Congressional Republican leaders are splitting over the Bush-era tax cuts for the wealthy. House Minority Leader John Boehner has suggested he might support President Barack Obama's plan to extend all the tax cuts but those for the wealthiest 2 percent of households, while Senate Republicans, including Minority Leader Mitch McConnell, have insisted on extending all the cuts. If a new bill is not passed, all the cuts will expire. What does this disagreement mean for the tax cuts, for the Republican party, and the coming elections?
Implication of Increasingly Likely Deadlock The Washington Post's Ezra Klein writes, "Republicans spent much of yesterday walking back John Boehner's conciliatory comments on the Bush tax cuts. Mitch McConnell and the Senate GOP, in particular, made it clear that either everyone -- including the rich -- get their tax cuts, or no one does. ... This sets up a possible fight in which Republicans don't budge and, buoyed by poll numbers showing extension of the cuts for the wealthy is unpopular, neither does the White House. But unlike a normal legislative battle, no agreement doesn't mean no change. Absent a compromise, we could see all the cuts simply expire."
- Why Senate Republicans Insist on Cuts for Rich The New York Times' David Herszenhorn says it's about "testing the willingness of Democrats to allow a tax increase on the wealthiest Americans in a weak economy and making clear that a partisan fight will extend deep into the campaign season if not beyond."
- Dems Plan Political Response Talking Points Memo's Christina Bellantoni reports, "House Democrats won't be forcing a vote on extending the Bush tax cuts for middle class taxpayers, a senior House leadership aide tells TPM. ... 'We shouldn't force his hand, we should let the Republicans dangle out there with their divisions exposed and keep hammering them on holding middle class tax cuts hostage for $700 billion in debt-financed tax cuts for the wealthiest 2 percent of Americans,' the aide said. ...After a separate conversation with a Democratic leadership aide, it's sounding like a vote isn't even a remote possibility, especially if the Senate tries to take action first."
- Holding Middle Class Hostage for Benefit of the Rich The New York Times editorial board points out that if Republicans fail to compromise with Democrats, the deadlock would mean that all the tax cuts, even those for the working class, would expire. This means Republicans would "allow middle-class tax rates to rise" for the sake of standing up for the wealthy. "Holding the middle-class cuts hostage to those for the wealthy would pose both a political danger to Republicans and an economic danger to the nation."
- How GOP Got This Wrong Liberal blogger Matthew Yglesias writes, "If you cut someone's taxes, that person will increase his savings and increase his consumption. If you cut a low-income person's taxes, he'll generally mostly increase consumption. If you cut a high-income person's taxes, he'll generally mostly increase savings. But economy-wide saving equals private saving plus government saving, so if you finance a tax cut by borrowing money (the reverse of saving) then the net impact on savings will be at most zero. To increase saving, you'd need to cut taxes on the rich and cut spending by the same amount. ... But it's not what's on the table legislatively. And as a savings-boosting measure, a debt-financed tax cut is not a close substitute for a deficit-neutral tax cut. Instead, debt-financed tax cuts are guaranteed to lower the savings rate and reduce investment."