Politics & Law

Bungee-jumping over the fiscal cliff

Robert Reich

What’s the best way to pressure Republicans into agreeing to extend the Bush tax cuts for the middle class while ending them for the wealthy?

The President evidently believes it’s to scare average Americans about how much additional taxes they’ll pay if the Bush tax cuts expire on schedule at the end of the year. He plans to barnstorm around the country, sounding the alarm.

The White House has even set up a new Twitter hashtag: “My2K,” referring to the extra $2,200 in taxes the average family will pay if all the Bush cuts expire. Earlier this week the Council of Economic Advisers published a report detailing the awful consequences of going over the so-called “fiscal cliff.”

But isn’t this fear-mongering likely to buttress Republican arguments that the Bush tax cuts should be extended for everyone — including the rich? Republicans will say (as they have a thousand times before) that the rich are the “job creators,” so we should tackle the budget deficit by cutting spending rather than raising anyone’s taxes.

Obama’s only real bargaining leverage comes from the fact that when the Bush tax cuts expire at the end of December, America’s wealthiest will take the biggest hit. The highest marginal income tax rate will rise from 35 to 39.6 percent (for joint filers), and the capital gains rate from 15 to 20 percent.

This will happen automatically if nothing is done between now and then to change course. It’s the default if Republicans won’t agree to anything else. It’s Obama’s trump card.

So rather than stoking middle-class fears about the cliff, the White House ought to be doing the opposite – reassuring most Americans they can survive the fall. To utilize his trump card effectively, Obama needs to convince Republicans that the middle class is willing to jump.

And the middle class can jump fearlessly if the White House and Democrats enact legislation that reinstates the Bush tax cuts for the middle class as of January 1.

The legislation would operate like a bungee cord — snapping the middle class back from the abyss of paying an extra $2,200 in taxes next year, even as the wealthy go over the cliff.

This bungee-cord legislation could be introduced early next year, but there’s no reason not to introduce it sooner — even now. And challenge Republicans to vote on it as we get nearer and nearer the precipice.

This would give the President’s “My2K” campaign the focus it needs — directly pressuring Republicans to support tax cuts for the middle class and not for the wealthy.

If Republicans won’t agree, they still face the cliff’s automatic tax increases on the rich. But they’re also revealed as shills for the rich — ready and willing to push the middle class over the edge in pursuit of even more wealth for their patrons.

Cross-posted from Robert Reich’s blog.

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