“I’ve talked to Senate Republicans, plural, who think there should be a fair tax on rich people. I’m going to make sure that my conferees understand that this could be part of what we try to do.”
The conferees Reid is talking about are the four he appointed Friday morning to the Senate-House conference committee that will, in January, be taking up the full-year extension of the payroll tax cut, emergency federal unemployment benefits, the "doc-fix" on Medicare reimbursement and other issues.
The Democrats gave up on the surtax idea as a loser in the fight to get the two-month extension that was finally and reluctantly approved Friday. So it's good to hear Reid saying it's not permanently dead. It is a matter of fairness. But it will take more than a surtax on those who have been getting one tax-cut deal after another since 1962. No way is real fairness going to be fixed with one little surtax, assuming it can be passed, and no way is a new tax code that progressives can even begin to support going to come out of the second session of the 112th Congress.
But, as a short-term matter, until a more progressive tax code can be attempted, the surtax makes good sense. Otherwise, all the offsets in spending, the "pay for" that the Republicans are demanding in exchange for the full-year extension, will come from federal programs. Here's Andrew Fieldhouse of the Economic Policy Institute discussing exactly the kind of 1%er approach the GOP will likely try again come the new year:
The Senate Republican proposal would limit federal agencies to hiring only one replacement employee for every three full-time employees leaving the agency until employment has fallen by 10 percent. This would result in roughly 280,000 job losses—ironic, given that the purpose of the payroll tax cut is to create jobs. Someone should remind the GOP that the purpose of a pay-for is to offset the cost of a policy, not its impact.
Laying off hundreds of thousands of federal workers is terrible policy for reasons beyond causing job loss during a jobs crisis. First, it ignores the need to keep up with a growing population. These civil service jobs deemed unnecessary by Senate Republicans include one out of 10 federal judges, FBI agents, Veterans Affairs doctors, National Institutes of Health cancer researchers, food safety inspectors, and air traffic controllers, to name just a few.
Second, haphazardly cutting certain agencies’ payroll would in many cases actually increase the budget deficit. Fewer Internal Revenue Service auditors would mean less tax enforcement and revenue. (In fiscal year 2010, 22,710 full-time IRS enforcement officers brought in $58 billion—an average of over $2.5 million per employee.) Fewer Medicare fraud investigators would mean more erroneous payments and unprosecuted fraudulent claims.
The surtax would make all that unnecessary. It would be the pay-for. No need to demolish tens of thousands of public sector jobs. Which, of course, is just one of the reasons the surtax idea goes against the GOP game plan.
Naturally, Reid's letting his conferees "understand" that a surtax "could be" part of a deal is a long, long way from actually making one happen. And the debate about it, assuming we get one, will be littered with more Republican caterwauling about the evils of class warfare. Plus many Democrats saying they don't believe in class warfare either, despite going along with policies that are, in fact, exactly that. According to the most recent Pew poll, most Americans seem to agree that self-defense in the class war is a good thing: 57 percent of them say that what bothers them most about the tax system is that the wealthy aren't paying their fair share.
The Democrats ought to capitalize on that, as well as the fact that the Occupy movement, whatever its flaws, has in a matter of months changed the national narrative about what matters most in the economy, something party leaders have failed to do, failed to even try to do, for decades.
Rather than continuing to seek that mythical "middle ground" which has moved the discussion and policy initiatives ever further to the right for the past four decades, Reid, Senate Democrats, House Democrats and the White House should capitalize on the changed narrative instead of ignoring it and trying to return to the conversation-as-usual. Standing firm on a millionaire surtax would be a good first baby-step along that path, both symbolic and having a real impact. But only a first step.