch: A Fair Tax?

Posted on by The Progressive Policy Institute

One of the more exotic policy tendencies of Wingnut World is a history of strong and pervasive support for replacing income taxes with higher consumption taxes. Many conservatives support this step on grounds that it will promote savings and investment, which is another way of saying that they believe capital should not be taxed at all. Others like the idea of getting rid of the compliance costs and “bureaucracy” associated with income taxes, and still others are attracted to the “flat” nature of consumption taxes, which do not vary based on the taxpayer’s personal circumstances (whether it’s income, or the various characteristics that earn deductions and credits against income tax liability).

The so-called “Fair Tax”—the general term used for any number of schemes for shifting from federal income to consumption taxes—has been a hardy perennial for years among conservative activists and talk show hosts. Among the latter was Herman Cain, whose so-called 9-9-9 (replacing current federal income, capital gains and estate taxes with a 9 percent national sales tax, a 9 percent VAT on corporations, and a 9 percent income tax with no deductions or credits) plan is explicitly advertised as an intermediate step towards a “Fair Tax.” Like the “Fair Tax,” Cain’s plan seems to have great curb appeal for rank-and-file conservatives, but less so for opinion-leaders.

Cain’s recent surge in the polls as a presidential candidate has suddenly put 9-9-9 and the broader movement to get rid of progressive income taxes under a microscope. On the eve of Tuesday night’s candidates’ debate in Las Vegas, the Urban Institute/Brookings Tax Policy Center published an analysis of the distributional implications of Cain’s proposal that immediately became fodder for his rivals and for critics generally. Faced with claims that 9-9-9 would boost total taxes for most American households with annual income under $200,000, Cain was reduced to repetitive denials without much in the way of explanation. Even among conservatives who are not troubled morally or politically by the idea of making federal taxes massively more regressive, the argument that 9-9-9 would give Uncle Sam a new instrument for confiscating private dollars (the national sales tax) is getting some traction. One of 9-9-9’s designers, the ubiquitous Steven Moore, is already urging Cain to replace the sales tax proposal with a 9 percent payroll tax.

There is virtually no broad-based polling of 9-9-9 available (figuring out how to describe it in a survey question is a real challenge, particularly since Cain and his advisers are not always very precise). But a new HuffPo/Patch survey of activist leaders in early caucus and primary states (whom they call “Power Outsiders”) shows lukewarm support at best.

The timing of the intra-party assault on Cain’s signature domestic policy proposal is no coincidence. It is based on the belief that he is a flash-in-the-pan phenomenon whose lofty support levels represent a “parking place” for conservatives who don’t like Mitt Romney but haven’t been sold on any of his competitors, and find Cain interesting and refreshing, not to mention his usefulness as an all-purpose antidote to suspicions that conservative hatred of Obama is at least partially racial in origin.

Tuesday night’s debate represents a transition point from a six-week stretch of frequent debates, to the run-up to actual voting events. Earlier this week another important piece of the nominating contest puzzle fell into place when Iowa set a firm date of January 3 for its “First-in-the-Nation Caucus.” There remains a not-insignificant chance that New Hampshire will schedule its primary for early in December in order to avoid too-close proximity to Nevada Caucuses currently planned for January 14, though it’s more likely that Nevada will move a few days in order to let NH have its event on January 10. Any way you slice it, though, candidates have a relatively brief window of time to get their act together before voters in the early states begin to become distracted by the holidays, which will also make negative campaigning problematic on grounds that it conflicts with the “spirit of the season.”

With Mitt Romney presumed to have a commanding lead in two of the five January events (NH and Nevada), developments in Iowa, South Carolina and Florida are of particular interest at this juncture. New NBC/Marist polls in SC and FL show Cain and Romney basically tied with just under a third of the vote each, with Perry mired in the high single-digits. This state of affairs is close to where the most recent polling in Iowa has placed the race there as well. If, as the conventional wisdom suggests, Cain soon begins to lose support because of attacks on 9-9-9, his lack of policy sophistication generally, or simply the fading novelty of his candidacy, the big question is whether those votes go back to Rick Perry, are scattered among various candidates, or even go in significant numbers to Mitt Romney. In any event (barring a December NH primary), media coverage of the campaign will now focus ever-increasingly on Iowa, where the picture is complicated by the relative importance of the “ground game” and Romney’s decision so far not to seriously compete in the state. Cain’s organizational weakness in Iowa is perhaps best illustrated by the fact that his former state director (who quit because her candidate seemed to be ignoring the state) just signed up for a less elevated job with Rick Santorum. So in the place where the 2012 nominating contest formally begins in less than eleven weeks, the two front-runners in that state and nationally are not really running at all. Something’s got to give, and soon.

Photo Credit: Gage Skidmore