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The Senate voted to move ahead on a compromise tax rate plan. The proposal keeps lower Bush era tax rates in place in exchange for an extension of unemployment benefits, and a series of other tax breaks designed to boost the economy. There is strong bi-partisan support for the bill, and a new poll suggest most voters favor it as well, but some House Democrats object to an estate tax provision which they say is overly generous to the nation’s super wealthy. What’s next for the tax cut plan, but first, this news
- Amy Walter political director, ABC News.
- Norman Ornstein resident scholar at the American Enterprise Institute and coauthor of "The Broken Branch: How Congress Is Failing America and How to Get It Back on Track."
- Chris Cillizza author of The Fix, a Washington Post politics blog, and managing editor of PostPolitics.com.
- Rep. Chris Van Hollen Democrat of Maryland, Chairman of the Democratic Congressional Campaign Committee
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Yesterday, the Senate voted to move ahead with the $858 billion plan on extending the Bush-era tax cuts. The bill now goes to the House where there is considerable support but also concern among some Democrats over what they say are overly generous estate tax rules. Joining me to talk about the tax cut plan and its prospects in both the House and Senate, Chris Cillizza, he's author of "The Fix," a Washington Post politics blog and managing editor of PostPolitics.com. Amy Walter is political director for ABC News. Norman Ornstein is resident scholar at the American Enterprise Institute. You are more than welcome to join us with your questions, your comments, 800-433-8850. Send us your e-mail to firstname.lastname@example.org. Good morning to all of you.
MR. CHRIS CILLIZZAGood morning, Diane.
MR. NORMAN ORNSTEINGood morning, Diane.
MS. AMY WALTERGood morning, Diane.
REHMNorm Ornstein, before we begin our discussion on the tax cuts, I want to ask you about Richard Holbrooke. I know you saw him just Sunday evening.
ORNSTEINSaw him Sunday evening, and he looked terrific. And he was in fine fettle. I mean, I'm really distraught about this. This man was a force of nature. And for about 10 years, the Asia Society runs a conference called, oddly, The Williamsburg Conference at a different place in Asia, and I got to go. And Holbrooke, as the chairman, would lead this small delegation. There is nothing like traveling around Mongolia or Cambodia or Indonesia with Richard Holbrooke, who knows everybody, knows everything, knows the history, has a nuance, a force of nature.
ORNSTEINAnd tragic as it is in -- for him and for his family and for anybody who knew him, the timing just could not be worse for the administration, right in the middle of a review of Afghanistan where, of course, he's been a central player and when things, certainly, with the Karzai government are not going well.
REHMYou know, the very last time he was in this studio, Sandra Pinkard, our producer, came in and said to him, now, be sure to turn off your cell phone. And the last thing he did before he turned his cell phone off was to call his wife, Kati Marton, and to say to her, good morning, darling, and why don't you listen in? I'm on "The Diane Rehm Show." So that connection was so strong, and I'm so sorry for the family.
ORNSTEINWell, you know, Kati came in a couple of these trips, too, and this was, you know, not a first marriage for either of them...
ORNSTEIN...but it was a -- it was just a perfect match. And she actually leavened him a little bit. Took -- didn't take the intensity away, but made it a little less abrasive and...
REHMI agree with that.
REHMThere was a change.
ORNSTEINYeah, and -- but, you know, I just -- I would hear him talk about Afghanistan four, five years ago, and it was stunning how much he knew, how well he understood the tribal factions, the different governmental entities. You know, there's nobody quite like him, and I don't think they're going to be able to find anybody quite like him at this critical time.
REHMNorman Ornstein of the American Enterprise Institute. Turning to you, Chris Cillizza. Yesterday's vote in the Senate on the tax cut plan was certainly not unexpected, but a key step. Talk about why.
CILLIZZAYeah, you know, Diane, I think -- as you said, not terribly unexpected. The House had always presented a little bit more of a problem for the president in this deal. But what I do think, actually, that was interesting, that I was a little bit surprised by, was the breadth of the vote -- 83 votes for, only 15 votes against. You know, 24 hours before the vote, we were debating. We -- people who follow this stuff probably a little too closely were debating. Okay, they'll get the 60 votes they need. Will they get 65 votes?
CILLIZZAMight they get a few more than that? Eighty-three votes on virtually anything that's not, you know, congratulating the Los Angeles Lakers on being the, you know, the NBA finals champions is very hard to do in the current atmosphere. I think it provides a bit of momentum to a plan that was already, I think, picking up momentum. Over the weekend, you saw some of the resistance to it, particularly among House Democrats. Chris Van Hollen from Maryland, being an example, at essentially saying, look, we're not going to stand in the way of this.
