Due to Democratic malice and Republican stupidity (mainly the latter), a soft version of progressivism might again be ambiguously popular. But the progressive vision of bigger government remains unsustainable, because the tax increase is insignificant as a funding device:
If even under the conditions of the past month—with a very liberal president just re-elected, Republicans in disarray, public opinion on taxes seemingly friendlier to them than it has been in decades, and higher tax rates automatically taking effect—the Democrats can’t get more than a tiny pittance of revenue and no chips to use later, then their basic approach to fiscal issues just won’t work. The idea that they will raise rates again in the Obama years when they don’t have all these factors working in their favor is a fantasy. And the notion that the politics of taxes has decisively changed in their favor has been disproven by their own behavior: Many Democratic senators were as relieved as Republicans to see the threshold for higher rates rise well above $250,000, and would not have stood for it dropping below that level to where their upper middle class voters are. Having discovered an effective political wedge in the tax debate, the Democrats have now basically used it up and gotten awfully little in return. They can’t begin to acknowledge that the levels of spending they want to sustain will require a far greater tax burden on far more people (and in a far more regressive way) than today’s code, and if they can’t even state what they want out loud then they’re not likely to get it. Their bluff has been called. The welfare state they want to retain and expand cannot be funded, and they apparently have no way to do anything about that….
The fiscal trajectory of our welfare state is not sustainable, no matter how much taxes go up. That is the truth at the heart of our budget crisis. The fiscal-cliff debate ignored that truth from start to finish, and so has achieved nothing worthwhile for anyone. The Republicans know why they got nothing out of this: The expiration of the tax rates meant they could only contain their losses here. But what about the Democrats? Now they have gotten their tax increase, and what has it gained them but the prospect of an even slower economy? What’s their game plan?
So the Republicans got nothing, but their position was really weak. The Democrats got nothing significant, and there position was (surely temporarily) really strong. What we have here, as Yuval explains, is more evidence still that progressivism has no future.
It wasn’t the time for the Republicans to fight a big battle that they would have lost decisively–if temporarily. And they need to turn to Yuval to help them frame for the public a clear view of what the problem really is. The leader they need they don’t have, which is not to say that Boehner and McConnell can be blamed for managing reasonably a necessary tactical retreat.
(The one thing that annoys me big-time–and could be viewed as evidence that the Republicans aren’t true friends of the working man–is that the Social Security tax cut–the cut to the regressive tax on the self-employed–wasn’t extended.)