One point that’s not always being made clear in discussions of the debt ceiling talks is that the revenue increases Barack Obama is demanding are increases relative to current policy rather than relative to current law. This is important because the Bush tax cuts are currently set to expire in 2012, and these tax cuts are extremely expensive. The upshot is that if Obama obtains bipartisan agreement on taxes, revenue will be much lower than where it would be if he simply promised to veto extension of the tax cuts.
Recall that the Bush tax cuts come in two pieces. One piece, the more expensive one, is composed of broad-based, highly regressive tax cuts. Political convention calls these “middle class” tax cuts because middle class individuals do indeed receive them. And because middle class people outnumber rich people, the largest share of the money goes to middle class people. But rich people actually receive much larger cuts than do middle class people. Another piece, cheaper but still very expensive, is composed of super-duper regressive tax cuts that only very high income people get. The current negotiating posture of the White House is to say that they favor permanent extension of the very expensive broad-based regressive tax cuts but do not favor permanent extension of the expensive rich people only super-regressive tax cuts. And the current negotiating posture of congressional Republicans is to say that they will vote against extension of the very expensive broad based regressive tax cuts unless they’re paired with permanent extension of the expensive rich people only super-regressive tax cuts. One of the things Obama has proposed in the negotiations is to settle for even less revenue than his proposal for partial extension would raise.
There are a few ways to interpret this series of events. One of them (about which more later) is simply that to an extent few realize, the Democratic Party has locked itself into a conceptual box around taxes, which is going to destroy progressive politics. Another is that a lot of the juice in the debt ceiling talks is less about what happens than about what people can make other people vote for. Republicans don’t just want to cut Medicare, they want Democrats to vote to cut Medicare and Democrats don’t just want more tax revenues, they want Republicans to vote for tax hikes. American political institutions create a lot of incentives for this kind of accountability-evading behavior.