CILLIZZAWe think there are things that we can do to it to make it better, but ultimately this is going to go through. So I think it lent a bit of momentum there and essentially sent a signal to the House that you can complain and you can have your issues, but this is something that's going to happen.
REHMAnd, just to note, Chris Van Hollen will be joining us a little later in the program. Amy, Sen. Mark Udall, Democrat of Colorado, voted no on the bill. Talk about why.
WALTERWell, I think you had a number of Democrats -- most of them were liberals -- one that stuck out for a number of us was Kirsten Gillibrand from New York, who was almost primaried from her left. This last year, she's up in 2012, and there is concern, of course, about protecting -- potentially protecting her left flank there. But what was interesting to me wasn't so much that the Democrats who voted against it, but the Republicans and the fact that you had five Republicans who voted against this.
WALTERAnd if there's anybody who should have some problems with this legislation, beyond the liberals who were upset with some of these, are conservative Republicans who say, wait a minute, didn't we run an entire election saying we don't want to run on the deficit? We're sick of putting, you know, extraneous pieces of legislation on top of what should be a very simple bill. And what I've been surprised about, and it's starting -- this momentum is starting to pick up now -- is the lack of real Tea Party ferment about this piece of legislation.
REHMWhy do you think that is?
WALTERWell, I think part of it is a lot of those of those folks aren't here yet, so it would be very curious to see what happens if the 63 Republicans who were elected this year were sitting in the House right now, talking to, you know, soon-to-be Speaker Boehner, or folks like Rand Paul -- who's come out and said, I probably would have voted against this -- come into the Senate. We saw Mitt Romney this morning write an op-ed in U.S.A. Today, saying he's opposed to this tax fund. He's also come out against the START Treaty. So I think we know what he's trying to do here is positioning himself to the right and to the hope -- and he's, I think, hoping that this will help give him some goodwill among the Tea Party types.
REHMAnd, Norm, what are the most popular aspects of the plan? What are the least popular?
ORNSTEINSure. Let me just add one thing...
ORNSTEIN...first to what Amy said. There's also, among many conservative Republicans, an almost religious belief about these low tax rates for everybody, and especially the rich. And, you know, the incongruity of people saying, we've got to pay for an extension of unemployment benefits for deficits, but $4 trillion in tax cuts, we don't need to pay for those, in fact, let's have more, tells you something about that. So the fact...
REHMWhat does it tell us?
ORNSTEINIt tells us that sometimes religious beliefs can lead to disaster, actually. But I think when Republicans got what they didn't think they could get -- John Boehner, remember...
ORNSTEIN...before the election, saying, we're going to have to -- we're not going to be able to get these tax cuts for everybody. When they got it, even for two years, and they now think that once you extended at all, it's a slam dunk for the future. They were willing to accept almost anything else. Now, you're getting pushback, though, from Rush Limbaugh and others. And it'll be interesting to see whether this shows up beyond Mitt Romney and some of those House Republicans.
REHMMm hmm. He was giving pushback the first day.
REHMWhat he said was, the Republicans did not go far enough. They should have pushed to make those tax cuts permanent. And that should have been right there in the deal.
ORNSTEINAnd, of course, Jim DeMint said that he was going to vote against it because the state tax wasn't completely erased. So, you know, we've got some serious differences here between the parties and within the parties.
REHMYou know, I don't quite understand this. Is there a sense -- you talked about religious fervor, but is there also a greedy fervor at work?
CILLIZZAI don't -- let me clarify. Do you mean political greed or...
REHMI mean, monetary...
CILLIZZAI mean, I would say I -- let me talk about the political piece of it. As a reporter, I'm certainly not -- I don't think I'm inclined to talk about the monetary because I don't know all that much about monetary.
WALTERThat's why we do what we do because we don't know anything about finances.
ORNSTEINAnd as a reporter, you're not the beneficiary...
CILLIZZAFrom a political perspective, Diane -- look, I think the argument made by the Rush Limbaugh's little world, the DeMint's little world in some ways is, look, we just won a historic victory six weeks ago. The 63 seats in the House, six -- granted, it could have been more, but six seats in the Senate. If you look at the state legislative level, you saw an absolute Republican wipeout. Why would we not push as hard as possible? We, the American people, did not like -- there's just the Republican point of view on the option did not like the growth of government spending, that sort of government -- feel of government creep, that government can solve all problems, that we're just racking up debt after debt after debt.
