The Poor Are Paying the Price for Frivolous Social Justice Weirdness
The reconciliation bill is making the tradeoffs clear
The $3.5 trillion (or substantially less) reconciliation bill is Democrats’ only chance to pass major social spending legislation for at least four years. We’ll probably lose the House next year; the President’s party always loses big in midterms except after 9/11, and I want Democrats to win but I’m not prepared to 9/11 anything. The 2024 Senate map is bad for Democrats; we’ll be defending 23 of 33 seats, so holding the Senate will be tough. If Kamala Harris or the admirably-tenacious husk of Joe Biden hold the White House in 2024, then the “out-party wins the midterms” problem will happen again in 2026. And if a Republican wins the White House, then social spending is off the table and shirtless Viking insurrectionists roaming the halls of Congress is back on.
This is our only shot for a while. Our airport-toilet-paper-thin margins in Congress make things tough; Pelosi and Schumer have to attend to the needs of any prolapsed anus who whines about anything — it’s like being a waiter. And, unfortunately, various complaints from various anuses have already shaped the bill in ways I don’t like.
Moderate Democrats are limiting spending on things like health care and child care; in fact, they’ve put the whole bill in jeopardy. They’ve caved to pressure from lobbyists and taken some of the most progressive taxes out of the bill. It sucks. And I want to be clear: The villains here are moderate Democrats who are blocking some of the most efficient and fair ways of raising revenue that we have. But I also think it’s worth reflecting on how the left’s frequent forays into unpopular identity politics is probably empowering those moderates and having negative consequences for the poor and middle-class.
Let’s start by quantifying what’s been lost. Senate rules — which, as we all know, were written by a Rumpelstiltskin-esque troll seeking to curse the American political system — require the bill to be paid for. So, Democrats’ first step was to figure out how much new revenue they could find. And moderate Democrats have managed to ax certain revenue streams, which I consider to be some of the best ones available to us. Here’s what the bill (almost certainly) won’t do:
Close the step-up in basis loophole. I’ve written about this loophole in detail before; it’s not so much a “tax policy” as it is a “gigantic glitch”. The basics are: Assets get more valuable with time, and normally that value is taxed. But, if the person holding the asset dies and passes it on to an heir, the asset can avoid taxation forever. It’s nonsensical, ripe for abuse, and gives us all even more reasons to sort of wish our parents would die. Which we don’t need.
The bible says “It is easier for a camel to go through the eye of a needle than for a rich person to enter the kingdom of God.” But our tax code says “Fuck the camels and needles: You can cram basically your entire estate through the step-up in basis loophole, and that works better anyway.” This bill probably won’t change that.
Make major changes to the estate tax. The bill mostly leaves the estate tax alone. It does reduce the amount of money exempt from the tax from an astronomically-high $23.4 million per couple to a stratospherically-high $12 million, but that’s about the only change it makes. Incredibly, former Democratic Senator-turned anti-tax lobbyist Heidi Heitkamp manufactured a story about a hypothetical truck driver to justify the $12 million exemption, saying:
“Let’s say truck-driver Sam, who let’s say makes $100,000 a year — all of a sudden now has a tax that he owes on inheriting that property.”
Truck Driver Sam — who apparently holds several million in assets — represents a bold new era in bullshit anti-estate tax storytelling. For years, estate tax foes have been invoking made-up farmers to justify their position. But those stories lacked pop, as well as a meat-and-potatoes name to bring the character to life. Now they have that: Sam. Truck Driver Sam. The name alone is 2/3 of the way to a Kris Kristofferson song. I’m a writer, so — if I may be so bold — allow me to humbly suggest some characters to feature in future made-up anti-estate tax narratives:
Ain’t nary a pine nor a poplar in this here land what can’t be felled by Gus and his ol’ blade, Bessie Mae (inset). Gus done took to bushwhackin’ when he got home from ‘Nam in ‘72 and ain’t never looked back. And sure: Two score & nine as a brush rat done a number on his joints, and Charlie left a bullet in his left hip, but you point ol’ Gus at a spruce and he’ll put some chaw in his cheek, spit on his hands, and give ‘er hell!
