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The Point of Plan B



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One reason that the talks between Speaker Boehner and President Obama stalled was the debt limit. The president won’t agree to any “grand bargain” that does not extend it, since he doesn’t want to follow up his deal with new spending concessions in a few months. A lot of Republicans and conservative groups are adamant that the debt limit provides a lot of leverage to get spending cuts, and refuse to give it up, even temporarily.

For what it’s worth, I think those conservatives are wrong about a one-year extension of the debt limit. I suspect that political conditions a year from now will be better for Republicans than they are now, because we’ll be further away from the 2012 elections and closer to the 2014 elections. For the same reason, I think a one-year extension of as many of today’s tax rates as possible would work in Republicans’ favor.

But the House Republicans’ views are what they are, and Boehner had to work with them. If a deal with the president looks unlikely (and not just because of the debt ceiling), then maybe something can be worked out inside Congress: That’s the thinking behind Plan B. The Republicans have three objectives: to protect as many people from tax increases as possible, to avoid blame for middle-class tax increases, and to minimize the revenues that Democrats can get without yielding on spending in return (the assumption being, again, that a grand bargain cutting spending and raising taxes can’t be gotten).

If it works out, it will go something like this: House Republicans pass Plan B, showing that they are not protecting millionaires, are taking steps to protect the middle class, and have moved on from the extend-all-the-rates position they took during the summer. The onus will then (again, if things work out) be on Senate Democrats to budge too, perhaps by passing a bill that extends tax cuts for everyone making less than $500,000 and limits tax increases on dividends. At that point we would see what Reid could pass, there being some dissension in his own caucus.

Then the stage would be set for a final bill that extends all the tax cuts for everyone making less than, say, $750,000 a year. Some people are asking how a deal can pass the House with a threshold below $1 million if Boehner is having so much trouble getting Republican votes for a bill with that threshold. The hope has to be that a lot of House Democrats—who have not yet had a chance to vote for a bill that extends the middle-class tax cuts—would support a deal, and therefore Boehner wouldn’t have to round up as many conservative votes for it.

If this exercise works, Republicans will achieve their three objectives (which are obviously ones that are very limited by the circumstances they’re in). I can’t say I agree with everything the Republican leaders are doing or all the constraints their followers have placed on them. I’d have extended the current payroll tax rates in Plan B, and only provided temporary relief from the AMT. (There’s a longer argument to make there, but for now I’ll just note that the existence of an AMT cliff puts pressure on the Democrats to make deals.) But that’s why, I think, Plan B is being voted on.

Reid is saying that the Senate won’t do anything in response to House passage of the bill, and that might be true. Of course it’s also what he would say to make it a bit harder for Boehner to pass the House bill. (Some Republicans will presumably say, Why vote for what can be characterized as a tax increase if it’s not going to go anywhere?) And even if Reid doesn’t do anything, the Democratic talking points about Republican intransigence in defense of millionaires might be a little harder to get across.



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