CILLIZZAWhy would we sign on to anything that, number one, gives President Obama a win? And make no mistake, look, this is something that has, in the Washington Post poll, 69 percent of people support the compromise. Just to return again, very few things in this country that are at all politically hard fought enjoy support of seven out of 10 Americans. So I think there is a strain within the Republican Party that says we should have asked for way more because the president is in a weakened position.
CILLIZZAThe president needs a victory more than we need a victory at the moment. So just from a political greedy point of view, you could say that there are certainly some of those people who would have said, we should not have -- that this compromise -- you know, it's a Charles Krauthammer argument that elucidated, that Republicans are rejoicing over this compromise. They, in fact, should not be rejoicing. This is a victory for President Obama.
REHMShould they be rejoicing?
ORNSTEINI actually think that for both sides and for the leadership of both sides, at this particular moment in time, this is a big plus. Remember, Mitch McConnell had his famous comment after the election that our number one political goal is to make Obama a one-term president. Here you are after an election, where we know that almost two-thirds of Americans say, now is the time to come together and compromise. And he says something discordant. Now, he's got a compromise that Americans, including Republicans, independents and Democrats support, and Barack Obama has shown that he's listened. So it's a plus for them. It's the wings that are unhappy.
REHMShort break. We'll be right back.
REHMAnd welcome back. Joining us now is Chris Van Hollen. He's outgoing chairman of the Democratic Congressional Campaign Committee and incoming ranking member on the House Budget Committee in the 112th Congress. Good morning to you.
REP. CHRIS VAN HOLLENGood morning, Diane.
REHMNice to have you with us.
HOLLENGood to be with you.
REHMYou have said you're not going to block it, but that you have a major issue with the estate tax provision as written. Explain.
HOLLENYeah, some people had interpreted this vote that was taken to the Democratic caucus this -- the other day to mean that House Democrats were going to somehow take this bill, put it in a desk and never allow it to come up for a vote. That is not the case. What form it comes up in is something under debate. And one of the most egregious provisions, I hear, is the estate tax giveaway that will add $25 billion to the deficit to benefit just 6,600 families. It has no positive economic impact. It doesn't add a single job.
HOLLENAnd it wasn't a necessary part of the core deal if you listen to what folks on both sides of the negotiations have said. So we want to put this question to the test. Are our Republican colleagues really willing to say that middle class Americans and upper class Americans and folks getting a payroll tax, and even folks paying estate taxes, are they going to say that those -- the American people don't get tax relief in order to protect just 6,600 estates?
REHMBut is there a better threshold rate that you think would be a compromise would please your fellow Democrats?
HOLLENYes. And it's not -- it's one that, actually, has been sort of the compromise that most people have understood, would likely emerge from the process between those who want the estate tax to revert back to the pre-Bush days, which what -- which is what will happen automatically on Jan. 1 if no action was taken, which was to put a 55 percent rate on the value of estates over $1 million, and those who want no estate tax whatsoever. And that deal was what the rates were and what the exemptions were in 2009.
HOLLENAnd, essentially, what those were, were for individuals, $3.5 million, for couples, $7 million. And the rate was 45 percent. That was the natural compromise here and the obvious tradeoff. I will tell you that there are many Republican leaders who are quietly amazed that they were able to get this so-called Kyl estate tax bonanza into this deal.
REHMSo if, in fact, Democrats were to push for a compromise on this, aren't you worried it would then have to go back to the Senate and make a big mess all over again?
HOLLENWell, we think this question should be debated openly and in the light of day. We've never had this discussion in the context of this debate and negotiation. This is something that emerged from negotiations behind closed doors. If the Senate Republicans were to block the entire package because of the insistence of providing a $25 billion tax break to 6,600 estates, then, obviously, we'd have to figure out where to go from there. But that question should be answered. It should be debated.
HOLLENAnd we believe, at the end of the day, when the American people are actually watching this debate, they will say, come on, guys, let's make sure that we provide tax relief for everybody. But why add $25 billion to the deficit for something that doesn't create any economic benefit? Except for it does create a bonanza for 6,600 estates.
REHMOn the other hand, as President Obama has said, he does not want working-class Americans to wake up Jan. 1 and find that their taxes have gone up. Are you willing to let this whole thing go down on this issue?
HOLLENDiane, in the House, we've already passed legislation to make sure that middle-class Americans get tax relief beginning Jan. 1. And we are absolutely determined to ensure that, at the end of the day, middle-class taxpayers do not face a tax increase on Jan. 1. We do have until Dec. 31 to resolve this issue in the fairest way possible. And, you know, the Senate has, actually, already made changes to the bargain that was negotiated between the White House and the Senate Republicans.
