Pelosi’s election-year tax ploy demolishes Democrats’ leverage

Let’s say you’re shopping for a new car. You’re willing to pay $25,000. The sticker price is $30,000. Would your first offer to the dealer be $29,000?

Of course not. But that’s the equivalent of what House Democrats are doing as they seek to execute a too-cute-by-half strategy on the George W. Bush tax cuts.

The Bush tax cuts, you might recall, are set to expire at the end of this year. Most Republicans want to make the cuts permanent. For everybody.

Sounds appealing, but few

To reduce deficit, end Bush’s cuts

things would make it harder to get control of the nation’s budget deficits and its worsening debt. The tax cuts were unaffordable when President Bush pushed them through Congress in 2001, and they’re even more destructive now that the nation’s debt has grown to ruinous levels.

The best course would be to phase the cuts out for everyone and return to the tax rates that prevailed during the Clinton administration, when the budget was balanced and the economy boomed. Ending the cuts — which Congress could do simply by doing nothing, something it does extremely well — would reduce deficits by more than $3 trillion over the next decade. Alternatively, Congress could radically simplify the tax code, simultaneously raising more money and eliminating various deductions and credits. Don’t hold your breath. Republicans have long made a near religion out of obsessive opposition to even the tiniest tax increases; recall that during a debate in Iowa last August, all eight would-be GOP presidents raised their hands to reject a hypothetical deficit deal with $10 in spending cuts to $1 in tax increases.

Now Democrats seem to have jumped on board, if only by out-smarting themselves. Until recently, Democrats have been determined to end the Bush tax cuts for families making more than $250,000 — a poor compromise, but better than leaving all the cuts in place.

In an election-year ploy, though, House Democratic Leader Nancy Pelosi of California has upped the ante, calling on Republicans to hold an immediate vote on making the tax cuts permanent for anyone making less than $1 million a year, while ending the cuts for everyone who makes more.

What’s really going on here, of course, is that Democrats want to embarrass Republicans by making them defend tax cuts for millionaires and billionaires.

Pelosi and like-minded allies such as Sen. Charles Schumer, DN.Y., seem to be forgetting two things: First, Republicans are beyond embarrassment on taxes. And second, allowing the Republicans to move the goal posts on tax cuts to $1 million is a colossal error that will haunt Democrats when real negotiations take place, as they eventually must. What are Democrats planning to say then? We were just kidding?

At a time when any fair deficitreduction plan requires a combination of spending cuts and revenue increases, Democrats have foolishly given Republicans their de facto endorsement for ruling out tax hikes for anyone but the super-wealthy.

To get a sense for how much leverage the Democrats are conceding, consider these numbers, from the Congressional Budget Office and Citizens for Tax Justice:

-Ending all the Bush tax cuts would reduce deficits by about $2.8 trillion over 10 years, not counting another half-trillion in debt service savings.

-Ending the tax cuts for families making over $250,000 (and individuals over $200,000) would cut deficits by about $849 billion.

-Ending the tax cuts for anyone making more than $1 million would cut deficits by only about $480 billion.

Put another way, the House Democrats are entering tough negotiations with the Republicans by going 83% of the way toward the GOP position. Whether you’re buying a car or trying to balance the budget, that’s no way to bargain.