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Democrat vs. Democrat: Liberal Divisions Emerge Over Tax Cuts

December 6, 2010 at 3:53 PM EDT
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As lawmakers search for possible bipartisan agreement on Bush-era tax cuts, some Democrats are asking if the price of compromise is too high. For more on what is turning into a bitter divide among liberals, Gwen Ifill speaks with Jane Hamsher of Firedoglake.com and Jim Kessler of Third Way, a centrist Democratic think tank.
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PRESIDENT BARACK OBAMA: We have got to make sure that we’re coming up with a solution, even if it’s not 100 percent of what I want or what the Republicans want. Now, there’s no reason that ordinary Americans should see their taxes go up next year.

GWEN IFILL: But the president is hoping to exact something in exchange for his concession on tax cuts for the wealthy, which he once pledged to roll back completely.

With the national jobless rate nearing 10 percent, he wants lawmakers to extend unemployment insurance as well.

In Washington yesterday, Senate Republican Leader Mitch McConnell all but claimed victory.

SEN. MITCH MCCONNELL (R-K.Y.), Minority Leader: I think it’s pretty clear now taxes are not going up on anybody in the middle of this recession. We’re discussing how long we should maintain current tax rates, and there are other issues that many people feel are important to address.

GWEN IFILL: Democratic senators spent their weekend making the case against compromise, failing in two efforts to exempt the highest earners from the reduced tax burden.

SEN. CHARLES SCHUMER (D-N.Y.): Our friends on the other side…

GWEN IFILL: New York Democrat Chuck Schumer proposed one plan that would have allowed only those earning up to a million dollars a year to qualify.

SEN. CHARLES SCHUMER: I think this is correct substantively. I think it’s high ground politically. And I think, in the past, Democrats have sort of — when we have had these kinds of cases, we have sort of thrown up our hands. We’re not going to.

GWEN IFILL: Seeking to allay the concerns of the party’s most liberal wing, Vice President Biden and President Obama met with party leaders this weekend and again this afternoon. Their message: This may be the best deal they can get.

Utah Senator Orrin Hatch was among the Republicans suggesting this weekend that the deal may be close to done. He appeared on CNN.

SEN. ORRIN HATCH (R-UT), Utah: We’re willing — it seems to me, we’re willing to kick this over for about two or three — I would like it permanent, but we can’t. We don’t have the votes. Kick it over. Let’s take care of the unemployment compensation, even if it isn’t — you know, even if it isn’t backed up by — by real finances. But we have got to do it. So, let’s do it. But that ought to be it.

GWEN IFILL: And Federal Reserve Chairman Ben Bernanke, appearing on “60 Minutes,” warned that any year-end budget action should not upset the fragile economy.

BEN BERNANKE, chairman, Federal Reserve: We need to pay close attention to the fact that we are recovering now. And we don’t want to take actions this year that will affect this year’s spending and this year’s taxes in a way that will hurt the recovery. That’s — that’s important.

GWEN IFILL: The timing on any tax cut agreement and vote remains up in the air.

The outline of the deal Democratic lawmakers are being asked to consider tonight also includes a temporary 2 percent payroll tax cut, an expansion in the amount of expenses businesses can write off, and a compromise on the estate tax.

But, as the search for bipartisan agreement takes a back seat to the fight for intraparty agreement, some Democrats are asking, what price compromise? It’s turning into a bitter divide within the Democratic Party.

Here to discuss it are Jane Hamsher, founder and publisher of the liberal blog Firedoglake.com, and Jim Kessler, vice president for policy at Third Way, a centrist Democratic think tank.

I always have trouble saying Firedoglake.com, Jane Hamsher.

Some Democrats, like you, say that this deal is a cave-in. Others say this is the best you can get. Why?

JANE HAMSHER, founder, Firedoglake.Com: Well, of particular concern to me — all the details haven’t come out tonight — are the 2 percent payroll tax cuts that is essentially being proposed.

That’s been a Republican idea that they have been pushing for a long time in order to sort of starve the beast of the Social Security trust fund. It means that money will not be coming in to the trust fund, but benefits will still be paid out. Up until now, the trust fund has been solvent and it’s been able to pay out its own benefits.