HOLLENAs part of that negotiation, Senate Republicans expressly rejected a provision to provide clean energy incentives. Well, those have now been put back into the bill. We believe this provision we're talking about should be debated. We think that the natural compromise should prevail, that provides very effective relief for over 99 percent of estates in this country without adding $25 billion to the deficit.
REHMHow many of your fellow Democrats are supporting you to push for this compromise as opposed to going forward after all this wrangling?
HOLLENWell, we have overwhelming support to go for this compromise, and that is why the Democratic caucus has expressed, you know, dissatisfaction with the package. There are going to be some in the Democratic caucus who would not accept any bargain, and I understand their arguments. But I think for, you know, most of us -- certainly, speaking for myself -- we understand that any compromise involves tradeoffs. You're always going to get stuff you don't like with the stuff that you like.
HOLLENThat's a given. But if you listen to what the administration has said, they have acknowledged that this particular deal -- what is known as the Kyl estate tax provision because it's been championed by Sen. Kyl -- that this was not essential to the core deal. What they've argued is this was essential to getting about $41 billion in add-ons to various tax credits from the recovery bill. But if you do the math, what you find is that the value of the estate tax change compared to current law is much larger than the value of the add-ons to the tax credit.
HOLLENAnd so what we're proposing is to have an equal amount. In other words, if you add up the value of the add-ons to the tax credits that are in the bill, that equates to the compromise, the estate tax proposal...
HOLLEN...almost exactly mathematical.
REHMYou have been one of the president's champions. You have been out there speaking in his behalf on many occasions. On this issue, you are speaking with your fellow Democrats against a plan that President Obama negotiated with Republicans. How much of this is the peak being shown by these Democrats, including yourself? And how much is real pushback on this estate tax?
HOLLENWell, Diane, as you say, I am a huge fan of President Obama's and remain a huge fan of President Obama's. Our concern is not with process. Our concern is with the final product. And we believe -- in fact, we know that we could have had virtually every element of this deal without having to have this giveaway on the estate tax provision. I understand exactly what the President has said. We agree that we have to make sure that taxes do not go up on middle class Americans, Jan. 1.
HOLLENWe agree that given the anemic recovery, that would create a drag on the economy. But we also believe that we've got to focus on deficit reduction. And we just had the bipartisan fiscal commission recommendation come down. And there is just no justification for adding $25 billion to the deficit for the benefit of 6,600 estates. There's no jobs argument for that. There's no economic growth argument for that. And so what we're simply saying is, let's put this question to the test.
HOLLENIt has not been debated in the light of day. Let's ask the House, let's ask the Senate whether or not they really want to take this step at this particular moment.
REHMAnd is it your prediction that an amendment to the estate tax is going to be approved and still go through the House and not have to go back to the Senate?
HOLLENWell, I am confident that there will be an amendment that includes a change to the estate tax. In other words, substituting what has always been considered the compromise for the estate tax (word?) as a giveaway. If that were to pass, the bill would go to the Senate and the Senate would have to make a decision on whether or not they really want to keep that $25 billion hit to the deficit or...
REHMAnd isn't that the huge problem, Chris, having it go back to the Senate after all this wrangling, and you are almost at Christmas?
HOLLENWell, there are two options, Diane, then. I mean, the Senate could agree to the change and send the bill to the president. Or they could say, well, we want to keep this $25 billion in the bill for 6,600 estates, send it back to the House, and then the House would obviously have to make a final decision. But at the end of the day, we are certainly on the same page with the president, that we need to make sure that there is no increase in taxes on middle class Americans. But we're saying to our Republican colleagues, why are you risking an increase on taxes to middle class Americans in order to try and preserve this $25 billion benefit for the wealthiest estates?
HOLLENLet's have that debate. Let's have that vote, and let's move forward.
REHMChris Van Hollen, he's outgoing chair of the Democratic Congressional Campaign Committee, incoming ranking member on the House Budget Committee in the 112th Congress. Thank you so much for joining us.
HOLLENThank you, Diane.
REHMAnd turning to you now, Amy. Given what you've just heard Chris Van Hollen say, where do you think this is going?
