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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Where It Stops, Nobody Knows

The manuevering in Washington over the tax agreement negotiated between the White House and Mitch McConnell grew even more complex today, with the House Democratic Caucus agreeing to a resolution to oppose the deal as announced, and the Senate apparently on the brink of approving the deal.
Here’s how the ever-astute Brian Beutler of TPM sought to explain the House Democratic action:

At a private meeting of the Democratic caucus this morning, members overwhelmingly rejected the idea that the plan is inviolable by passing a resolution agreeing not to bring up the tax package without changing it first. However, the White House and Republicans insist that the plan is in stone — and any changes would likely prompt a GOP backlash.
The Senate could adopt the proposal as early as tonight, leaving House Democrats a choice between swallowing it, modifying it, or rejecting it and starting from scratch.
After the meeting, though, members and aides stressed that future steps are unclear, and were unable to say that the White House plan won’t pass the House untouched.

In other words, it’s not at all clear what House Dems are actually trying to accomplish, and it may well be the “no-confidence vote” that passed was designed to appeal to Members with wildly different understandings of what will happen next. It may also transpire that the maneuver was a bluff design to test whether Republicans are willing to make some last-minute concessions that will make Democrats feel less like chumps.
To the extent that the deal’s provisions on the estate tax seem to be feeding a lot of progressive angst, it’s worth noting that this is one area of tax policy where there is a vast, unbridgeable gap between most Democrats and virtually all Republicans. GOPers think of the “death tax” as inherently evil, and thought its demise was sure when the initial legislation phasing it down and out was enacted. Progressive Democrats tend to regard the estate tax as one of the few progressive levies with zero negative macroeconomic effects, and are outraged that concessions benefitting a small handful of the super-rich, with no economic payoff at all, would be considered during these negotiations.
Beyond the dialogue of the deaf on this subject, the prospects for a renegotiation of the tax deal depend on some pretty speculatative ideas about which side might blink first, and also are vulnerable to a reaction in the financial markets. It’s reasonably safe to assume that hardly anyone wants to begin 2011 with higher tax rates on nearly all Americans and big drops in stock prices. But it’s less clear which side could be confident the other side would get the blame if that happens. The most convincing argument among progressives is that the vote on tax extensions should have been held before the midterms. But the future of this dispute remains much murkier than its past.

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