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December 13, 2010

Senate Tax Vote Underway
Cloture Reached

Above The Post Update:
The vote is still going on (and will for another hour) but the bill already has 60 votes, so the rest is just bookkeeping at this point. Once they finish up this cloture vote, they can move on to final passage, which is just a formality.

Original Post:
Harry Reid is giving the Senate a break from important stuff like DADT and the DREAM Act to give the Senate a chance to prevent a massive tax hike. Sporting of him, isn't it? The vote just started but it will last for over two and a half hours to give Senators a chance to get back into town.

House Democrats, for all their bitching and moaning have been exposed as empty suits as their leader on the Budget Committee over the weekend announced they'd reluctantly pass the package.

Opinion has been divided on the conservative side over whether or not to support the deal. Most famously, Charles Krauthammer came out swinging against it. I think he's wrong simply for the fact that adopting the left's arguments that tax cuts or in this case, not raising taxes, "costs" the federal government is ceding way too much ground.

Keith Hennessey, Director of the National Economic Council under George W. Bush gives the deal a qualified thumbs up.

Let’s look at where the deficit increases in this bill come from.

All figures are from CBO and JCT, are relative to current law and are 10-year totals:

* Prevent income tax rate increases ($408 B)
* Prevent AMT increase next year ($137 B)
* Prevent estate tax from returning to $1M exemption and 55% rate in 2011 ($68 B)
* 2% payroll tax holiday ($226 B)
* Temporarily extend business expensing provisions ($22 B)
* Extend unemployment insurance ($57 B) and
* Grab bag of tax “extenders” ($55 B).

I think I just have different policy preferences than Mr. Limbaugh on this one.

I strongly support $613 B of the above policies – the first three.

While the bill would be better without these (or with the unemployment benefits offset), I’m happy to accept the following policies in a package:

* the half of the 2% payroll tax holiday that’s actually a tax cut, which increases the deficit by $112 B;
* extending unemployment insurance, for $57 B;
* extending the business expensing provisions for $22 B.

I’d prefer to drop the business expensing provisions ($22 B), and the other half (the “refundable” part that is just an entitlement payment in disguise) of the payroll tax provision ($114 B), and I could easily cut the tax extenders at least in half if you let me ($28 B).

If I tally “things I really like” and “things I can accept” and compare them to “things I don’t like,” the numbers look good to me. Not great, mind you, but good. And for a divided government this looks to me like a great deal.

There's a more point by point rebuttal to the conservative critique of the deal at the link.

One part of the equation I think Hennessey leaves out is a lot of the stuff he (and most conservatives don't like) were going to pass anyway. The Republicans have caved several times in the last two years on deficit spending for unemployment insurance, there's no reason to think they wouldn't have again, especially less than two weeks before Christmas.

Also, if Conservatives don't like that it's a temporary cut and not a permanent one, I really need it explained to me how Republicans were supposed to get a better deal out of Democratic Congress and President than they were able to get 10 years ago with a Republican Congress and President. The math there is a bit fuzzy to me.

On the politics of it, I have to say this is a big loss for Obama. He can go on all he wants about having a discussion and fight over these cuts for the next two years but that's pretty hollow. He's spent the last 4 years (2 campaigning, 2 as POTUS) saying the upper end cuts have to go. Remember the whole "if you make less than 200K you won't pay a dime more in taxes" and if you make more than that the rates will only go back to the Clinton Era rates? Well, he lost that fight. Even Clinton himself supports staying at current rates (at least for low and mid level earners) rather than go back to the levels they were under him.

If Obama wants to run for reelection on raising taxes, a position that has already been rejected, he's welcome to it.

Stray thought:
If you went to Vegas this time last year and bet that the two biggest legislative 'achievements' of Congressional Democrats and Obama would be the combination passing "health care reform" and extending the "Bush tax cuts", you would have won a ton of money.

That was not a combination I think a lot of people expected.

Another thought: How stimulative is this plan going to be? Will it ensure Obama's reelection because it will save the economy? I doubt it will have much impact on either the economy or Obama's reelection prospects. Most of this deal involves doing exactly what we've been doing all along. We aren't cutting taxes here, just defensively not raising them. At best, it means things might not get worse.

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