ASSETS: $6.2 million in stocks, $2 million in derivative securities, $3.5 million in real estate, $4 million in pine cone futures
Despite having lost seven fingers in seven separate blender accidents, Three-Fingered Annie has never once missed a shift as lunch lady at D.B. Cooper Elementary School. A single mom since her husband was killed by falling excrement from the International Space Station, Annie dotes on her son, Chris, who is just a head. Annie was born with a rare condition that causes her to be a focal point for static electricity, and as a result has been struck by lighting more than 7,000 times.
ASSETS: 30% stake in Baidu, majority owner of the Houston Rockets
Born in 1891, Timmy fell into a rip in the space-time continuum while chasing a chestnut down a sewer, only to re-emerge in 2021. Sadly, Timmy’s 19th century provenance means he is still subject to the labor laws of that era, so he continues to work as a newsie for a cruel man named Fabius. Fabius — now 170 — is a master of the cruelest disposition, never hesitating to steal Timmy’s ha’pennies or take a switch to his backside at the slightest sign of insolence.
ASSETS: An old mutt named Scraps, 12 grams of lung soot, half a locket with his mother’s picture in it, mint-condition tobacco cards of Cy Young and Wee Willy Keeler (est. value: $40 million)
That was quite the digression. Where was I? Oh yeah: I was listing tax changes that the bill won’t make.
Tax capital gains like other income. It looks like the bill will raise the capital gains rate for income above $400,000 from 20 percent to 25. I wish they had stuck with Biden’s original proposal to move it to the high 30s so that it’s in-line with ordinary income.
Arguments for low capital gains taxes often boil down to: “We need to encourage investment.” But…do we, though? Investment is great, but should we incentivize it? Aren’t we creating a market distortion that leads to inefficient capital allocation? That’s how I see it. Unfortunately, this argument has no political home; people who respond to phrases like “inefficient capital allocation” tend to be asset holders, and therefore not generally fans of capital gains taxes. Oh well.
Close the carried interest loophole. If you don’t know what this tax is, then you almost certainly don’t pay it. It mostly affects hedge fund managers; it’s yet another way of treating some income as special income that’s taxed differently.
You may notice that one of my foundational belief about taxes is that income is income. I don’t think it should matter how you made the money — if you made it, then it’s income, and it’s all basically the same. That’s my ground-breaking Thomas Piketty-style formulation: i = i. I hope that becomes a t-shirt — I would love to have a career arc like Piketty, in which I: 1) Write an enormously-influential critique of global capitalism, and then 2) Cash in big-time on merch.
Every dollar in revenue that isn’t collected is a dollar that can’t be spent on the poor and middle class. And I’ve only listed some of the changes to the bill that I don’t like; another would be that the bill’s enormously-important climate change provisions are at the mercy of Joe Manchin. Also, a measure that would let Medicare negotiate prescription drug prices is struggling to advance even though it is the most popular policy out of 194 policies that one firm polled. It literally doesn’t get more popular than that. Free ice cream: Unpopular by comparison. Animals of different species who become friends: Unpopular by comparison. It’s astounding to me that politicians could fuck this one up, but moderate Democrats seem determined to find a way.
The outlook would be very different if Democrats’ margin was just a bit larger. Pelosi is struggling to deal with the so-called “Unbreakable Nine” moderate House Democrats who are leveraging their votes. If the Democrats’ margin was ten, you could dub that group “The Nine Who Can Fuck Straight Off”. But their margin is eight, so they wield power.1 Similarly, if Democrats had just two more Senate seats, they could ignore Joe Manchin and Kyrsten Sinema. What would you give to be able to ignore Joe Manchin and Kyrsten Sinema right now? Personally, I’d give the entire asset portfolios of Timmy Time-Warp and Lumberjack Gus combined.
Most people agree that congressional Democrats underperformed relative to Joe Biden in 2020.2 They don’t agree on why. Some people — like James Clyburn, David Shor, and James Carville — point to unpopular identity politics like the “defund the police” slogan. I tend to agree with that analysis, but if you don’t, fair enough. I can’t prove any of this. We have extensive polling showing that “defund the police” unpopular, but we can’t know how the election would have gone in a counterfactual universe.
