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The Democratic Party’s Last Chance?

Posted by MICHAEL SILVERSTEIN, Wall Street Columnist in Featured Articles, Politics.
Nov 10th, 2010

One definition of a lousy poker player is someone who throws away a winning hand, someone who loses with two pair to the guy across the table who’s sitting with eight high and bluffs a win. That’s also a pretty good definition of a lousy politician. Or a political party whose time has passed.

The big issue before the coming lame duck session of Congress, an issue that will likely set the tone for the next two years in the relationship between a Democratic President and Senate, and the Republicans in both houses of Congress, is the extension of lower income tax rates for the country’s top 2 percent earners. In the debate about this issue the Democrats hold a winning hand — if they decide to play it.

Taxes were a big issue in the recent election. Republicans benefited greatly by opposing tax increases, with one very notable exception. A large majority of Americans in every poll taken on the matter thought lower tax rates for the top 2 percent of this country’s earners should NOT be extended. Democrats who support this position now would thus have a proven majority on their side.

They also would have a jobs issue on their side. These lower tax rates for the richest Americans have been in place for nearly a decade and haven’t generated a lot of jobs. There’s no reason to suppose keeping them in place would do so.

Republicans say that 3 percent of small business owners would be hurt if lower tax rates for top earners are not extended. Maybe so, and small business owners are popular with most Americans. But ALL top commercial and investment bank managers, every single one, 100 percent of them, would see their own taxes rise a bit if there’s no extension, and they are among the least popular group in the country today.

Lost spending power if we increase these 2 percenters taxes a tad? Spending on what? Spending on investments in hedge funds that make their money with leveraged buyouts, and firing employees of taken over companies? Spending on investments in emerging markets with companies that compete with American firms?

And then there’s the matter of the deficit. Giving the top 2 percenters a lower tax rate extension would increase the deficit that so many Americans are worried about by hundreds of billions of dollars over the next decade. How will this shortfall be made up? With cutbacks in aid to states for infrastructure projects? Through reductions in programs for this country’s neediest? These are trade-offs that even a Beltway wuss can oppose without fear of being labeled a socialist.

So there it is. A winning hand. Will the Democrats take the bet? Or will the folks on the other side of the political poker table yet again boffo their way to victory over today’s terminally timid remnant of the party of Jackson, Roosevelt and Truman?

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