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No Good Tax Options for Democrats

If you didn't know any better, you'd think House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid, and the rest of the Democrat party were itching to have a debate on taxes. Republicans, they say, are wreaking havoc on the middle class by demanding that the Bush tax cuts be extended for everyone – even for the evil rich.

Au contraire. The fact is, we've reached that stage of the political debate when there's little the defeated party can do except bluff and hope for the best. Democrats surely know, even if they won't publicly say it, that they've painted themselves into a corner on taxes.

Let's begin by saying the parameters of the tax debate are far different now than Democrats imagined they would be when Obama was swept into power. The failure of his $800 billion stimulus is now a public spectacle which cannot be ignored or wished away. Contrary to Democrat assurances made at the time of the stimulus passage, the economy has not roared back to health; instead it continues to languish. Unemployment, instead of dropping below 8%, continues to hover at politically lethal levels – just under 10% if you count active job hunters, and far higher than that if you count the discouraged and the under-employed.

Democrats thought they'd be coasting to victory by now. They assumed public outrage over Obamacare would be fading. They assumed that the economic and polling numbers would be on their side, and that the President would be well-positioned to persuade the country to swallow the bitter pill of tax hikes.

Democrats have clung bitterly to this scenario, despite strong evidence that it bears no relation to reality. Had they faced reality they might have had time to change course in time to change their fortunes. They might have been able to avoid a ballot box bloodbath, and perhaps even take credit for any economic recovery that came along. But Democrats had no appetite for facing the truth – it would have forced them to repudiate their own beliefs. Now as the shadow of the 2011 tax hikes blots out the sun, they find themselves in a tough debate made tougher by their own machinations, with 9.6% unemployment, a tottering economy, a widely-despised political agenda, a business community up in arms, and a resurgent GOP spoiling for a fight.

So what are the options for Democrats?

Option 1: Another Ram-Through

Congressional Democrats take a deep breath and throw themselves into a new frenzy of sausage-making, bribing and bullying their caucus into yet another Obama jam-down – one that preserves the Bush tax cuts only for those earning less than $250,000. It won't be easy, especially now that 38 House and six Senate Democrats have openly called for extending all the Bush tax cuts.

Meanwhile, Pelosi liberals are loathe to let any of the tax cuts survive. The Blue Dogs see Option 1 as a career killer; their vote to keep only some of the tax cuts will unleash a wave of GOP ads lambasting them for favoring a $700 billion tax hike on small business in the depths of a recession.

With more than 75 House Democrats already in danger of losing their seats, the thought of having to defend this vote, and Obamacare, and the failed stimuli, and cap-and-trade, is enough to make them gag.

As the election draws near and the need to defend more seats with less money grows acute, Democrat rainmakers will fret that this vote further antagonizes business and slows the already lackluster flow of donations into party coffers to a trickle.

Then there's the cherry on this sour sundae: the possibility that House Democrats' reward for their suicidally injurious quest might be a Republican filibuster in the Senate.

Option 2: Do Nothing

With so many harrowing downsides to Option 1, one can see the attraction to Democrats of doing nothing at all before November. The Leadership would spare itself a world of hurt by sitting on its hands. That neither Pelosi nor Reid has introduced new legislation is consistent with their favoring this very choice.

But inaction is no picnic for rank and file Democrats. If they do nothing between now and November, they'll be painting targets on their own backs. As surely as night follows day, Republicans will slam them for letting $4 trillion in tax increases became law in January, which will sound a lot worse to voters than voting for $700 billion in tax increases. Of course Democrats will try to blame Republicans for this, but that will be a tough sell this year.

Option 3: Do What The Republicans Want and Extend All the Tax Cuts

Not only would Democrats in battleground states benefit from this choice, taxpayers would too. Political pressure to take this route continues to rise, and Mrs. Pelosi has shrewdly avoided ruling the option out. Unfortunately for her, President Obama is going Full Alamo and trying to rally his base by declaring opposition to tax cuts of any kind for the hated "rich". Many lefties worry that if they give in to Republicans they'll further discourage supporters and undermine themselves all the more on election day.

In the end there's little choice when your hand is as weak as the Democrats': you bluff. And Republicans, for all their strength in the polls, should be wary. They should prepare for a procedural gambit by the Dems, who in all likelihood will scheme to offer an up-or-down vote on one option, and one option only: extended tax cuts for the middle class alone. The Dems will then defy Republicans to oppose it. And Dems have reason enough to think it could work – Minority Leader John Boehner's recent admission that Republicans might settle for such a plan. Yes, he walked his comments back when other Republicans objected. But it showed political weakness.

And if it comes to that, Republicans should take the dare. If the President and the Democrats really have such a strong hand on tax cuts, why aren't they proposing bills? If they hold the political high ground, why are the rank and file running for the hills? If the GOP can't win on comprehensive tax relief in 2010, when can they?



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