WALTERYeah, fortunately, I'm sitting next to Norm who knows a lot more about parliamentary procedure than I. But it does seem as if what we're -- what Congressman Van Hollen is looking for and what many Democrats are looking for is exactly pointed out. We just want to have the discussion. We want to have the debate. I know there has to be a rule that gets approved. There are all these different hurdles that we have to go through in order to make this process work. But, fundamentally, they want to at least have a voice, have a seat at the table where they have been denied. And, ultimately, I think the thinking is probably, it doesn't go anywhere. They have to make an up or down vote on the bill that comes from the Senate.
REHMAmy Walter, political director for ABC News. And you're listening to the "The Diane Rehm Show." Where is it going, Norm?
ORNSTEINWell, first of all, there will be a rule. It's not at all clear that Chris and his allies will have the votes for this. You know, they're going to have to keep their Democrats together, and this includes all of those Blue Dog Democrats who were defeated or retired. Many of whom – remember, you know, he mentioned that this is Kyl's proposal. It's Kyl and Blanche Lincoln, the defeated Blue Dog Democratic senator from Arkansas. Many of the Blue Dogs may vote with the Republicans, who will be united on this, so it may go down. If it passes the House, then it will go back to the Senate which will refuse, and then they'll come back in a conference.
ORNSTEINAnd what Chris was basically saying is we've got the discussion. If they want to refuse, it will be on their shoulders. One thing I can assure you, Diane -- assuming this does not happen -- next year, there will be vote after vote, including when Democrats in the minority have an opportunity with each bill -- it's called a motion to recommit with instructions -- that will offer breaks for the middle class to be paid for by changing the estate tax back. So this is going to be a big issue that Democrats are going to push for the next two years. They'll probably lose on most of those. But they want to frame this issue as we're giving breaks to a few multimillionaire families -- 6,600 -- and take them away from the middle class. They're not going to prevail now, but it'll come back.
CILLIZZADiane, you asked the congressman what I thought was an interesting and important question was -- which is, is what happened last week with the internal caucus vote to not bring it to the floor, the dissention that we've seen in the House Democratic ranks, is this a personal peek or is this a legitimate policy difference? And he sort of said, well, no, of course, it's just a legitimate policy difference. Now, it is a legitimate policy difference, but in politics, it can be both and.
CILLIZZAAnd it is also an issue that many of these people -- and I think Norm makes a very important point about these Blue Dogs. The losses, by and large, not all of them, but the great majority of the losses in November were people who represent moderate to conservative districts. Many of those people feel as though the president of the United States and his administration left them to wither on the vine with the way in which they conducted themselves policy wise over the first two years of the Obama administration -- health care, economic stimulus, cap and trade.
CILLIZZASo I don't know that we can rule out the fact that the House, which does tend -- if you talk to even people who are friendly about the House, does tend to have a little bit of an inferiority complex. They feel like they're the Rodney Dangerfield of Congress, and they don't get enough respect or any respect. I do think that what has happened in the past two years does influence what we're seeing now, which is Democrats -- Amy mentioned this. They want to sort of stand up and say, hey, wait a minute.
CILLIZZAWe're not going to be cut out...
CILLIZZA...out of every deal. I think you heard from Congressman Van Hollen, at the end of your interview with him, essentially saying, well, if the Senate rejects and it comes back to us, well, then we'll have a choice to make. Well, we all know what that choice is going to be. They're not going to ultimately say, no, we're not doing this priority of a Democratic president. No, we are not doing this because we want to stand up and be heard. But this is a symbolic thing to say, we're not just going to roll over anymore because look what it got us.
REHMAmy, I heard one commentator over the weekend saying that as historians looked back at this first term of President Obama's term in office, that this past week, when he did negotiate with Republicans, will prove to be a real turning point in his presidency.
WALTERAnd it very well could be. I mean, this clearly was a very big victory for a president who had been trying to get his footing for weeks. But I will -- I think what will be very instructive will be to see how many of these Blue Dogs end up voting for -- with, actually -- Republicans to pass this legislation -- of course, many of them not coming back -- and how many of these Tea Party types who aren't in Congress yet come in with the same incentive to negotiate. I mean, what we're going to -- what we're looking at right now is the 111th Congress, which has many more moderates in it and doesn't have its significant Tea Party influence.
WALTER112th Congress is going to look significantly different. It's going to be much more liberal Democrats. It's going to be much more, certainly, on the conservative Tea Party side for Republicans. Would they be able to hammer something like this out? I don't know.
REHMAmy Walter, she is political director for ABC News. When we come back, we'll open the phones, take your calls, your e-mail, your messages on Facebook.
