Brinkmanship

One of the things you can always count on Republicans doing is sticking to their guns, no matter how misguided. George W. Bush didn't spend the last six plus years ignoring reality just to start acknowledging it now. That's why it's so important for Democrats to be firm in their opposition to Republicans. On two crucial issues, taxes and Iraq, the Democrats will have prime opportunities to make their stand.

Taxes
The elephant in the room, as it were, when it comes to taxes is the Alternative Minimum Tax (AMT). The AMT was instituted in the late 60's to stop millionaires from taking advantage of so many loopholes they ended up not paying any taxes at all. One potential solution would have been to close the loopholes, but instead this crazy, complicated parallel tax system was invented. The problem is, no one ever indexed it to inflation, so next year it is set to affect way more people (middle class people, specifically) than it was ever intended to. There is bipartisan agreement that this is a bad state of affairs, but no agreement has yet been reached on how to fix things.

This article from the NYT details Democrats' intention to overhaul the AMT so that it once again only affects the truly rich. The problem is that by doing so, billions of dollars of currently projected government revenue will dry up. The article has what I consider to be a fairly limited view of the range of options Democrats face:

House Democrats see multiple political benefits from seeking a permanent fix. Some are eager to position themselves as tax cutters. Others want to show their ability to tackle a big and difficult initiative. Last but not least, the alternative minimum tax has a disproportionate impact on states with higher average incomes and high state and local taxes — like New York and California — which tend to vote Democratic.

“It’s a tax cut to the 23 million American families who have no concept that they’re going to get hit with this tax increase,” said Representative Rahm Emanuel of Illinois, chairman of the House Democratic Caucus.

Rahm's comment at the end there demonstrates the political peril of the AMT situation. Politics is NOT an arena in which, as the saying goes, "when you've done your job right, no one will be able to tell you've done anything at all. " In politics, when you do something right, you hit the road and the airwaves to make sure everyone and his sister knows. Fix the AMT now, and no one will really know you helped them because they will simply continue not paying a ridiculously high AMT. Don't fix it, and everyone will be mad at you for not having fixed it. What to do?

If the Democrats can stomach the brinkmanship, this could be a prime opportunity to reverse a core piece of Republican ideology. You see, for the last 25-30 years, it has been political poison to suggest raising taxes. But the sentiments that drove that political reality look like they may be fading, and fixing the AMT might be a good opportunity to get the ball rolling on our counterattack.

John Edwards, the candidate for the Democratic presidential nomination in 2008, has already announced that his universal health care plan will have to involve some higher taxes. Even some supply-side conservatives are now admitting that it is unrealistic to constantly lower taxes without ever raising them. As Mark Schmitt wrote in Washington Monthly recently, taxes will have to go up soon if we are to retain a government that can act on behalf of its people, but it's going to take some smart political planning to get us there. Schmitt goes on:

But the truth is that we are heading down a path toward fiscal crisis that will inevitably require a major increase in revenues. In case that sounds like a euphemism, I’ll say it plainly: Taxes must go up. If Democrats try to avoid that fact, they’ll become mired in trench warfare with Republicans over small-bore increases that will cost them political support and won’t really address the problem. But if Democrats seize the opportunity to define a new era of the politics of taxes, as Republicans did 30 years ago, they can shape the debate in a way that may actually help them to achieve some of their most-cherished policy goals.
...
[T]o make it possible to talk about revenues when the opportunity arrives to actually do something about revenues, Democrats and anyone else who is serious about avoiding economic crisis must spend the next two years thinking and planning how to condition the political environment so that politicians can move with courage. That will require, first, establishing the idea that taxes must increase as a non-debatable fact; second, fixing the political process that has greased the way for tax cuts; and, third, setting the framework in which we talk about taxes.

Fixing the AMT could be the opportunity to lay some effective groundwork for a new era in which taxes can actually be raised when appropriate. Democrats should use AMT debates to highlight the enormous loss of revenue that fixing the situation will cause. They should frame a choice between continuing popular programs and letting government wither away. They can offer Republicans the chance to work with them on overhauling other parts of the tax code to make up for the lost revenue. After making this offer, though, it gets tricky.

