Will Tax Cuts Win the Day?

The Senate passes the GOP-Obama tax plan -- on to the House.

As anticipated, the U.S. Senate overwhelmingly approved the Obama-GOP tax plan Wednesday in a vote of 81 to 19. Today, the bill is expected to be brought to the House floor, where it will face more significant opposition from ideological purists on both the Left and the Right. Yet the outlook for House passage of the bill is favorable, thanks, in large measure, to broad-based centrist support and active executive campaigning. Instead, what the lingering tax debate has seemed to imperil are other items on Congress’s ambitious lame duck agenda, particularly, the massive “omnibus” spending bill needed to avoid a government shut-down.

The $858 billion tax plan negotiated between the Obama administration and Congressional Republican leadership has been adamantly opposed by far-left House Democrats, who object primarily to extending Bush-era tax rates for the wealthy. The issue, they say, is that the tax rate extension “adds” to the deficit by failing to appropriate funds that must otherwise be borrowed. The argument is one of selective fiscal hawkishness directed toward a measure that accounts for a fraction of the total plan.

Democratic opposition to the plan is in sharp contradistinction to House Republican opposition. Although House Republicans are predominantly behind the bill, external pressure has been mounting, arguing that the prodigious concessions to left-wing demands are far too costly, for far too little gain. Critics cite the precipitous 35% estate tax hike (now at 0%) and the unprecedented extension of unemployment benefits, for instance. This, following a midterm election largely interpreted to be a referendum on deficit spending and raising taxes, has many believing that Republicans failed to fully consider both their mandate and their advantage.

A slight miscalculation perhaps it was. Some analysts, in fact, are urging House Republicans to vote against the tax plan in the hopes that, once Republicans assume the majority in the House in January, they will be able to permanently extend the current tax rates without the addition of what is essentially (yet) another unfunded economic stimulus package. This hope rests on the complicity of a conservative-leaning -- though not conservative-dominated -- Senate and a hamstrung president. Both would presumably be facing a "double-dip" recession if action was not taken, as warned by White House economic advisor Larry Summers. Far too much uncertainty for such a move, unfortunately.

Which is why the tax bill is widely projected to pass as it stands now. And though it is distasteful to many on the Left and the Right, it represents bipartisanship; usually chimerical and unsatisfying to the extremes. To the center, however, the compromise is relatively popular. It seems to enjoy broad support from the public, including large swathes of liberals and conservatives. A new Wall Street Journal/NBC News poll shows approximately 60% of the public approves of the tax bill compromise. The majority of self-identifying liberals and conservatives also approve, including 68% of Republicans. Bipartisanship has won the day.

There is even bipartisanship over the recognition of the fundamental problem of the bill. Opposition from both the Left and the Right centrally involves fear over the radically ballooning deficit. Echoing left-wing frustration, former Democratic National Committee chair Howard Dean recently told NPR's Neal Conan that the federal deficit was more dangerous than al-Qaeda (in reference to the tax bill). Senators Jim DeMint (R-SC) and Tom Coburn (R-OK) vocally opposed the tax bill before it was passed, flaunting their conservative bone fides on the political talk show circuit. Many pundits, both liberal and conservative, have parroted the same. As the tax cut debate has escalated on the national stage, both parties have, in an interesting way, brought worries over the deficit and prodigal spending acutely into focus.

It comes as no surprise, then, that the $1.1 trillion “omnibus,” or general federal spending bill released Tuesday was met with even more pronounced opposition. Democratic Senator Claire McCaskill (D-MO) has vowed to join with Republicans to stop the bill. Senator DeMint has threatened to request the bill be read out loud on the Senate floor in order to slow the process. The Obama administration has refused to voice any support for the bill. The measure does not, at this time, seem to have the support to pass the House or Senate -- from either the Left or the Right. If it does manage to make its way through the Congress, future House Speaker John Boehner has asked the president to prove his commitment to fiscal responsibility and veto it.

Much of the outrage over the omnibus bill is no doubt attributable to public perception of the type of spending at issue. Whereas unemployment benefits and tax breaks are perhaps reasonable to charge to the national Visa in exigent circumstances, so-called omnibus spending -- complete with ludicrous earmarks for things like "maple research" -- has been a toxic issue for quite some time. Even during the 2008 presidential election then-candidate Obama and his Republican rival John McCain were virtually indistinguishable on the issue of earmarks, as they vied for popular support.

National refocusing on the deficit, along with a grotesque spending bill at which to direct political ire, makes a government shut-down a la 1995 a palpable reality. From its introduction, the omnibus bill has faced minimal support, which deteriorates with each passing day. And yet, the bill is needed to keep government operative. The hope is that a resolution can be reached before then, perhaps in the form of provisional funding for only essential government functions. If not this is not possible, an unwanted government spectacle may already be at our doorstep -- just as the bipartisan fellowship wears off.