Democrats, led by former co-chair of the Super Committee Patty Murray, continue to threaten that they will let a host of tax and spending measures expire at the end of 2012 if they don’t get an acceptable policy solution:
In a speech Monday, Sen. Patty Murray (Wash.), the Senate’s No. 4 Democrat and the leader of the caucus’s campaign arm, plans to make the clearest case yet for going over what some have called the “fiscal cliff.”
“If we can’t get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013,” Murray plans to say, according to excerpts of the speech provided to The Washington Post.
If the tax cuts from the George W. Bush era expire and taxes go up for everyone, the debate will be reset, Murray is expected to say. “Every proposal will be a tax-cut proposal,” according to the excerpts, and Republicans would no longer be “boxed in” by their pledge not to raise taxes.
Because Lori Montgomery is a hack, she frames this as Democrats risking a situation “that could plunge the nation back into recession.” But this is where the imagery of a fiscal slope versus a fiscal cliff is important. If we go into 2013 with the various tax hikes and spending cuts unchanged, the economy will not collapse all at once. Rather, the tax hikes in particular play out over a very long time frame, with some money in withholding changing, but not an appreciable amount to change near-term circumstances. Once you get past that first couple months things start to bite a little harder. But the 2012 tax situation is already locked in stone, and that is what will guide everyone’s April 2013 returns. The full effects of the fiscal slope really wouldn’t be felt until much later.
The trigger cuts are not really so similar. The cuts would have to come right away, and certainly the layoff notices, which by law must get distributed 60 days before any action, would go into effect early. Governors are trying to delay the issuance of layoff notices in the defense sector in particular.
So a game of chicken on the trigger is a harder sell. But you will not get anywhere without playing some hardball. And Democrats are learning that they have no leverage whatsoever over the tax issue unless they are willing to let them all expire and come back with a different round of tax cuts later. That’s the only way to occasion a split between the Bush tax cuts below $250,000 of income and above it. It’s worth noting that creating an arbitrary line at $250,000 ensures that progressive policy will probably get starved for a long time, absent unrealistic economic growth figures. It would be a tactical victory that presages a longer-term struggle. But at a time when Democrats are supremely unwilling to engage in even these tactical games, it’s at least a step. And when Mitch McConnell calls it “an outrageous ultimatum,” you know that it’s actually likely to work.