Middle-class tax cut extension passes Senate: Policy or politics?

Senate Democrats squeak through an extension of middle-class tax cuts. Republicans deride it as damaging to the economy. And a January train wreck for spending cuts and tax increases looms even closer.   

J. Scott Applewhite/AP
Senate Majority Leader Harry Reid, D-Nev., center, talks about the yearlong tax cut extension bill Democrats passed by a near party-line 51-48 vote, at the Capitol in Washington, Wednesday, July 25, 2012.

Senate Democrats squeezed through an extension of the Bush-era tax cuts for households making up to $250,000 Wednesday, pushing a measure that has little chance of Congressional passage but instead highlights both the persistent gridlock and the quest for political points ahead of November’s election.

The 51-48 vote was so tight that Vice President Joe Biden was called to preside over the debate, sitting in the speaker’s chair in case he was needed to serve as a tiebreaker. 

Two retiring senators, Sen. Jim Webb (D) of Virginia and Sen. Joe Lieberman (I) of Connecticut, who caucuses with Democrats, voted with a united Republican front against the bill.  But a slew of Democrats in tough reelection contests including Sen. Jon Tester of Montana to Sen. Claire McCaskill of Missouri held the line by voting in favor.

Minority leader Mitch McConnell (R) of Kentucky allowed the vote to proceed with only a simple majority in order to put Democrats on the record as supporting or promoting a proposition that Republicans deride as a massive tax increase on small businesses.

“The only way to force people to take a stand is to make sure that today’s votes truly count. By setting these votes at a 50-vote threshold, nobody on the other side can hide behind a procedural vote while leaving their views on the actual bill itself a mystery to the people who sent them here,” Mr. McConnell said on the Senate floor.
Republicans likewise pointed out that because all bills dealing with revenue must originate with the House, the bill is susceptible to what’s known as a “blue slip:” that is, that the House could tank the measure on procedural grounds.
But majority leader Harry Reid of Nevada and his Democratic colleagues weren’t buying that – and thought the vote was one that could help carry them to success in November.
“If something’s important, we get it done,” Mr. Reid told reporters after the vote.
Sen. Charles Schumer (D) of New York crowed afterward that the vote was a “watershed” moment in the tax debate because Democrats had decoupled tax cuts for the middle class from tax cuts for the wealthy. With that distinction in mind, he said, Democrats could hammer Republicans in the coming election as protectors of the most well-off at the expense of average Americans.
“We have set the debate so that we have the high ground – the rest will all flow from that,” Senator Schumer said.
House Republicans immediately begged to differ. The House, which is scheduled to vote on tax rates next week, is likely to have an almost mirror response to the Senate. Full extension of all the Bush tax cuts, which fell 45-54 in the Senate on Wednesday, will be passed on a largely partisan basis with the Democratic proposal beaten in similar fashion.
“With unemployment still above eight percent, the only vote on taxes that matters to the American people is a vote to stop the small business tax hike the president wants that Ernst & Young says will cost our economy 700,000 jobs,” said House Speaker John Boehner (R) of Ohio in an e-mailed statement after the Senate vote.
Next week’s vote will leave Congress no closer to resolution on taxes than when it started a political grudge match on the matter at the beginning of the month.
Bubbling below the surface of the vote, however, was an ocean of discontent on both sides of the aisle with the fact that the Senate isn’t taking up the sort of wide-ranging, debt-slashing financial reform that the nation needs to get back on a sane fiscal track.
The Democratic measure passed on Wednesday “is not a bipartisan plan to balance our budget in a way that will create job growth. Its enactment at this time, in my opinion, would only serve to preclude debate and action on exactly the broader type of reforms we need to fix our broken federal government fiscal system,” Senator Lieberman said on the Senate floor Wednesday.
Sen. Scott Brown (R) of Massachusetts, who voted against his own party on the full extension of the tax cuts, as well as against the Democratic measure, struck a similar tone.
"Right now, we should be working on a bipartisan tax and spending reform plan that keeps rates low for everyone, promotes growth and stability for businesses and families, and restores fiscal balance for future generations,” Senator Brown said in a statement.
The impasse leaves Congress no closer to resolving the $600 billion in higher taxes and lower spending barreling toward the American economy in 2013—about 4 percent of the nation’s gross domestic product. (About a third of that total comes from the extension of the Bush tax reductions on marginal income rates.) The Congressional Budget Office estimates that if Congress allows the nation to go over what budget wonks call the “fiscal cliff,” the American economy will fall into a recession in the first half of 2013.
“At the end of the day, this isn’t going to solve the problem,” said Sen. Bill Nelson (D) of Florida, who favors the continuation of tax cuts for up to $1 million in household income but voted for the Democrats’ bill Wednesday. “It’s going to be more political posturing all the way up to the November election and then in a lame duck session we’re going to get down to work and let common sense and bipartisanship operate and we’re going to solve this deficit problem.”

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