But, in this plan, they’re basically trying to reduce the solvency of the trust fund, because they couldn’t get a benefit cut through the Catfood Commission. They’re just not going to stop until they try.

GWEN IFILL: So, you think that, basically, the president and his — and the people who support him on this are caving in to Republican ideals, not Democratic ones?

JANE HAMSHER: Well, you know, the whole idea for the deficit commission, the Catfood Commission, was the president’s. He…

GWEN IFILL: I wondered what you meant when you said Catfood Commission.

(LAUGHTER)

JANE HAMSHER: Yes. He — he’s the one who issued the executive order. And they very much considered one of their fundamental challenges to be able to fix Social Security.

But, as Nancy Altman, who is one of the president’s advisers on Social Security, says, it is ridiculous that this is — this idea is coming from the Democrats. And anybody who gets Social Security or ever hopes to get Social Security should be very concerned that the Republicans are finally getting a foothold into it like this.

GWEN IFILL: Why shouldn’t liberals be upset that the president is giving away too much of the store?

JIM KESSLER, vice president for policy, Third Way: Look, I come from a centrist organization. I don’t love the plan either.

I mean, I think it’s — you know, the tax cuts for those over $250,000, I think it’s dubious economic value at a time we can’t really afford it. It will have to be paid back by future generations…

GWEN IFILL: Do I hear a “but” coming?

JIM KESSLER: … to Chinese holders of our debt.

Yes. Look, there’s a new reality out there that I don’t love, but it’s the reality. And that is, you know, they’re going to have to find bipartisan compromises on things — on these things. I don’t know if this was the best plan the president could get or the best plan that Democrats could get, but this is — you know, after the election, there’s a whole new ball game going on right now.

And, as much as we don’t love this plan, my guess is, the American people are probably going to like it. They want to see the two parties work together, even if it is something that neither of them really like.

And I just want to add one other thing. The president and Republicans and Democrats agreed on 85 percent of the tax cut plans going in on this. The whole debate has been about the other 15 percent. It’s an important 15 percent, but that’s what that debate has been on.

GWEN IFILL: So, if there’s only 15 percent that you disagree on, why not embrace the plan and say this is — the White House is saying, you know, we’re getting $40 billion in tax cuts and we’re getting a huge temporary investment incentive. Why not just embrace that and go?

JIM KESSLER: Well, look, because you always want to do better than — than what you can get.

But, look, I — I just think that this extra $700 billion in tax breaks for people who are very wealthy, I just don’t think it has got a real value for our economy right now. I disagree with Republicans who say that it does.

And we can’t afford it. We have got a huge deficit. But this is the best that we can get. And this is what we’re — you know, this is what’s going to pass.

GWEN IFILL: What would you like to see, Jane Hamsher, the White House do, other than the best it can get…

JANE HAMSHER: Well, I…

GWEN IFILL: Beyond, I guess, is the word I’m looking for.

JANE HAMSHER: I don’t believe — I think this is what the president wanted. I think it’s pretty indisputable that this is what he has seriously tried to hope for — tried to work for.

GWEN IFILL: This wasn’t the compromise; this was always the goal?

JANE HAMSHER: I don’t think this was a compromise.

Organizing for America, his organization, never went out on the tax cuts. Chuck Schumer was trying to get a compromise through at a million dollars, rather than $250,000 worth of income. And the president fought against that. He doesn’t want to be the president who is running against — on having raised taxes in 2012.

But the problem is, is that that’s what he tells America that he wants. So, you have got this problem, this dissonance between what he’s saying and what he appears to want. And people are very confused and they’re very frustrated.

I would like him to be honest and make the argument with the American people that — why he thinks this is a good idea.

GWEN IFILL: Is this residual bad feeling left over from other debates which liberals lost with this White House, like the public option debate during the health care…

JANE HAMSHER: You know, this is weird. It’s different. I didn’t think people were going to get upset — that upset about this, but they are.

And particularly here in D.C., you had many of the president’s strongest supporters are federal employees, who are willing to take a tax cut — a freeze on their wages for the good of the country.

GWEN IFILL: Which the president did call for last week.

JANE HAMSHER: But now they’re seeing that wage increase go to pay for millionaires, you know, for people who make more than a million dollars a year. It’s going out the door for that.