REHMAnd it's time to go to the phones with Chris Cillizza, Amy Walter, Norman Ornstein. Earlier, you heard Congressman Chris Van Hollen talking about why a group of Democrats really, really is angry about the change in estate tax where President Obama agreed to go along with Republicans. Let's go to Bradenton, Fla. Good morning, Brian, you're on the air.
BRIANGood morning. Thank you. I just wanted to comment on the Social Security tax.
BRIANI have mixed feelings about several portions of the tax cut, but I wanted to make a comment on the payroll tax. Personally, I really don't like the idea. But what surprised me is that I really don't remember this being an -- a recent issue. I try to stay up in the news, but it seems to have come out of nowhere. I don't believe it will be a financial benefit to either most wage earners or the overall economy, especially when you consider that 50 percent of the employed individuals are above-average wage earners. And I'm not so sure they're going to spend this money. I feel that, for the long-term, the Social Security fund has a greater need.
BRIANAnd there's also several concerns later on. Will the wage earners who lose the money get credit for their long-term earnings or contribution record? Is there going to be resistance when the time comes to reinstate this 2 percent contribution? And the way politics are going, very concerned that there could be an argument that will later date that the contribution will actually have to be raised above what it is today in order to pay for the shortfall that we're about ready to contribute to.
REHMAnd don't you think, Norm, that all the questions -- good ones -- that Brian raised came up in the debate over whether to allow that relief 2 percent?
ORNSTEINIt's certainly true. And The Washington Post poll...
REHMUh huh. Mm hmm.
ORNSTEIN...had very interesting findings, that when you parse out the parts of this program, this was not a popular one. About 57 percent said that they didn't like it very much -- I think very much for the reasons that Brian has suggested. People are concerned both about deficits...
ORNSTEIN...and about the Social Security trust fund. I think, you know, frankly, the Social Security trust fund is a construct. It's a not a reality. It's not like there is money salted away somewhere. And many of the plans, most of the plans from the commissions that have been out there that deal with Social Security will make adjustments, including adjustments in the payroll tax that will raise the amount paid by wealthier people. What is -- and Brian may be right that the wealthier group among this, the upper middle class types, who pay up to, you know...
REHMOne -- 105, I think.
ORNSTEIN…ninety-some thousand dollars -- $105,000 now -- may not spend at all. But actually, the reason that President Obama and Democrats wanted this included is that for a lot of people, it will go right into consumption, which right now is needed to get a jumpstart in the economy. And when you look at what many of the economists -- the Goldman Sachs economist, Mark Zandi, who had a real impact on Senate Democrats, they're saying that this package will increase the GDP by 1 percent. And a good part of it is the consumption fueled by this payroll tax cut.
CILLIZZAYou know, I think just more broadly, too, I think what you're seeing here -- and the president has admitted as much -- is there aren't any great solutions here on the economy. You can make a very strong and convincing argument that what is happening right now -- and what I think this bill eventually will pass -- is a series of short-term fixes and kicking the can down the road. Look, this is not a -- this is neither a wiping out of the Bush tax cuts nor is it a permanent extension of the Bush tax cuts. This is a temporary extension, which means at some point down the line, likely in 2012, we will be right back where we were. The...
REHM...that president has also introduced the idea of revamping the entire tax system, which was, to some, a brilliant political move.
WALTERRight. Because it said we can kick the can down the road because...
WALTER...ultimately, this will be a new point because we'll have changed the entire tax structure.
CILLIZZAWe'll make the can disappear.
WALTERYeah, but as we saw it -- now, granted this was a lame duck Congress that did this, but the political will to do any of this clearly was not there. I mean, when you see the tax breaks that got, you know, put into this package, for the American Samoa tax package and the biodiesel-fueled tax credit. And, you know, tax credits are wonderful carats to give to legislators who might be weary about supporting something. So you're not only getting rid of a structure that regular Americans understand in terms of deducting your mortgage from your tax, but now you're talking about using the tools that legislators have to convince other people to come along with you. That is a big hurdle for the politicians.
REHMLet's got to Sycamore, Ill. Good morning, Hamish (sp?).
HAMISHGood morning. Since the inception of the internal revenue 'till 1952, there were no changes made. The tax law was, like, 700 pages. It's now over 600,000. In 1997, $58 billion was the budget for the IRS. What was the return on that investment that we're getting? If it was 20 cents on a dollar, it was $1 trillion, $160 billion dollars. If it wasn't even a nickel, we need to change the system.