The Republicans will hear the offer, and their knees will jerk, and they will reject any form of increasing government revenue, no matter if the net effect keeps revenue constant. Republicans will offer their usual style of compromise (see below): you give up on your position and we get everything we want, in this case rolling back the AMT without doing anything about replacing revenue.

At this point in the process, there will be enormous pressure on Democrats to cave and do what the Republicans want. Instead, they must have the courage to let people get hit with a year's worth of really high taxes, if necessary. People will be furious. But, if Democrats have done their job right, they will have made sure everyone knows that they are paying more as a result of Republicans refusing to come to the table. Once a precedent like this has been set (that sane debate over revenue can and should take place), Congress' budget talks might start taking place in a whole new paradigm.

Iraq
The Democratic-controlled House and Senate recently passed supplemental funding bills for the wars in Iraq and Afghanistan that set dates for American withdrawal from Iraq. Since that isn't precisely what Bush wanted, he's naturally kicking and screaming a bunch of nonsensical BS about how Democrats hate the troops. In times gone by, Democrats would have immediately run away with their tails between their legs at the very invocation of troop support.

One such bygone time was two weeks ago, when Barack Obama did precisely that. Obama was busily admitting that after Bush vetoes the Democratic supplemental bill, Congress will go right ahead and give him the money with no strings attached anyway. The best part was when he said that no one "wants to play chicken with our troops," which is such a great Republican talking point it might as well have been said by Karl Rove.

In times gone by, Democrats would have been sensitive to calls for compromise with Republicans. Such calls would lead to some very earnest press conferences and meetings, at the end of which Republicans would have everything they wanted and Democrats would have done all the compromising. This is Joe Lieberman's idea of compromise, and it's what snarky bloggers call "date-rape bipartisanship". It's also what the insider's insider (and noted U of C alumnus) David Broder thinks of as compromise.

Fortunately, the Democrats look like they are going to abandon Obama's idea of negotiating and Broder's idea of compromise in favor of principled action. (To be fair, Obama apparently improved his post-veto rhetoric this evening.) When Bush accuses Democrats of playing political games with troop safety, the correct response is what it looks like Dems might actually do: point out how we passed the damn bill already and now he's the one playing the games.

In particular, Harry Reid's statement hits all the right notes. Quoth Reid (emphasis added):

"The American people want the President and the Congress to work together to bring a responsible end to the war in Iraq. Congressional Democrats are willing to meet with the President at any time, but we believe that any discussion of an issue as critical as Iraq must be accomplished by conducting serious negotiations without any preconditions. Our goal should be to produce an Iraq supplemental bill that both fully funds our troops and gives them a strategy for success.

"With his threat to veto such a plan for change in Iraq, President Bush is ignoring the clear message of the American people: We must protect our troops, hold the Iraqi government accountable, rebuild our military, provide for our veterans and bring our troops home.

"The President is demanding that we renew his blank check for a war without end. Despite the fact that the President persists in trying to score political points at the expense of our troops, congressional Democrats have repeatedly reached out in the spirit of cooperation. We renew our request to work with him to produce a bipartisan bill that provides our troops and our veterans with every penny they need, but in turn, demands accountability."

In a way, Obama's right: no one truly wants to throw our troops out on the curb. But the solution to that problem is not to cave to Bush, especially when we can fund the military through July without passing the supplemental funding bill. The correct solution is to stand our ground as long as we can and keep making sure the American people realize this is Bush's mess, and he's the one who is refusing to get us out of it.

Conclusion
Cautious observers are partly right: it is a dangerous game of brinkmanship for Democrats to call Republican bluffs on taxes and Iraq. But these are very dangerous times. The last twelve years of Republican Congressional dominance have proven there is nothing for Democrats to gain from timidity. I am encouraged by their refusal to blink on Iraq so far, and I hope they can bring that same resolve to our fiscal mess.