As widely expected, Congress did finally put something to a vote to “save” the country from going over the fiscal cliff. And as everyone should have expected, even a bill to “save” the country was still amply provided with pork for certain corporations:
Throughout the months of November and December, a steady stream of corporate CEOs flowed in and out of the White House to discuss the impending fiscal cliff. Many of them, such as Lloyd Blankfein of Goldman Sachs, would then publicly come out and talk about how modest increases of tax rates on the wealthy were reasonable in order to deal with the deficit problem. What wasn’t mentioned is what these leaders wanted, which is what’s known as “tax extenders”, or roughly $205B of tax breaks for corporations. With such a banal name, and boring and difficult to read line items in the bill, few political operatives have bothered to pay attention to this part of the bill. But it is critical to understanding what is going on.
The negotiations over the fiscal cliff involve more than the Democrats, Republicans, the middle class and the wealthy. The corporate sector is here in force as well. One of the core shifts in the Reagan era was the convergence of wealthy individuals who wanted to pay less in taxes — many from the growing South — with corporations that wanted tax breaks. Previously, these groups fought over the pie, because the idea of endless deficits did not make sense. Once Reagan figured out how to finance yawning deficits, the GOP was able to wield the corporate sector and the new sun state wealthy into one force, epitomized today by Grover Norquist. What Obama is (sort of) trying to do is split this coalition, and the extenders are the carrot he’s dangling in front of the corporate sector to do it.
Most tax credits drop straight to the bottom line — it’s why companies like Enron considered its tax compliance section a “profit center”. A few hundred billion dollars of tax expenditures is a major carrot to offer. Surely, a modest hike in income taxes for people who make more than $400k in income and stupid enough not to take that money in capital gain would be worth trading off for the few hundred billion dollars in corporate pork. This is what the fiscal cliff is about — who gets the money. And by leaving out the corporate sector, nearly anyone who talks about this debate is leaving out a key negotiating partner.
