Now that Senate Democrats fell 7 votes short of 60 yesterday on extending the Bush tax cuts only for those with incomes under $250,000 ($200,000 for singles) or under $1 million, the conventional wisdom says they will accept a two-year extension of the Bush tax cuts for everyone if unemployment benefits are extended too. That’s supposedly what has tentatively been agreed upon in the bipartisan talks with the White House. I believe such a deal will be announced soon, but I remain skeptical about it chances for passing the Senate and the House. What’s to stop a filibuster by Senator Bernie Sanders (ID-VT) or other liberal Democrats? Is there 60 votes for anything? Until next January, it will take 18 Democrats to vote with all 42 Republicans to reach 60. That’s a lot of Democrats, many of whom are very much on the record as opposing an extension for those over $250,000. And what about the House, where Democrats have a 255D-178R majority? Are 39 House Democrats going to vote with all 178 Republicans? The distinguishing characteristic of this lame duck session and of the next Congress, the 112th, will be the large minority of members in each party in each House who will vote against their leaders on issues like extending the Bush tax cuts.
Failure to extend some or all of the Bush tax cuts by next year would hurt the financial markets and the economy, hopefully only temporarily, until the new Congress acts in January. A lot of job creation and business investment is being held back until so certainty is restored to our tax system.