But if you agree that identity politics costs Democrats seats in Congress, then those politics are having a tangible negative impact on what might be the only chance to pass a major spending bill this decade. The linkage is clear: Bad politics » fewer seats » narrower margins » more leverage for moderates » less revenue » less spending. Phrased another way: There’s a tradeoff between identity politics and social spending. Back some nonsense CRT excess today, lose the ability to add dental care to Medicare tomorrow. It’s basically this Simpson’s clip in real life:
Consider AOC. I recently read that she wants to tax the rich. I can’t quite remember where I read that…was it in the Financial Times? Maybe The Economist? Oh wait no: I read it on her ass. Anyway: I think her ass made a salient point. Our mildly progressive tax system could be more progressive, which would fund social spending whose likely effect on the economy would be essentially neutral.
But while AOC’s ass was admirably on-message, her mouth veered into identity nonsense around the same time. She went on Anderson Cooper 360 to denounce the Texas anti-abortion law and tied herself in knots saying “menstruating person” instead of “woman”. I don’t want to debate the scientific appropriateness of the term one should use to refer to a person who can give birth, though I agree with this analysis that her words, if you think about it, don’t make sense. The more important thing from my perspective is that the word most English-speakers on Earth use for a person who can get pregnant is “woman”, and you alienate people by saying “menstruating person”. A moment like that is the first step in the chain reaction that I outlined above, which ends in “less spending”. AOC’s mouth is ripping up checks that her ass is then unable to cash.
I don’t think AOC’s eventful week will amount to much; I just think it’s illustrative. Democrats have a popular tax-and-spending program and an unpopular weird-college-freshman-bullshit program, and they can’t seem to keep the focus on the former. I understand that my problem is with the moderates, so it’s weird that I’m turning to the lefties and saying “get your shit together”. I also understand that sometimes politicians should do unpopular things, consequences be damned. But I think many on the left aren’t conscious of the tradeoffs they’re making. I think people go on crusades and don’t think “this might make it hard to do important things later.” We’re at a moment when those tradeoffs are especially tangible, and quantifying the losses really stings. If I’m right that there’s a link between frivolous social justice politics and social spending cuts, then, in a sense, the phrase “menstruating person” is just another way of saying: “So long dental plan.”
It would be reasonable to think “If Democrats had won a few more seats, they would have all been moderate seats, and all that would have happened is that the Unbreakable Nine would be the Fracture-less Fifteen.” That makes sense, but I don’t think it’s quite right. Moderates aren’t moving in lock-step on this; there are nine holdouts, but the DCCC lists 30 “frontline” (vulnerable) Democrats. You’ll get some moderate votes. It might be reasonable to expect that for roughly every two extra House seats you give to Democrats, they might get one vote for something like the reconciliation bill.
I want to address two things that are often brought up when discussing Democrats’ underperformance in 2020: 1) Expectations relative to 2018, and 2) Gerrymandering. The first point is simple: Democrats did well in 2018, so it was tough to do that well again in 2020. The second point is that gerrymandering tilts the congressional map towards Republicans. These points are both obviously true, though not relevant to this discussion. Democrats didn’t just underperform in terms of seats won; they also underperformed in terms of votes relative to Joe Biden. So, forget the translation from votes into seats; if we just focus on how many votes Democratic candidates won, Democrats didn’t do very well. That makes the question of what happened after the votes were cast irrelevant.
I agree with all of this, especially that the left's unpopular social justice politics are a problem in elections. Sometimes the connection feels obvious: I believe "defund the police" did cost seats in 2020, and I was glad that Abigail Spanberger went off on the caucus after she almost lost her seat due to Republicans associating her with it.
AOC making a show of saying "menstruating people" probably won't impact the elections directly, in part because they're over a year away. But every time Democrats talk like this, they alienate people. It all contributes to our image as the party of smug, woke elites. Ordinary people (quite reasonably) view this version of "social justice" politics as hostile to their lives and values, and more importantly, they viscerally dislike the people who promote it.
This makes it emotionally satisfying to align with the other tribe, the one that doesn't call you problematic for saying "pregnant women" or wanting someone to answer when you call 911. Because, fuck those smug annoying kids.
We're losing so many people with this nonsense, and even when some of these fads go away, it's going to be hard to get them back.
Its exhausting that our governance is essentially a giant game of Calvinball. https://calvinandhobbes.fandom.com/wiki/Calvinball