Democrats Should Adopt the Republicans Budget Framing and Make them Regret Ever Suggesting It

© Josh Sager – December 2012

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If you read my blog on a regular basis, the simple fact that I am suggesting that the Democrats adopt a Republican plan should shock you—don’t worry, I’m not going insane or selling out. I simply recognize that Democrats can adopt the Republican budget framework in order to disorient the conservatives and get people comparing conservative ideals with progressive ones. Just as an Aikido practitioner can capture an opponent’s momentum and use it to throw them, the Democrats can attack the Republican on their own ground and use their own talking points against them.

If the Republicans want to suggest an economic plan based around “reforming entitlements”, “limiting deductions/loopholes” and “cutting spending”, then I see no reason why Democrats shouldn’t take them up on this—there are plenty of progressive policies that achieve these goals, most of which are more popular with the American public then their conservative analogs.

In some fights, Democrats should say: “Okay, you want to do X and to pay for it with Y; we agree that X needs to be done, but we are going to pay for it with Z instead.” This agreement will force the public and the media to focus on the merits of the Republican plan, when compared with the merits of the Democratic plan.

By adopting the Republican framework, Democrats will be able to shift the debate from one of comparing complex ideas to one of comparing principles. For example: rather than arguing about whether or not to cut the budget, Democrats can shift the debate to one over whether to cut our bloated military budget or to cut aid to starving children. Arguing that our spending and revenue rates are unsustainably unbalanced is easy, but arguing that defense contractor waste is more important than food aid to underprivileged American children is considerably more difficult.

If both sides agree on the premise of the debate (ex. the United States government sometimes wastes money), then the discussion is reduced to one of priorities and specific policies rather than one of ephemeral concepts—as the Republicans are woefully unprepared for a debate on specifics and are rightfully afraid that their policies aren’t popular, this narrowing of the debate is nothing but beneficial to the Democrats.

It is important to note that this tactic isn’t applicable in all issues (ex. voting rights and voter ID), as the Republican premise is simply ridiculous. In these issues, Democrats should not attempt to adopt a flawed debate, lest we fall into the trap of legitimizing a ridiculous debate.

 

Keep Tax Rates, but Limit Deductions and Loopholes

In the lead up to the 2012 Presidential election, the Republican Party position on taxes became one of keeping the Bush-era Tax cut rates in effect, but balancing these out with reductions of loopholes and deductions. While they consistently refuse to even discuss raising tax rates, the Republicans have asserted that tax loopholes and deductions can be removed in a way which helps balance the budget and protect the middle class. Unfortunately, the Republicans who suggest that tax rates don’t need to be increased and that loopholes are the only problems either lack an understanding of our country’s economic problems or are being intentionally dense—multiple assessments have indicated that any plan that is based solely in limiting deductions would inevitably cut into middle class deductions (ex. Mortgage tax credits).

In a recent interview with Fox’s Chris Wallace, John Boehner—the Republican who is running “fiscal cliff” negotiations with the White House—suggested the following budget solution as an alternative to raising tax rates: “But you can cap deductions at a percent of income. It’d be one way to get there. You can eliminate certain deductions for those — the wealthiest in our country. You could do all of that.”

I suggest that Democrats throw Boehner’s words back at him and propose doing exactly what he suggested, just with a progressive implementation. There are plenty of tax deductions and loopholes that primarily benefit the rich which can easily be removed to help our country’s fiscal situation. Reforms to the alternative minimum tax rate can be utilized to cap deductions to the point where the wealthy actually need to begin paying their fair share.

First and foremost, Democrats should propose eliminating the “capital gains” rate and begin taxing all investment income as though it were regular income. Capital gains taxation is taxation which is targeted at the dividends of investment—essentially, when a businessman invests in a company to make a profit, they pay this rate rather than a normal income tax rate. Currently, wealthy investors only pay 15% of their investment income to the federal government, while people who work for a living pay far larger percentages through their payroll and income taxes. This disparity is unfair, and leads to the wealthy being able to avoid a large amount of taxation (many very rich people make a vast majority of their money through the capital gains rate).

Just this change in the tax code has the potential to raise the base tax rate of wealthy investors from 15% all the way up to 35%–when compared to the potential 2% to 4% increase in the tax rates which the Democrats are asking for, we see just how much more effective this change is. I, for one, would be perfectly happy taking the 20% increase in the capital gains rate over a potential 4% tax rate increase on the income tax.

Once capital gains reforms are suggested, the Republicans will fight back with the inevitable “killing small businesses” and “stifling investment” attacks. Defending against these would be simple and would involve only minor changes to the program and the rhetoric which accompanies it.

