Republican “Doomsday Plan” Allows Tax Increase, Uses Debt Limit For Future Leverage
Jonathan Karl has early notice of a potential “doomsday” plan devised by Republicans:
It’s quite simple: House Republicans would allow a vote on extending the Bush middle class tax cuts (the bill passed in August by the Senate) and offer the president nothing more – no extension of the debt ceiling, nothing on unemployment, nothing on closing loopholes. Congress would recess for the holidays and the president would face a big battle early in the year over the debt ceiling.
Republicans may vote “present” on the bill en masse, so they don’t take ownership of a tax increase (even though the Senate bill just allows top marginal tax rates to rise as scheduled).
But if the vote includes just the Senate bill, where does that leave us? On January 1, taxes go up on not just the top marginal rates, but on every income earner, when the Bush tax cuts expire. Two million people immediately lose their unemployment benefits. Medicare reimbursement rates drop 30%. The sequester on defense and discretionary spending goes into place, and while OMB has the ability to lessen the impact there for several weeks, they can’t hold back the tide forever. And the country will hit the debt limit by the end of February or the beginning of March.
Karl says that the sequester could get delayed for a year as part of the House GOP doomsday scenario. But either way, this would put Democrats in a tough spot. They would lose the tax leverage after having won that battle. They would see an economic slowdown from the end of extended unemployment benefits, the payroll tax cut and possibly the sequester. And they would have to battle over a debt limit increase without the tax rate discussion to fall back on.
This actually shows some recognition that the fiscal slope is not solely a tax discussion. Even if you solve the tax puzzle, there are lots of other moving parts. Republicans learned that the debt limit gives them real leverage as long as the President doesn’t resort to the Constitutional option, using the 14th Amendment to essentially render the debt limit moot. I’d almost guarantee articles of impeachment in the House in that event.
If the President doesn’t go that route, and he doesn’t direct his Treasury Secretary to mint a $1 trillion platinum coin, then you have a situation where House Republicans have the power to control events, and Democrats have serious needs – a debt limit increase, restoration of extended unemployment benefits, etc. The Republican position may be unpopular, but if they’re willing to press the issue, they can force through many of their priorities. The increase in top marginal rates will soon turn into a hollow victory on partisan grounds.
Photo by Gage Skidmore under Creative Commons license