Don’t believe the hype: there is no deal on the budget.
Yes, I saw all of the headlines, too, some of them to prompt readers to write me for details. Is there a payroll tax holiday? What about the adoption credit? What’s happening to capital gains?
The quick answer: nothing.
What happened was this: the Democratic-controlled Senate voted to extend tax cuts for individual taxpayers earning less than $400,000 and a couple filing jointly earning less than $450,000. Permanently.
The Senate approved the bill overwhelmingly (the vote was 89 ayes to 8 nos; Sens. DeMint (R-SC), Kirk (R-IL) and Lautenberg (D-NJ) did not vote). Vice President Biden is on board. President Obama is on board. Even Grover Norquist appears to be on board with the plan, telling Wolf Blitzer, “Not having read it all, I’m not endorsing it. But right now, as explained, it doesn’t violate the pledge.” Norquist is, of course, referring to the “no tax” pledge signed by many in Congress which has been losing support over the past few months. Norquist’s take on the Senate bill is markedly different from his stance a few months ago though he believes it to be consistent. Do with that piece of info what you will.
While that might sound like a huge, big deal, consider this: the Senate already passed a similar deal earlier in the year. It just didn’t go anywhere in the House. And guess what? This new vote is going to the House.
Will it pass in the House? Maybe. But it will be an uphill battle. The House is controlled by the GOP and most GOP lawmakers have signaled that they will not support a bill that does not extend the cuts across the board. Sen. Majority Leader Harry Reid (D-NV) acknowledged as much, saying, “We’ll see if the Republicans in the House can become functional instead of dysfunctional.”
The House is scheduled to come back to work today (yes, really, on a holiday). They could vote today. Could.
So here’s what I think will happen: eventually the House will pass a bill that extends those cuts… temporarily. And they’ll do it tomorrow. Why tomorrow? If they wait just one day, the tax cuts will expire and rates will go up. Then, the House can argue that they cut rates when they take a vote. Because the House apparently thinks taxpayers are just.that.stupid. And no, I’m not making that up. It’s being floated about as a real strategy. And sadly, it has legs.
I could go through the Senate-passed bill provision by provision for you (you can read it here if you’re interested) – but I don’t think that’s helpful until the House hashes through the bill. I do, however, think it’s worthwhile to note what the bill doesn’t touch: spending cuts. Congress has decided to put those off until February. Realistically, that’s where the biggest fights will happen. The Republicans in the House have repeatedly expressed concern over President Obama’s spending as outlined in his proposed budget; those so-called “entitlement programs” (like Medicare and Social Security) are likely to be front and center.
So, for now, we’re really back where we were a few months ago. But that could change at any hour… stay tuned.
