The mainstream position of the Democratic Party is that over the medium term taxes should be higher than they are now but lower than full expiration of the Bush tax cuts would make them. Achieving this policy objective requires the following steps:
1. Barack Obama is re-elected.
2. Barack Obama vetoes full extension of Bush tax cuts.
3. Bush tax cuts expire.
4. Since now Republicans and Democrats both agree that taxes are too high, the White House proposes the “Obama tax cut” package.
This is not a foolproof plan since obviously Obama might lose the election. But if Obama loses, then Republicans will just do whatever they want on taxes one way or another.
The strange thing about my plan is that even though almost every single Democratic member of Congress agrees that taxes should be higher than they are now but lower than full expiration would make them, this plan is not the consensus Democratic approach. Instead on Friday morning I found myself sitting through a baffling discussion of tax strategy with Sen. Sheldon Whitehouse and some folks from the new labor-backed group Americans for Tax Fairness, in which this sequencing strategy seemed off the table. Instead the focus was entirely around the idea that liberal messaging would be so effective as to mobilize the public into coercing Republicans to take a pre-expiration vote to partially repeal the Bush tax cuts. Messaging is, obviously, an important part of politics and any strategy needs an element of that. But in this particular case, the merits or demerits of any particular message pale in comparison to the difference in the tactical situation before the Bush tax cuts expire (when one party says taxes are too low and the other says they’re too high) and after expiration (when both parties will agree that taxes are too high).
In follow-up discussion, Democratic staffers seemed flabbergasted that I would even suggest this strategy, but what I find flabbergasting is the extent to which it’s not being considered in high-level Democratic circles.
Instead the party seems to be in the grips of a dangerous obsession not with increasing tax revenue but with getting Republicans to vote for an increase in tax revenue. The Obama administration appeared to believe in the winter of 2010-2011 that the debt ceiling would be a good opportunity to force Republicans to cast an affirmative vote for higher revenue. The result was a long and economically costly debate that failed to produce Obama’s desired “grand bargain.” Strangest of all, throughout that period Democrats seemed willing to play odd baseline games in which anything that increased revenue above the current policy path counted as a GOP concession even though simply letting existing law take its course will make taxes even higher. Now once again we have Sen. Max Baucus, D-Mont., talking confidently about how Republicans will vote for higher revenue rather than talking about how higher revenue is guaranteed unless Democrats surrender.
But make no mistake about this. Unless Congress and the White House agree to change the law, taxes will automatically go up. If Democrats want more tax revenue, there is absolutely no need to get even a single Republican to vote for it. All they have to do is stop themselves from voting for a full extension of the Bush tax cuts.
