An anachronism leaves the losing Democrats in charge of the US Congress for another month. This last session of the Congress is called the ‘lame duck’ session, because it was generally considered as not able to do anything. But this time, the Democrats try to change this perception. They attempt to vote into law a maximum of the Obama agenda while still in the majority. But they may not succeed, because (1) time is running out (only 2-3 weeks left); (2) the Republicans who won so overwhelmingly in November are slowing down the legislative process in the Senate as much as possible; (3) a number of reelected Democrats are scared to upset their voters again. 

A historic note. The newly elected members of Congress gain power only on January 4th, thus two months after the election. The reason goes back to the founding of the Republic now more than 200 years ago. In the 19th century, when America expanded over the whole continent, slow moving courier was the only way to communicate.  People travelled on foot, on horseback or by boat in the first half of that century. Travelling during winter was impossible in most parts of the vast country. Congress only convened for a few months per year.

Near the end of the 19th century, travel per train between the East and the West of the continent was possible, but such a voyage could still take a couple of weeks. Elected House Members, and Senators, appointed by their respective States, needed weeks or months to convene in Washington DC. It was only in 1933, the start of the first meeting by the new Congress was brought forward from March to January. Now, in the 21st century, the new elected Members of Congress would be able to convene rather quickly, say early December. Such a new start date is only possible after changing the 20th amendment of the Constitution. A long process, indeed. The Americans have bigger problems on their plate now.

Back to today. The most important point on the schedule of Congress is preventing all taxes to rise. President Bush lowered the taxes in 2001 and 2003, and produced a big bounce in the economy. But, these reductions in taxes were only voted for a limited time. They expire at the end of 2010. Thus, on January 1, 2011 taxes rise automatically: lowest income from 10 to 15%, middle income from 25 to 28%, top income from 35 to 39.6%; capital gain tax from 15 to 20%; tax on dividends from 15% to 39.5%; the dead tax from 0 to 55%. A number of tax deductions are canceled totally or are lowered. An eye-opening list can be found here.

Republicans refuse to raise taxes on principle. They want to perpetuate the Bush tax cuts. Democrats first wanted to let them expire for everybody, but now they accept not to raise the taxes for families earning less than 250,000 dollars per year. Yesterday, the House, under leadership of Pelosi, voted just that, without any debate, Republicans against Democrats, with a few dissidents on both sides.  For over a year, Pelosi refused to discuss the tax issue in her House. The Republicans promise to stop this legislation in the Senate, where the Democrats lack the necessary 60 votes to make it law.

If no compromise is reached in the next week, besides all other tax raises, the withholdings on the salaries and compensations of the working people will rise on January 1st. The Department of Finance needs two weeks to instruct all companies how to calculate the taxes and what part to deduct and prepay. The Republican controlled Congress will vote early January to make all Bush tax cuts permanent and backdating it to January 1st. At that point it will be up to Obama to accept the new law, or to veto this legislation. A veto means he will be responsible for a huge tax increase on everybody.

Two compromises are circulating. The first offer is to extend the Bush tax cuts for another two years. The second proposal is to pull the $ 250,000 point up to 1 million dollars. Three reasons why Republicans object any raise in taxes are:

First on principle: no new taxes while the economy is stalling.

Second: self-employed people own a lot of small and medium sized companies. The profits of these companies are taxed as personal income of the owner. Tax legislation is different in many aspects between the US and Europe. This kind of small and medium sized companies are responsible for the biggest chunk of employment creation in the US. The center-left research institute ‘Tax Policy Center’ estimates 44.3% of these companies will be victimized by the higher taxes.

Three: continue to aggrandize the slope of the tax tariffs is contra-productive. An ever decreasing number of people are paying an ever larger amount of the taxes, while a growing number of people are paying no taxes or almost no taxes at all. The balance between ‘payers to the government’ and ‘receivers from the government’ is almost 50-50. The top 1% of earners pay 33.7% of income taxes. Half of the earners pay about 95% of all income taxes. (Numbers of 2008.)

What else will be discussed in Congress these weeks? Democrats love to vote in a hurry, before the end of the year, on a few other tricky laws. For example: (1) the START agreement between Russia and the US, a subject Obama invested a major part of his prestige in. (2) accept gay soldiers to serve as such in the military by outlawing the Don’t Ask Don’t Tell policy, instituted by Clinton. (3) The dream-act: legalizing the children of illegal immigrants, when these children participate for two years in post high school education (graduating not necessary, city colleges OK, on-line courses OK), or when they serve in the military. (4) Tax CO2.

The START accord has a fair chance to be ratified, although a respectable number of Republican Senators have issues with it. START may be the only thing Democrats get trough Congress before the end of 2010.

The CO2 tax is dead, and will not be voted on, not this year and not in the years to come. The Republicans in the House, for that matter, promise to abolish as soon as January the House Committee engaged in the promotion of the Man Made Global Warming swindle. This theory is rejected by the Americans for the biggest deception ever concocted by power grabbing politicians it is.