  • Democrats could easily mitigate the “killing small business” attack by suggesting that this change only affect those making more than $250,000 annually.
  •  The “stifling investment” attack is simply nonsensical, as current taxation is nowhere near high enough to stop people from investing. Mocking the Republican business sense could help dissuade this attack: ex. “Let me get this straight congressman. If somebody offers you a good investment, but says that you would need to give a third of the profits to support local schools, you would refuse because you could only keep 2/3 of your profits? If so, please send these investments to me and I will gladly take them off of your hands.”

Our tax code is littered with pointless and wasteful deductions that benefit only the wealthy and can be cut out of the code to benefit the country. While there are dozens of such deductions, two great examples are the tax incentives for corporate jets and the home mortgage deductions available for an individual’s second home—needless to say, if you are able to afford a personal jet or a second home, you clearly should bear more of the tax burden than somebody who is simply scraping by. These tax breaks exist only to benefit the super-wealthy and have no real benefit to society. Democrats should target these tax breaks for elimination and dare Republicans to present plans that keep these deductions while delivering pain on the middle class.

After the Democrats propose specific and progressive reforms to the tax code, they should immediately begin demanding that the Republicans name the deductions that they want to remove or reform. Democrats should demand specifics on the Republican plan—complete with deductions and amounts of new revenue that would be gained—and then draw comparisons between the two plans.

Once the Democrats present a clear plan for tax code reform, Republicans would be forced to present their plan. If they refuse to present their plan, Democrats can simply hammer them with the accusation that they lack real ideas and are simply stalling to protect the rich—this accusation is particularly damaging, as the idea that tax rates should be kept the same and only deductions should be reformed is the Republican plan.

The Republicans in Washington want to preserve low tax rates for the wealthy and would never willingly pass a tax plan which harms the rich significantly; as such, they bound by constraints that prevent them from touching certain deductions (ex. capital gains reform). Any plan that comes out of the Republicans would be much more harmful to the middle class and poor than the Democratic plan, thus it would likely be much less popular (simple math: the money must come from somewhere and, if you can’t touch the rich’s tax breaks, you need to rob the poor/middle). This likely unpopularity of the Republican tax plan with the public is the reason why they have been reticent to discuss any specifics around it.

As I have detailed above, by willingly accepting parts of the Republican tax reform plan, Democrats can create a situation where the Republicans are trapped by their own rhetoric. They can force Republicans into a situation where they must choose between agreeing with the Democrats, painting themselves as the party that is willing to sacrifice the middle class for the rich, or simply appearing to be a party which doesn’t even know the specifics of its own tax plan.

 

Cut Spending

Modern Republicans almost universally deride the federal government as wasteful and propose that government spending must be cut. By invoking the threat of “big government” and the national debt, the Republicans have attempted to initiate draconian austerity initiatives on many important federal programs. Ironically, the programs which tend to be first on the chopping block for Republicans are often the most beneficial (ex. the SNAP Program), and those which only benefit the wealthy tend to be the most well protected.

Just as with the tax code, the Republicans are suggesting reform in an area which could easily be turned to the benefit of the Democrats. Our government does waste money and proposing cuts on wasteful programs and corporate welfare is something which could be beneficial to the country in the long-run.

To counter the Republican cuts, Democrats should go to the Republicans and the American public and propose their own plan for cuts, focused exclusively on programs which are actually wasteful. Such cuts have been suggested before (see the Congressional Progressive Caucus’s 2012 Budget), but have failed to achieve traction in the Democratic Party—this needs to change and now is a good time to do so.

Here are a few examples of wasteful programs which Democrats should suggest cuts in:

  1. Defense: The American defense budget is bloated, wasteful, and could easily be cut by a significant amount. Lobbying by defense contractors and weapons manufacturers has led to our politicians supporting a grossly inflated military budget, simply to profit the military-industrial complex. A perfect example of this waste is found in the creation of the F-22 fighter jet. This fighter jet, which has never been used in combat and has experienced numerous malfunctions, has cost the United States over a trillion dollars to create. Democrats should suggest cutting the defense budget by a significant portion of it its budget and should propose the elimination of any wasteful programs. In doing this, Democrats could easily cut billions of dollars out of the defense budget and still keep the United States military the strongest in the world by far.
  2. Oil Subsidies: Oil subsidies in the modern era are antiquated, ridiculous, and should be second in line for Democrats’ cutting. The oil business is immensely profitable (the most profitable industry in the world), and there is simply no reasonable justification for giving these corporations billions of dollars a year in subsidies—it isn’t as though they will stop drilling, be forced out of business or move elsewhere to drill.
  3. Farm Subsidies: The United States gives billions of dollars a year to large farming corporations, most of which is simply wasteful. These corporations are already profitable and simply take the subsidies as profits.