CILLIZZAWell, look, Hamish says -- I think expresses the viewpoint of many, many people in this country, which is the tax -- and I will put myself in that category -- which is that someone who was an English major in college, the tax code and even filing my relatively meager taxes, is very -- it's very complicated. And people get very frustrated by it. I just return to the point Amy made, which is if you ask people, should we have -- should the tax code be shortened, revised, made more practical, you will have overwhelming majorities of people who say yes. The devil is in the details.
CILLIZZAHow do you do it?
CILLIZZAHow -- because every time that you try to take one little thing out of those 600,000 pages out, it matters to one congressman or one congresswoman in a constituency that, to them, is the most important constituency that there is.
CILLIZZAAnd that's why it's so hard to do something like this despite public well-being behind it.
REHMHere's an e-mail from Jack who says, "Is there any evidence that part of the president's deal was to include passage of the START treaty or Don't Ask, Don't Tell before Republicans take over?"
ORNSTEINThe answer is there's no evidence. The estate tax -- part of this came from out of nowhere, and part of what stunned Chris Van Hollen, who was liaison for the House in some of these negotiations, was it had not been raised. And they thought that it was pretty clear that Jon Kyl and others had agreed to a 45 percent rate. So you can speculate, because Kyl is the Republican's point man on START, that maybe there was an implicit or an under-the-table deal. And right after the deal was announced, we had John McCain saying, well, you know, we're starting to make some progress here. So perhaps that was an element of the deal. And, of course, it means an awful lot to President Obama. But right now, there's still a very limited amount of time left, and we do not have vote schedule...
ORNSTEINAnd we don't have the votes for it, so I can't be sure.
REHMAll right. To Tulsa, Oklahoma. Hi, Johnny, you're on the air.
JOHNNYThank you for taking my call.
JOHNNYI hope this brief as possible. But just wanted to say I heard the gentleman say much earlier in this show about -- he made it sound as if Republicans just wanted tax cuts 'cause it's like a religion to them. And as a person who works three jobs to make $70,000 a year, and I have to work that many jobs because of our government who just keeps wanting to take more and more out of my check, my state, government who wants to take more and more every year out of my check.
JOHNNYAnd I have to do that also because, when the wealthy are taxed so much and I work in the private sector, guess what happens to me when they get taxed that heavily? I don't get raises. My benefits are reduced and all of those kind of things, so therefore I have to spend more money on the benefits that I had that were greater before the taxes, all right? This year has been a year of great uncertainty, and I work in a country club for my full-time job. So I think I get to see things a lot more quickly than the people in the private sector.
JOHNNYAnd I see the wealthy holding on to their money and they are scared. They're uncertain. They're working a lot more, so they're not enjoying the benefit of the country club, which means no revenue to the country club...
JOHNNY...no revenue to me.
REHMYeah, Amy, what's your reaction?
WALTERThat's a -- it's an excellent point. And I think it's one in which, you know, Republicans have been focused on, which is -- look, when we're talking about taxes, we have to see it beyond just looking at, you know, just what one wealthy person getting that money and spending on themselves. They say, well, they spend it in many other ways. Now, the Democratic response, of course, is if this indeed creates jobs -- the Bush tax cut -- then why don't we have more jobs today because these very wealthy people have these tax cuts for 10 years…
REHMOf course. Of course.
WALTER...and we've had negative job growth? Okay. I think, really, fundamentally, what it comes down to is this -- and these are the people that I really like to hear from after this bill ultimately passes -- if it does, but -- and the president signs it, which is -- well, business as you've been saying now for the last year, uncertainty. It's uncertainty. We're holding on to this cash because we're uncertain. We're uncertain. They now will have some certainty. And will they start spending that money that they've been sitting on? And if they start spending that money they've been sitting on, then it should, theoretically, go to the people like that last caller who are working extremely hard just to be able to makes ends meet.
REHMThe administration could not get through a $900 billion stimulus plan. This becomes the $858 billion stimulus plan. Here's an e-mail from Tim. It's titled An Ignorant Public. He says, "The bigger narrative they've worked in the tax debate is the ability of the Republican Party to convince Americans that tax cuts for the wealthy are good for them."
ORNSTEINAnd, you know, we had some of that expressed in, I think, a very articulate and sophisticated way by Johnny working in a country club. But the fact is that these tax cuts for wealthy individuals -- and Republicans talked about them being small businesses -- the overwhelming majority, 90 percent-plus, are sole proprietorships who file Schedule Cs on their tax return. They don't have other employees. So this was not a job creator in any significant way, and that's why we talk about the religious element to this. There are better ways to have tax incentives to create jobs, but there was no interest in pursuing those.
