Money

It’s All for the Rich

Senate Democrats were forced to accept another bitter defeat from obstructionist Republicans yesterday, as the Senate voted to fix the Alternative Minimum Tax (AMT) for another year but without providing any replacement revenues for the $50 billion in lower tax receipts. The concession now puts the Democrats’ "pay as you go" principle at risk.

The 88 – 5 vote came after Senate Democrats attempted without success to get Republicans to agree to enact offsetting tax increases so that the net effect on the federal deficit would be zero. As the WaPo reports, the House has been more successful in upholding the principle, and a House Bill already includes such offsets:

The House-passed AMT "patch" would have been paid for mainly by forcing managers of private equity "buyout" firms and hedge funds to pay ordinary income tax rates on the millions of dollars they earn each year. Currently, much of those earnings are counted as capital gains and taxed at 15 percent, rather than at the 35 percent income tax rate paid by the nation’s highest earners. Wall Street launched a major lobbying campaign to defeat that tax increase.

Protecting tax breaks for the rich is what Senate Republicans do best, and unfortunately, they’re getting help from some Democrats unwilling to tap their hedge fund contributors (h/t selise); together, they refused to allow any offsets to the AMT fix, and their refusal now puts in jeopardy the Democrats’ efforts to impose fiscal discipline on the Congress. The lost revenues from the one-year fix in AMT is $50 billion, but if pay-as-you-go is not upheld, that loss could reach over $1 trillion over the next 10 years. And that’s on top of the $1 trillion or so cost of the President’s Iraq war, for which we’re also not paying. But the Republicans don’t care.

By comparison, recall that the SCHIP bill the President vetoed would have cost an additional $35 billion to cover an additional 4 million uninsured children over five years, and it was nominally "paid for" via an added tax on cigarettes. When the President vetoed the budget for Health and Education early this Fall, the "extra spending" the President complained about was only $11 billion out of a $606 billion bill. And the total difference between all Congressional budget bills the President promises to veto and his own budget requests are only about $22 billion.

The President and his party want to pretend they’re all for fiscal discipline, but it’s all a fraud. A New York Times editorial Thursday accurately described the White House strategy as "The President’s Cynical Budget War."

While Mr. Bush wrestles with more responsible members of his own administration, his larger and more immediate game is to portray the narrow Democratic majority in Congress as feckless overspenders.

In October, he vetoed a sensible bill that would have provided health insurance for millions of uninsured children. In the name of faux fiscal discipline, he is threatening to veto budget measures that the nation needs for effective government.

Mr. Bush is clearly hoping that the public will somehow forget that he is the one who spent the last seven years running up huge deficits and debt with his off-the-books war in Iraq and serial tax cuts customized for his affluent political base. Mr. Bush’s Republican allies on Capitol Hill are also hoping that the voters will forget how they abetted the president through all those years. Those fiscal turncoats are now scrambling to pose once more as budget hawks to survive in next year’s watershed election. . . .

He’s decided the real political traction comes with manufactured standoffs and blame-the-Congress gridlock. And he clearly doesn’t care who suffers — the nation’s vulnerable cities or vulnerable children without health insurance.

In his special commentary about Iran and national security last night, Keith Olbermann explained the White House is occupied by a man who is so dangerously dishonest he has no business being President. But Bush is no more honest on domestic matters. In an inexplicable death wish, Congressional Republicans are desperately clinging to his dishonesty, hoping they’ll fool the American people one more time.

Apparently, deception is all they’ve got left, and they’re willing to use it even if it drives the country into the ground.

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