Just through cutting Defense and corporate welfare, the Democrats would be able to cut billions of dollars in waste, never mind the other wasteful programs which could be eliminated. These cuts would be far less damaging to the middle class and the economy as a whole than any of the cuts proposed by the Republicans.

The Republicans have suggested huge cuts to social welfare programs as well as programs which they are ideologically opposed to (ex. NPR), but have given corporate interests a free pass. By suggesting the opposite, Democrats can force the Republicans into a position where they either face the prospect of defending oil subsidies while attacking home heating assistance, or capitulating on certain cuts. Rhetorically speaking, it is very difficult to justify to the public cutting big bird, while protecting subsidies to rich oil corporations, and Democrats will win this fight.

If Republicans want to cut spending, Democrats should agree with them and propose strong cuts to the programs which benefit wealthy multi-national corporations. These cuts would avoid harming the American people, would force the Republicans into the defensive position, and would help reduce the deficit in the long run. By going on the offensive and suggesting their own cuts, Democrats can pre-empt the Republican cuts and force them into a priorities fight between the Republican cuts and the Democratic cuts.

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Reform Entitlements

Washington Republicans have presented a unified message that they want to “reform” entitlements by cutting benefits or increasing the age of eligibility. Put plainly, these “reforms” are nothing of the sort and are simply the next phase of the attacks on entitlements that Republicans have been doing for decades. In order to justify their entitlement cuts, Republicans cite the potential collapse of the program due to increasing life expectancies and the specter of the programs—both of these justifications are false.

Unlike with tax rates and spending cuts, Democrats should not fully accept the Republican framing. Entitlements have nothing to do with the budget, as they are paid into through dedicated taxes (ex. Payroll taxes), and Democrats should not buy into the false narrative that entitlement cuts are necessary to improve the budget. Such a conflation would allow future fights over entitlements and would likely be harmful to entitlements in the long term.

That said, Democrats should suggest reforms to entitlements in competition with the Republican “reforms” (read: cuts). Simple changes to the payroll tax structure that remove the upper limit on payroll tax contributions can allow entitlements to remain solvent for the foreseeable future. Currently, individuals pay 4.2% (a normal rate of 6.2%, reduced by temporary tax cuts) of the first $102,000 of income in payroll taxes. By removing the upper cap, thus causing people to pay 4.2% of all income (under the Democratic plan this could also include capital gains) into the entitlement trust funds, Democrats could ensure full sustainability for both Medicare and Social Security without cuts to benefits.

Democrats should propose removing the upper cap on payroll tax contributions in order to sustain entitlements as well as to force the Republicans to capitulate on entitlement reform. If this fix were to pass, entitlements would be solvent for decades (if not forever) and Republicans would have an extremely hard time justifying future cuts to the programs.

When the Republicans inevitably line up to protect the rich and continue to propose their plan of benefit cuts and age eligibility increases, Democrats should use this position to pulverize them in the public eye. Americans love the entitlement programs and consistently line up to defends them if threatened (even Romney tried to capitalize upon this by accusing Obama of cutting Medicare to fund ObamaCare). By turning this situation into a simple choice between the Republican cuts and the Democrats tax reform, Democrats can score a concrete policy and political win:

On one side of the debate, we have the Republicans who want to cut entitlement benefits and raise the eligibility age for everybody in order to extend the program by a few years. On the other side, we have the Democrats, who want to  make people who have money to spare pay a little more to the Medicare and Security trusts in order to sustain the program ad infinitum. If the Democrats present this case to the public with any reasonable level of coherence, they will win and the Republicans will either capitulate quickly or go down fighting and damaging their party brand.

 

Conclusion

By adopting the Republican framing of the debate in some cases, Democrats can force the Republicans to debate their unpopular policies without the buffer of generality—rather than being able to simple brand the Democrats as the “tax and spend party”, Republicans would be forced to debate specific program cuts, tax loopholes and entitlement reforms. Due to the widely unpopular nature of some of the Republican policy plans, they hate discussing specifics (Case in Point: the Jello-like Romney tax loophole removal answers during debates), and this tactic could easily force them to do what they hate.

At a minimum, this tactic would force the media and political punditry to begin discussing the differences between Republican and Democratic economic policies on a specific level rather than a macro level. This would turn the debate from one over whether or not to cut entitlement programs and benefits for the poor, to one over whether the poor and middle class should have their programs cut in order to sustain low taxes for the wealthy.

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