And we’re seeing the destruction of the Social Security trust fund? I mean, these are the things that really, really bother people. They’re willing to make sacrifice, but not for millionaires.

JIM KESSLER: I don’t think this is the destruction of the Social Security trust fund at all. I think it’s a completely different debate.

Look, here’s the problem that Democrats have. Going into this debate, I counted six different tax cut compromise proposals that Democrats proposed that all were being debated. Republicans had one. If you go into a position where you have got one negotiating position, and the other side has six, that one is going to win.

Now, you could argue, gee, the president should have gathered everybody together and unified Democrats around one thing. I have been involved with the Democratic Party for 22 years. It’s just not something we do very well.

I do think it’s similar to the public option, which was, you could see down the line, when the public option was being debated, that there was absolutely no chance the public option could get into that bill. There was never the votes. There was never going to be the votes.

Here, there was never a real chance that just $250,000 and leaving the rest of the tax cuts behind was going to be the final solution. We had to figure out a place where we wanted to go. We had to have one position.

GWEN IFILL: And that didn’t happen.

JIM KESSLER: Never happened.

GWEN IFILL: Is this the beginning of a slippery slope involving other Democratic priorities, like don’t ask, don’t tell, the DREAM immigration reform act, the START treaty, where you see the president or the White House or people who agree with him in Congress bargaining away Democratic positions?

JANE HAMSHER: Yes. And if you look at the Korea free trade agreement that was announced on Friday, you know, that was another one of the president’s tentpole promises on the campaign trail, that he was going to repeal the provisions of NAFTA and CAFTA that were very bad for labor, were bad for the environment, and were bad for jobs in the United States.

And, yet, on Friday, they announced another trade deal with Korea, basically the one negotiated by George Bush, that gives the Korean — that gives them everything they want, in exchange for military presence, basically, in South Korea. I mean, people are upset about these things.

GWEN IFILL: What do you say to that?

JIM KESSLER: The Korea free trade agreement is a great deal for the United States. And if you really want to see how good a deal it is, watch the protests in Korea, how upset they are about it, because they think that America got the best deal.

Look, I think that I don’t love this tax deal at all. But I’m a bit more optimistic about what can be accomplished in this divided-government Congress coming up than a lot of folks are. I do think we have a decent chance with don’t ask, don’t tell. I think we do have a decent chance on immigration reform, even with the Republican House.

I think there will be progress made on some of the trade agreements, like Korea.

GWEN IFILL: Not in the lame-duck, necessarily.

JIM KESSLER: Not in the lame-duck. But I think there’s a greater opportunity for compromise and progress than we think.

And just one final thing: The president got 90 percent of what he wanted — and so did Democrats — on the health care bill. That was one of the biggest accomplishments of any presidency since 1965 under Medicare. Let’s not talk about Democrats as caving. That’s a big accomplishment.

GWEN IFILL: So, let’s talk about 2012 briefly, because we know that that’s what people have turned to, that the president has weakened himself among his base and will have a difficult time in 2012.

Does what — does this fight resonate, or does it — that go away between now and 2012?

JANE HAMSHER: It seems like it’s going to — sticking in people’s craws, that this was really the big issue that they cared about.

But I will argue, on the South Korea free trade deal, that you have got — you know, we have lost 45,000 factories since NAFTA passed and 5.5 million jobs. And the Tea Party has overwhelmingly opposed free trade deals.

And the reason they were rioting in Korea is because they don’t like the fact that their government has to accept the jurisdiction of foreign courts any more than Americans do. The president campaigned to stop all of that. And this — this — during this 2010 election, that was one of the number one issues that Democrats won on, 210 ads that were produced against these things.

GWEN IFILL: Is it going to resonate in 2012?

JIM KESSLER: First, I just want to say, we lost those jobs to China. We don’t have a trade agreement with China.

GWEN IFILL: OK. We will have the trade debate another time. I would really like you to answer the question.

JIM KESSLER: I think, ironically, the 2012 debate will be about the Bush tax cuts, Iraq and Afghanistan. And that’s what the 2008 debate was about.

GWEN IFILL: Jim Kessler, Jane Hamsher, thank you both very much.

JIM KESSLER: Thank you.