Tax Cut Tick Tock: How The Dems Championed The Issue Before Letting It Fall Apart

Democrats still fervently promise they’ll be passing a middle class tax cut by the end of the year, even though pre-election votes were kicked down the road.

Two weeks ago, everyone seemed to be chugging along on the same train. So where did it go off the rails?TPM interviewed a dozen sources in the White House and on Capitol Hill, and a picture emerged of the Democrats first being in agreement and energized… and then getting deflated just in time to head home and face voters.

Here’s our brief history of the tax cut tussle:

May 26, 2001: The Senate, with just 12 Democrats on board, passed George W. Bush’s tax cuts. In the House, 28 Democrats joined Republicans to vote “yes.” They cost $1.35 trillion and were set to expire in 2011 to comply with Congressional rules, triggered by the GOP’s use of reconciliation, that required they either expire within 10 years or not increase the deficit. (More on that here.)

2007 and 2008: Barack Obama campaigned on ending the upper income tax cuts. Aides signaled right after he was elected that Obama might be willing to just let the cuts expire rather than repealing them.

The discussion percolated on Capitol Hill for much of Obama’s eighteen months, but only the major agenda items of health care reform and Wall Street reform were cleared did members turn their attention to the tax cuts.

Late July 2010: Democratic leadership from the House and Senate gathered for an in-person meeting on the Hill. Finance Committee Chairman Max Baucus said he would fight for a vote for the middle class cuts. House Speaker Nancy Pelosi and Majority Leader Harry Reid agreed as well. Pelosi laid out her preference for a vote, saying, “We think we can make this case.”

August recess: Congress then left for summer recess and members got an earful from constituents about the sagging economy. Leadership and staff have multiple calls on tax cuts. Administration officials and Vice President Joe Biden start talking more frequently about why Democrats want to extend the cuts for the middle class.

Sept. 2, 2010 President Obama, Pelosi and Reid held a conference call focused on tax cuts. Two Hill sources said Obama asked the leaders what they wanted to do, allowing them to state their preference. Both Pelosi and Reid told Obama they wanted a vote before the election, the sources said.

“The White House was listening to the hill to see what the next steps would be,” one source said.

Sept. 7, 2010: Obama, Pelosi and Reid held a second conference call. “It was clear that for everyone the priority was passing middle class tax cuts,” a leadership source said. They talked about the deficit as well, with a particular focus on reminding voters the high-income tax cuts would add $700 billion to the deficit. Obama told the House and Senate leaders that he would be outlining his position in detail in the coming days.

That day, there was a brief discussion among staff to dub the new plan the “Obama tax cuts for the middle class,” since the “Bush tax cuts” would expire and, by design, be over.

Sept. 8, 2010: Obama spoke in Cleveland, detailing his position in clear terms and criticizing Republicans.

Sept. 10, 2010: Obama gave a press conference, telling reporters that Republicans should vote with the Democrats on the middle class cuts since everyone is in agreement on those and try to negotiate for the upper income brackets. For lower level Democratic offices, Obama’s comments were like laying down a marker, and they were welcomed. “That was the first indication we had that he felt strongly about one thing,” an aide said.

Sept. 12, 2010: Minority Leader John Boehner took Obama’s bait, saying on CBS’ Face the Nation that he would vote for the middle class cuts if that were his only option. Each of our sources said this was a major turning point in the debate. “That was the moment, oh yeah,” an aide said. “The Republicans blinked.”

Sept. 13, 2010: Democrats jumped all over Boehner’s comments, and the Republicans quickly moved into damage control.

Sept. 14, 2010: Congress returned to session. Stan Greenberg presented the House Democratic caucus with a poll showing tax cuts are a winning issue for November. Pelosi pled with nervous members to frame it back home that they are for the middle class and Republicans are for the rich. “A lot of people were impressed,” one aide said.

At the same time, members in purple districts grew more adamant, and Rep. Jim Matheson (UT) complained at the caucus to Pelosi that the cuts should be extended in full.

Sept. 15, 2010: The GOP sounded a note of unity on tax cuts and called for the current tax rates to be frozen in place. Things started to fall apart for Democrats as 31 conservative members (including Matheson) sent Pelosi a letter asking for a vote on extending all of the cuts. Leadership still talked about the possibility, but more members start clamoring for an early adjournment. House Democrats don’t do a formal whip count because it’s looking less likely they can pass the tax cuts.

Sept. 22, 2010: Pelosi and Reid have one in a series of conversations as it appeared that Reid was concerned about vulnerable Democratic senators. Several senators who aren’t even up for reelection seemed to be breaking away from the original Democratic position.

Sept. 23, 2010: House leadership realized the caucus was too spread out to form a consensus. Leaders planned one last pitch for the next morning.

Yesterday: In the morning, all signs pointed to abandoning ship. TPM breaks the news that the Senate was going to scrap its plans to vote before Senate Democrats headed into their caucus luncheon.

During the lunch, several senators spoke up and pressed Reid to have the vote.

A source familiar with the meeting said Baucus spoke, along with Sens. Al Franken, Bob Menendez, Debbie Stabenow and John Kerry. Those Democrats said they asked Reid to call for a vote “to show contrast and show Democrats stand for the middle class.”

But bowing to pressure, Reid formally announced the vote won’t happen at the end of the day. The House announced its schedule for next week will include just two days of voting, Wednesday and Thursday.

Democrats quickly formed some talking points, and joined the White House in blaming the Republicans for not taking a vote.

“It wasn’t until last night that we knew 100 percent the Senate would definitely punt on it, but it’s still not clear if we do that too,” a House aide said.

Today: Pelosi told reporters a vote could still happen before they adjourn next week, though most observers felt it remained unlikely.

Next Wednesday: House Democrats at some point will hold a caucus meeting. Leadership expects to make one last pitch to members for a vote. More on how the vote would function can be found here.

Next Thursday night: Members are scheduled to go home and face the voters for the final stretch before the midterm elections.

Nov. 2, 2010: All 435 members of the House are on the ballot for reelection. The GOP holds a slight advantage in the Congressional generic TPM Poll Average (45.6%-42.2%). They need 39 seats to retake control of the House.

Mid-November 2010: An expected lame-duck session would begin. The Democrats have pledged to take action and extend the middle class tax cuts only before they expire. The majority of Democrats want the cuts to expire for the income above $250,000, while Republicans want the cuts permanently extended for every income bracket.

Jan. 1, 2011: Without action, tax rates will go up to the pre-Bush levels.