Here is Robert Reich on the three things he is worrying about today. If you are confused about the tax hikes the bill proposes, read the section on that (3) and it will clear it up.
--Kim
Friends,
Here's what I'm paying attention to this week.
1. Opening round on the reconciliation (building back better, or family plan, or $3.5 trillion budget plan).
The Senate is back in session and Democrats are hustling to pass this bill with historic investments in families, jobs, and clean energy. This week starts a frantic effort to beat the clock.
Nancy Pelosi has promised so-called moderate Democrats she'll hold a vote on the infrastructure bill by September 27, and promised progressive Dems she won't hold that vote without a simultaneous vote on the $3.5 trillion reconciliation bill. She has a margin of 3 Democrats, and can't count on a single Republican vote. So this is delicate, to say the least.
Can she make this work? My guess is yes. I've known or worked with many Speakers over the last forty years. In my view, she's the most gifted. She knows exactly how many votes she has, how far she can push the members, and what she needs to do to get the number she needs.
She and Joe Biden are the most experienced legislative team in modern American history. Together, they have more than 80 years on the Hill. If they want to get something done, they have the skills to get it done.
What about the Senate, where Biden needs every Democrat? He can't afford to lose either Bernie Sanders or Joe Manchin. But here's the thing. Both of them have a stake in making at least part of this high-wire act a success -- Manchin wants the infrastructure bill, Sanders wants the reconciliation bill. They have every reason to compromise. The real question is how close to $3.5 trillion will that compromise be?
Over the weekend, Manchin made the rounds on the big news shows reiterating his flawed arguments about the reconciliation bill, claiming that $3.5 trillion is too much to add to the national debt and would spur inflation.
As I've noted before, the economy still has plenty of room to grow. Most if not all of the price rises we've seen over the last few months are due to temporary lags as supplies (computer chips, lumber, etc.) catch up with demand. And the national debt isn't a problem for two big reasons: Most of the things in the $3.5 trillion package will make Americans more productive (education, healthcare, childcare), which will grow the economy and cause the debt to shrink as a share of it. And most of it will be paid for with tax increases on the rich and large corporations.
Manchin admits the infrastructure bill would be a boon to the people of West Virginia and wants it passed separately from the reconciliation bill. But he leaves out all the ways the reconciliation bill would help West Virginians, who are among the poorest workers in the nation. Oh, and let's not forget what may be Manchin's biggest reason for cutting the reconciliation bill, which promotes solar and wind energy and penalizes fossil fuels: his documented ties to the fossil fuel industry.
Manchin's big show this past weekend was intended to strengthen his hand in the upcoming bargaining. Bernie Sanders, as chair of the Senate Budget Committee, has started to push back.
I've known and worked with Bernie for a very long time. He's not just a fighter. He's a shrewd politician. He knows how much he can get, and how. And as I mentioned a moment ago, Joe Biden knows the Senate (he became a senator in 1972), knows the players, knows how to push and prod and make deals. Overall, I'm cautiously optimistic.
2. The fight over how to pay for it.
Yesterday, the House Ways and Means Committee released its plan to increase taxes to offset the cost of the $3.5 trillion bill. The committee is proposing an increase in both the individual and corporate top marginal tax rates to 39.6% and 26.5% respectively, as well as raising the tax rate on capital gains to 25%.
Remember, these are just the opening salvos in a bargaining game and these numbers are likely to drop -- even though the committee's target of a 26.5 percent corporate tax rate is lower than Biden wanted (28 percent) and way lower than what it was under Clinton, Bush, and Obama (35 percent).
So what's going on? Why can't Democrats do better than this?
Because there's a huge asymmetry of lobbying power in Washington, especially when it comes to taxes. Corporations have platoons of lobbyists with influence over the Democratic Party as well as the Republican Party. Most Democrats need corporate dollars to help with their election and reelection campaigns. Note also that in recent years, nearly half of retiring Democratic senators and representatives have become corporate lobbyists, because the money is so good.
There's no comparable Washington force on the other side, pushing for higher taxes on corporations. Which is why the share of federal revenue coming from corporations has declined from 35 percent in 1970 to just 7 percent today -- with the result that a greater burden falls on individual taxpayers.
One irony here is that big corporations love the parts of the reconciliation bill that will fund child care, child benefits for low-income families, paid family leave, and extended Medicaid -- because corporations now bearing these costs will be able to shift them onto the public. (Corporations with lots of minimum-wage workers are already subsidized by government programs that help lift these workers out of poverty).
Yet most of these same corporations are furiously lobbying against the tax increases that would help pay for these things. And, of course, they're also bankrolling Republicans and "moderate" Democrats (like Manchin) who claim the reconciliation bill will increase the federal debt. Anyone spot some inconsistencies here?
3. The media is perpetuating confusion about the tax proposal.
I also want to clear up some confusion that seems to be pervasive in the media coverage of the tax proposal. Almost every major media outlet, including The New York Times and The Washington Post, has written something like:
"The Democrat's plan would also levy a 3 percent surcharge tax on individuals earning more than $5 million annually." Or "the top corporate tax rate of 26.5 percent applies to corporations earning more than $5 million annually."
Wrong.
The Ways and Means Committee is proposing a 3% tax on any dollar earned after a person's first $5 million of yearly income. This means if someone earns $5,000,001, the surcharge would be $0.03 -- 3 percent of that one dollar in excess of $5 million. That is, 3 cents.
Similarly, the top corporate top tax rate of 26.5% applies only to corporate income earned over and above the first $5 million. This means the vast majority of small businesses in America would not be affected.
This kind of reporting is a disservice to America.
4. The CA recall election.
The California gubernatorial recall vote is tomorrow and, although the 2016 election left us all skeptical of political polling, the latest polls show Gavin Newsom with a healthy lead among people who have voted or plan to vote.
One thing that gives me confidence in this outcome is that Republicans are already claiming that the election is rigged in anticipation of losing.
Claiming election fraud is becoming a standard Republican ploy in the wake of Trump. It's dangerous for our democracy. The Big Lie that led to the unprecedented January 6th attack on the capital was horrific enough. The repeated Arizona ballot recounts and election "audits" now underway in Republican states—premised on that same big lie—have been chipping away at public trust in the credibility of our election system.
Republicans are playing with fire here, for entirely cynical partisan reasons. Democracy relies on people believing in the integrity of elections. We must guard that integrity, of course. But if there is no basis for claims of fraud, those claims themselves can result in a vicious cycle of distrust, in which losers and their followers refuse to accept the outcomes. That puts us on the road to authoritarianism.
Hope you find this helpful.
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