REHMAll right. To San Antonio, Texas. Good morning, Richard. You're on the air.
RICHARDGood morning. I haven't heard anybody talk about the size of the national debt. The national debt is now turning into a tsunami. I think our deficit next year is going to be over a trillion and the year after that. And, you know, Hillary Clinton the other day said that this is really going to be a national security problem. You know, we're losing influence because we're owing so many people overseas. Also, Moodys, I think yesterday, said there's a good chance in two years our bond rating is going to be lowered. So my own feeling is it's really time for us to -- well, let me ask this question. When do you think the public will start to focus on this and be concerned about it?
WALTERYeah, no, that's a really good question. I have two ways of looking at this. You know, one is that we talked a lot about the political will, and the second is you can look at the American psyche in two ways. One is, you know, we are a country of optimists, and we just always assume that things are going to get better. Everybody talks about, oh, we're heading to the end of the cliff. And somehow America always finds a way to make the turn at the last minute, and we come back. We are survivors. The second, though, is we are also a country that doesn't like to deal with crisis until it looks us right in the face.
REHMAmy Walter, a political director for ABC News. And you're listening to "The Diane Rehm Show." Maria sends in a message. She says, "I'm so disappointed in our elected officials, both Democrats and Republicans. What happened to the great call for fiscal responsibility? That was the clarion call during the midterms. What happened to Obama's call for sacrifice when he took office? We can see what's happening in Greece and Ireland. So why not call on the American people to accept sacrifice now on behalf of the nation to prevent us from going down that road? Let the tax cuts expire. This is not a tax hike. It's a return to the level of taxation we had that we need to pay for our government." Norm.
ORNSTEINWell, it's a good and compelling point. Although having those tax cuts expire now with a very weak economy and a weak global economy was a dangerous thing. Having more stimulus now, I believe, is necessary. But as President Obama said in his press conference -- and as we've seen from leaders in both parties -- there is a need now to make a quick pivot...
ORNSTEIN...to looking at the longer-term, deep debt and deficit problem. Simpson and Bowles and their commission had one great value, which was to get us to focus on the real things, not the stupid symbolic things like earmarks, but where the real problems are. That's when we'll see whether the American's deep concern over deficits that gets to a tax reform that begins to take away mortgage interest deduction or tax-free health benefits or changes, not just in Social Security but in Medicare -- the big programs that have ballooning growth in the future -- how much appetite there will be, and whether the continuing dysfunctional politics that disappeared for a moment with this deal can be overcome. And you got to be a little skeptical in the short run.
CILLIZZAYou know, I think both in the call from Richard and the e-mail you just read, Diane, the word sacrifice was mentioned a number of times. You know, I think one of the interesting strains that's come out over the last month or so is this idea among some people that we need to -- that the president -- President Obama has not articulated specific ways in which the American people need to sacrifice to solve our long-term problems, whether they'd be debt or otherwise. I'm interested to see if and when he does that in a meaningful way and then what the reaction will be. Because, again -- and I return, Amy made this point -- I think it's an important one. The idea of sacrifice for the common good is something that we all believe in, that we have to sacrifice to push that rock in whatever direction we -- right.
REHMBut who's doing it? Who's doing it, Chris?
CILLIZZAThat's the problem, I think, is that when you say, okay, we all have to sacrifice...
CILLIZZA...and your sacrifice, Chris Cillizza, is to give up X or to pay more taxes. Then people say, whoa, wait a minute here.
CILLIZZAI don't -- you know, I didn't -- I was unaware that sacrifice. And that's the problem, that -- those are these two opposing forces, this idea that, clearly, if you look at where we are fiscally in this country, we are not headed in a right direction. And, on the other hand, the sacrifices are so politically unsavory that all we keep doing is putting together commissions and doing these sort of things that have no legislative teeth. And, ultimately, one of the two of those -- those two things cannot continue to exist. At some point, those two things are going to collide with one another. And what happens when that collision happens, we don't know.
REHMLast word, Amy.
WALTERI agree -- and I -- with Chris' point. But I think that, fundamentally, it comes down to, not simply what am I going to sacrifice, but that somehow it's not going to be equally distributed. Everybody feels like they're going to be the sucker.
REHMAnd it seems to me, until we get out of both Afghanistan and Iraq, money is going to be tight. It's all there is to it. Amy Walter of ABC News, Norm Ornstein of the American Enterprise Institute, Chris Cillizza of Washington Post. And thank you, all. Thanks for listening. I'm Diane Rehm.
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