The Obama team announced the tax cut portion of their stimulus proposal and it turns out that 40 percent of the package is wrapped up in middle class and business tax cuts. On the surface, this is nothing new, though the 40 percent figure is catching everyone by surprise. Krugman:
Look, Republicans are not going to come on board. Make 40% of the package tax cuts, they’ll demand 100%. Then they’ll start the thing about how you can’t cut taxes on people who don’t pay taxes (with only income taxes counting, of course) and demand that the plan focus on the affluent. Then they’ll demand cuts in corporate taxes. And Mitch McConnell is already saying that state and local governments should get loans, not aid — which would undermine that part of the plan, too.
I don’t quite grasp the political strategy of this yet, but it seems to me as if basic negotiation tactics dictate that you start with a lower percentage and trade to the upside. In other words, announce 30 percent, then, if necessary, negotiate up to 40. However, it’ll be interesting to see the other 60 percent of the stimulus. Maybe it’s wishful thinking, but perhaps there are some new and very progressive items in there — items that required a larger nod to the Republicans.