The Democrats’ Great Tax Caper

Matthew Yglesias is sanguine about the Senate Democrats’ new assurance that they will accept nothing less than the Obama version of Bush tax rate extensions. He suggests a plan:

You write two bills. One is called the “Middle Class Tax Cut Extension Act of 2012” and one is called the “Middle Class Tax Cut of 2013.” One says the Bush tax will be partially extended, the other says that having expired the Bush tax cuts will be partially reinstated. You hold one in your right hand and the other in your left hand, and you keep trying to get votes on the one through December 31, 2012 and start trying to get votes on the other starting on January 2, 2013

It sounds a bit like the plan Democrats already have in place, so we can already see the seams. The majority party is circulating a version of the tax extensions that keep rates for ever bracket under $250,000. Already on the fence over that: Sen. Joe Lieberman, D-Conn., and Sen. Jim Webb, D-Va. It’s worth pointing out that both of these senators are retiring, and face exactly zero political consequence if, in December 2012, they vote to enslave the rich by making them pay Clinton tax rates on income above $250,000. Dems in disarray, right? Close: But Sen. Ben Nelson, D-Neb., who is also retiring, is open to the plan. Sen. Joe Manchin, D-W.V., who is up for re-election this year in a state where less than 1.5 percent of people would be hit by the partial Clinton tax rate resurrection, has not ruled it out. You’ve now got 51 Democrats potentially locked in to the “Middle Class Tax Cut.” It’s essential that Democrats keep that voting bloc, because if it looks like they’ve only got 50 or 49 votes, the whole strategy crumbles.*

Republicans, for the moment, are resorting to pretty obvious counterattacks. The Wall Street Journal editorial page scratched some notes in GOP hymnals, arguing that the Democratic plan “holds the economy hostage,” because bringing back all the tax rates would be awful. “I didn’t think they’d literally shoot the hostage!” snapped Sen. Jon Kyl, R-Ariz., as he talked to reporters yesterday about the Democrats’ play. “Hostage” is the preferred term. But Democrats rely on the ill will and bad PR from last year’s debt limit crisis and bet that they can keep the onus on Republicans, who do not want to scrap any of the rates at all. Both parties are holding hostages! The Democrats usually just give up more quickly.

*If Republicans do well in Senate races and seize control – say they win Montana, Missouri, Nebraska, and North Dakota, while Democrats lost Massachussetts – they can emphasize that the majority-Dem Senate is lame duck and shouldn’t make policy. That doesn’t usually influence votes, though. See the 2010 Don’t Ask Don’t Tell vote, see the Clinton impeachment in 1998. Democrats get their leverage if Obama beats Romney.