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Chuck Schumer: Dump Simpson Bowles, It’s a “Tax Trap”

MUSIC TO my ears when Sen. Chuck Schumer’s speech started circulating. Schumer was talking about something Jared Bernstein has warned about too. The highlighted section from Sen. Schumer is the most important.

“If upfront rate cuts are the starting point for negotiations on tax reform, it will box us in on what else we can achieve. Certain conservatives will pocket the rate reductions and never follow through on finding enough revenue elsewhere in the code to reduce the deficit. Or, if they do, it will almost certainly come out of the pockets of middle-income earners.” [Washington Post]

From Bernstein recently, bold mine, all caps emphasis his:

but most of the actual reform proposals–like those of Rep Paul Ryan, Gov Romney, or the Bowles-Simpson commission–cut rates first, with an agreement to find the base broadeners later (Bowles-Simpson, to be fair, included “illustrative” cuts, but the members of the commission were unable to reach agreement on them).

Therefore, TAX REFORM THAT LOWERS RATES WITHOUT FIRST LOCKING IN HIGHER REVENUES WILL VERY LIKELY FAIL TO RAISE THOSE REVENUES. The sequencing of tax reform therefore must be…

Chuck and CC conclude that tax reform, done badly with the wrong sequencing, could end up exacerbating both inequality and the budget deficit. …

Even if you’re not an economist or don’t understand the intricacies of taxes, you certainly can appreciate one thing, especially after watching the debate since 2011. If revenue models aren’t locked in first, before the tax cut sweeteners, we’ll never see the money.

More from Bernstein today:

As Matt Yglesias notes here, Jan doesn’t get why both parties are so ready and willing to allow the payroll tax cut to expire at the end of this year when unemployment is still so elevated. That 2% cut to take home pay that aggregates up to $120 billion, contributing to precisely the fiscal contraction you see in the second figure in this post (see the black parts of the bars).

I know that some people worry that this tax cut diverts money from the Social Security trust fund, and in doing so, provides great comfort to those who would destroy social insurance, and does so in the name of progressive, Keynesian stimulus, which is pretty diabolical, actually. I hear them and understand their concern–I know how much the enemies of Social Security would love to weaken the trust fund.

But the law specifies that any and all diverted dollars must be replenished by general revenues. A few months back I even identified the ledger within the government accounts that specifies the transfers, and they were, in fact, being made in accordance with the law.

Why is no one fighting to preserve this important stimulus right now?

Why, indeed? I wrote that Mitt Romney should challenge President Obama on the payroll tax cut and for obvious reasons, first of all because it boxes Obama in and challenges him on Tim Geithner’s advice, plus talks directly to the people Romney need to reach in Ohio.

Simpson-Bowles is all the rage, but it shouldn’t be, for a number of reasons, starting with entitlement shenanigans.

That Sen. Chuck Schumer had the chuzpah to take the tax issue embedded in Simpson-Bowles is magnificent.

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7 Responses to Chuck Schumer: Dump Simpson Bowles, It’s a “Tax Trap”

  1. LiberalJoe October 9, 2012 at 10:11 pm #

    TM,

    With all respect I don’t trust Schumer for a gdamn minute. He is a corporatist and an opportunist extraordinaire. If he has taken this position so far out ahead of the negotiations then to me the fix is already in-one way or the other. If the fix is in to cut Soc Sec and Medicare then he can say he opposed the cuts fought the fight and look like a hero. If Soc Sec and Medicare are unscathed he looks like a hero again. Color me very skeptical.

    I find the announcement of this position at this time very curious. It’s getting closer to the election and follows the debate in which Pres Obama messed himself worse than a newborn, especially on the question of Soc Sec., which has made true Dems in the base extremely worried, even working class Repubs are nervous.

    A day or so after the debate, I called my Congresswoman’s office in NY, Carolyn Maloney, and spoke with her office COS. I asked if the Congresswoman’s position was the same as Pres Obama’s which If you believe the Pres is practically the same as Romney’s. The COS was trying to run from the comment saying the Congresswoman opposes cuts to Soc Sec and Medicare. I pointed out that the Congresswoman was a staunch supporter of womens health care rights and was also in favor of the Public Option but voted for the ACA which contained the Stupak language and no public option. The COS was scrambling to sound cogent. This is the key – put pressure on the Congressional Reps and force the White House to run from cuts to Soc Sec and Medicare.

    The Dem base is worried and the smarter Dems in Congress know it.

    Simpson Bowles is a train wreck for Dems. Any Dem who embraces it should be voted out of office and they would deserve it.

    • Taylor Marsh October 9, 2012 at 10:19 pm #

      Yeah, I know what you’re saying. I’ve written it before on other issues myself.

      But it’s not like anyone else in any position of power on the Dem side is going anywhere near criticizing or even offering an option beyond Simpson-Bowles.

      Maybe others will chime in if the conversation gets picked up, which is the whole point in writing about Schumer’s speech. If no one talks about this we’ll choke on the results.

      There is stirring on pressure, trust me. It starts with Bernie Sanders, but is going to be joined by the AFL-CIO, too, according to people I trust.

  2. fangio October 9, 2012 at 11:10 pm #

    Schumer is and always has been in the pocket of Wall street and it’s banks. All through the recession he cut deals to preserve their power and influence. He knows where his bread is buttered and he most probably knows something we don’t.

  3. Art Pronin October 9, 2012 at 11:12 pm #

    I got an interrnal afl email saying they will commit to fighting simpson bowels but who knows

    • Cujo359 October 9, 2012 at 11:23 pm #

      “afl”? I don’t recognize who that is, but if they’re just about any group in DC, I’ll believe it when I see it, and I’ll only believe it then if there’s physical evidence that corroborates the story.

      • Cujo359 October 10, 2012 at 4:54 am #

        Wait, AFL-CIO? If that’s who you meant, what I wrote goes double.

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