As progressives sift through the entrails of the budget deal, there is some guarded optimism on two grounds.
First, despite claims by House Speaker John Boehner, it turns out tax increases, or other revenue enhancements such as loophole closings, would count towards the $1.5 trillion dollars in mandatory deficit reduction to which Congress and President Obama agreed.
The details are mind-numbingly technical, but for fiscal masochists, the Center on Budget and Priorities has a good explanation.
Also, the Bush tax cuts automatically expire at the end of 2012. So all Congress and the president have to do is . . . nothing, and $830 billion more in revenue pours into the Treasury’s coffers, presumably reducing the need for spending cuts dollar for dollar. Actually, that figure just counts the money from extending the cuts for the wealthiest two percent. Congress would have to act affirmatively in order to prevent tax increases from hitting the bottom 98 percent, which it would surely do.
In Barack Obama’s Washington, where progressives grasp at straws, this passes for good news.
But here’s the bad news, in three parts.
First, the likelihood of Republicans on the super-committee of voting for tax increases is close to zero. We might get a tiny pittance from loophole closings in exchange for mostly program cuts.
Second, even though the Bush tax cuts expire under present law, Obama will need a fair amount of spine to resist Republican demands to extend them as part of the next budget deal.
And even if the Bush tax were to expire, under the budget deal just enacted the other budget cuts take effect anyway. The $830 billion in tax revenues would not automatically count towards the $1.5 trillion in mandated budget cuts. The only practical way this can be reversed is if Democrats take back the House, hold the Senate, re-elect Obama, and alter the law.
Third, and most depressingly, let’s say all of that happens. Raising taxes, even on the top two percent, is still the wrong policy unless all of that money -- and more -- is redirected to public investment and job creation. Obama is talking about fairly puny measures such as an extension of a payroll tax holiday, which just won’t create very many jobs.
So we need not just tax hikes on the wealthy rather than public spending cuts. We need a whole new strategy and rhetoric on economic recovery—and massive increases in public investment.
Rep. Jan Schakowsky’s Emergency Jobs to Restore the American Dream Act would increase public investment by $227 billion while reducing the deficit. That would be a good start. She’s a member of the House Democratic leadership. She and the president should talk.