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Democrats’ Divisions on Fiscal Cliff Solutions

If it’s true that the election was a morale booster to liberal Democrats, it’s just as true that they have reason to temper their excitement.  Despite what you may see in the media, the Democrats are not entirely unified on how to solve our nation’s fiscal crisis.  Most can agree that they do not want tax rates to rise for families making under $250,000, but harmonizing on the details above the $250,000 mark has proven more difficult.

Apart from those Democrats who feel entirely apathetic about our nation’s debt and fiscal crisis, many Democrats’ rallying cry is that we must “tax the rich” more in order to avert the fiscal cliff.  However, they disagree on just how much they’d be willing to increase tax rates.  They also disagree on the magnitude of reforms that they’d be willing to implement in terms of entitlements and welfare. 

Some Democrats take a so-called moderate position on taxes, as opposed to an ultra leftist liberal stance, since they represent a constituency made up of high income earners.  Politico reminds us that “Senate Majority Leader Harry Reid (D-NV) will have to find 60 votes to extend just middle-income tax rates — far from a given with a swath of the Senate’s moderate democrats up for reelection in 2014.”

Senator Ron Wyden (D-OR), a member of the Senate Finance Committee, would keep the top income tax rate at 35 percent and would keep preferences for mortgage interest and charitable deductions.  House Minority Leader Nancy Pelosi said the she would prefer to see the top rate rise from 35 to 39.6 percent.  This, of course, would be an awful move for the economy and job creation.  Heritage’s Curtis Dubay explains:

After adding state and local income tax rates, the 39.6 percent top federal income tax rate long fought for by President Obama and his congressional allies, the higher Medicare surtax from Obamacare, and the new millionaire surtax, the average top marginal income tax rate in the U.S. would be 55 percent.”

Such a tax hike would render the U.S. far less competitive than other developed countries and cost countless American jobs.

Thankfully every Democrat does not publicly hold this extreme, liberal position.  For example, Senate Finance Committee Chair Max Baucus (D-MT) is marching to the beat of a different drum, at least with regard to the estate tax.  While many Democrats would be glad to see estate tax rates rise, Sen. Baucus has expressed a willingness to maintain the Bush-era rate and exemption for estate taxes.  According to Politico, Senator Mary Landrieu agrees that estate tax rates should not increase because she sees how this tax negatively impacts small businesses.   With the economy still recovering, she contends, it’s not the time to raise taxes on middle-class families or small businesses.

Democrats are not perfectly aligned on the issue of welfare reform, either, and if they are of a progressive bent, they may not be in tune with a broad swath of liberal voters.  According to a Third Way poll, there is broad support for Medicare and Social Security reform among liberal voters.   Yet, there is strong opposition in the Senate and among labor leaders to bringing entitlement reform to the table at all, which Sen. Harry Reid has explicitly ruled out.

Senator Mark Pryor (D-AK), on the other hand, takes the opposite stance.  He said, “My view is that everything should be on the table… I don’t want anything to be ruled out.”  The Wall Street Journal reports (sub. req’d) “Democrats are divided on the magnitude of changes they would accept when it comes to overhauling Medicare and other safety-net programs.”

The solutions Democrats are willing to entertain range from major reforms, such as “increasing premiums for wealthier beneficiaries and raising Medicare’s eligibility age,” to not touching entitlements at all.  There are also some Democrats who fall between these two positions and would tolerate some cuts as long as beneficiaries won’t be directly affected.

Make no mistake.  Democrats have their own divisions to work out, and they want to maintain the illusion that they’re all on the same page.  Sen. Reid is particularly concerned about his party’s image.  Roll Call reports that he tried to discourage a group of Senate Democrats from sending a letter to President Barack Obama this week detailing suggestions to avoid the fiscal cliff since it might suggest underlying divisions among them.

Democrat disarray presents an opportunity for conservatives on the so-called fiscal cliff.  If we can stand united around the iron clad principle of not raising taxes, there is a chance we can exploit the aforementioned fissures and secure a solution that does not raise taxes…or revenue.

 

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