In the glow after last fall’s election victory, Grover Norquist, ringmaster for the right’s tax-cutting circus, mischievously compared minority Democrats in Congress to a bunch of neutered farm animals. Once snipped, he said, they can be counted on to accept comfortably “the finality of their powerlessness.” Norquist often employs such tasteless metaphors. He also often gets the politics right.
At this moment, Senate Democrats are preparing to take a dive on the issue they have righteously hammered for four years–repeal of the estate tax–and they intend to call this “victory.” The Dems want to negotiate a “compromise” with Senate Republicans that will restore the inheritance tax while reducing the rate at which estates are taxed and exempting many more families who are rich but not extremely rich. Yet the outlines of what Democrats are pursuing looks like a monstrous giveaway. It would yield roughly $420 billion in tax relief for the very wealthiest families. Indeed, the bipartisan bargaining may wind up producing far greater revenue losses. When wobbly-kneed Democrats set out to negotiate with hard-nosed Republicans on taxes, the Republic is very likely the loser.
This cave-in would make a joke of Democrats’ fervent demands for fiscal responsibility and balanced budgets. Forget all their rants about growing income inequality and shameful Republican tax cuts for the rich. The “reform” proposal circulating among Dems would surrender 55 percent of the estate-tax revenue that would otherwise be gained by the government. This windfall would go to something like 160,000 families and leave a huge hole in the federal tax base. Some victory.
The maneuvering illustrates, once again, the defeatist mentality of the party establishment. Always eager to avoid a fight on matters of conviction, the Dems’ one inflexible principle is incumbent self-protection. Senate minority leader Harry Reid wants to get the estate-tax issue settled before next year’s elections so the GOP can’t use it to club two or three vulnerable Democrats as “tax and spend liberals.” So Reid deputized Charles Schumer of New York to lead the negotiations with Senate Republicans. Schumer chairs the Democrats’ Senate campaign committee and is thus the guy who makes nice to the wealthy contributors. They are the only people who pay this tax.
Oddly enough, though they are in the minority, Senate Democrats should have the high ground on this issue. If they unite to block any further action by Republicans, the original estate tax will automatically come back into full effect in 2011. Bush’s massive tax-cutting bill in 2001 dramatized this long-established provision as the “death tax” and further confused the public about the impact repeal would have on government programs. Bush’s too-cute concoction provided that the estate tax was to be slowly reduced but not repealed in full until 2010. To conceal the true long-term revenue losses–approaching $1 trillion–the legislation was then designed to expire in 2011. So essentially the repeal has to be enacted again to become permanent. The House Republicans have already done so.
Democrats, instead of digging in for a five-year fight of resistance, already wish to fold. They are terrified of the tax-cutting issue, despite their supposed devotion to fiscal rectitude. Plus, seven Democratic senators have already voted for repeal on one occasion or another, so Republican pressure might be able to pick off enough votes to overcome a filibuster. The Dems’ haste to settle the matter also reflects a gloomy, though unspoken, assumption that they are not likely to regain a Senate majority anytime soon–not in 2006, 2008 or 2010.
On the other hand, Dems could win a standoff if they truly believed in the issue. In reality, some Republican senators are very nervous about their party’s huge deficits and agree that the estate-tax repeal is impossible to defend in these circumstances. Dems could plausibly build a coalition of forty-plus votes, which would hold the line.
The negotiating arithmetic looks like this: Senate Republicans propose a revived estate tax with a rate of 15 percent–compared with the old rate of 55 percent–and a very generous exemption of $8 million per estate, compared with the old exemption of $1 million. This is the virtual equivalent of full repeal, since it would lose 90 percent of revenue. The Dems’ so-called “reform” counters with a proposed tax rate of 45 percent and a household exemption of $2-$2.5 million. That formulation loses around $420 billion over ten years. The supporters claim that this is probably the best that can be achieved, but they are surrendering to the Dems’ usual logic of retreat: Better give in because the Republicans are going to beat us anyway. Once again, Dems are allowing the weakest collaborators in their ranks to define the party’s position. Then they wonder why the public doesn’t think their party has any values.
Schumer’s position is unknown, but he’s collaborating with a group of twelve Democratic senators, many of whom want far more generous tax relief for the wealth-holders. The fear is that Schumer and friends will end up splitting the difference with the right wing. Comfort the big-money campaign contributors, make the problem go away. An estate-tax rate of 35 percent, for instance, would lose an estimated $546 billion. Again, that money would be dispersed to a very small group of very wealthy citizens, some of whom are Democrats too.
The Democratic action is shocking and cynical. It ought to trigger a storm of protest from the liberal faithful and heavy bombardments from progressive bloggers. Dem leaders know they will likely offend rank-and-file supporters, but they also figure they can get away with it. Past experience tells them they will pay no real price beyond a certain amount of angry wailing for going against the party’s popular base.
The rancid politics of retreat created the minority status and promises to sustain it. It tells me the party in Washington is not likely to change much until groups of aroused outsiders, progressives and others, are truly mobilized to punish their wayward and disloyal incumbents. That is, attack them frontally for selling out, run candidates against them in party primaries, weaken their public reputations and, yes, even cause their defeat to Republicans in general elections.
Loyal Democrats are naturally reluctant to employ this hardball strategy for fear of further weakening the minority party. But nothing changes minds in Congress like seeing one or two colleagues cut down by their own loyal constituents on matters of principle the pols didn’t take seriously (this is essentially how right-wingers transformed the Republican Party).
Democratic incumbents do not expect this to happen to them. They believe they’re free to serve up the high-minded rhetoric to the party’s faithful foot soldiers while they work out the money deals with the other side.