Election Year Tax Increases Are All Part Of The Plan

After 18 months of political arm wrestling inside the Democratic Party, it seems the Democrats finally have enough votes to pass their long-awaited Build Back Better plan (although they dropped the name Build Back Better months ago; it was one of the worst political PR ploys ever).

The Democrats can do what they want in the House of Representatives, where a five-vote margin, simple majority rule, and an iron-fisted leader in the person of Nancy Pelosi is enough to ram through legislation.

The Senate is different. The split there is 50-50 with Kamala Harris positioned to pass a tie-breaking vote for the Democrats as needed. Still, there are two impediments to getting laws passed there.

The first is the filibuster, which takes the form of unlimited debate. One senator can stop the business of the Senate by insisting on his or her right to debate. Some Americans may recall the scenes of the 1939 film Mr. Smith Goes to Washington, in which a determined Jimmy Stewart portrays a senator who talks to the point of physical collapse to sustain a filibuster against a law that he opposed based on high-minded principles. It’s not like that anymore.

The filibuster can be conducted by handing in a “blue slip” or paper notification to the leadership without actually having to talk on the floor (although the latter still happens from time to time). It takes 60 votes to stop a filibuster. As long as Republicans don’t lose more than ten votes (there’s always Mitt Romney ready to defect), they can stop the Senate from acting or at least drive the Democrats toward a reasonable compromise.

Yet, there’s an exception to the exception (this is Washington, after all). Once per year, on matters that are budget related, the Senate can use a process called “reconciliation” to pass a law with just 50 votes. That creates two additional problems. The Senate Parliamentarian (a separate official, not a senator) gets to decide what’s “budget related.” And the Democrats still have to get 50 votes.

That’s where Joe Manchin comes in. He’s a Democratic senator from ultra-conservative West Virginia who has not supported the big-ticket Green New Deal legislation included in Build Back Better. Until now.

This article describes how Joe Manchin has come around to support a scaled-back version of the bill (about $900 billion instead of the original $3 trillion +), with the most extreme green new scam provisions removed. Still, there’s a lot in this law for the progressives to cheer about (too bad for the rest of us).

One provision that has mystified outside observers is a tax increase. Manchin likes the tax increase because it helps pay for the boondoggles in the bill. But, why would Democrats raise taxes in an election year? That sounds like political suicide.

The reason is that they are all in thrall to Modern Monetary Theory. Even if they’ve never heard of MMT, they are still following it.

MMT says you can spend as much money as you want and the only danger is inflation. If inflation emerges (which it obviously has), then all you do is raise taxes to cool down price increases. That’s the rationale (plus Democrats like to raise taxes anyway).

If the Dem tax increase does cool down inflation, that’s because they’ve pushed the U.S. economy into a more severe recession than we have already. Get ready for sharply declining growth with or without the Build Back Better nonsense.

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