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Tax-Cut Deal: Sympathy for the President

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It was tough times for progressives before President Obama announced his tax-cut "compromise" with the GOP this week. The Democrats were routed in the midterm elections, tea party zombies were in ascent, and the inspiring change-candidate of 2008 wasn't looking too triumphant. Then came the deal, and many on the left became apoplectic, accusing Obama of caving to the obstructionist Republicans. After all, he had indeed yielded on an article of faith for the left: George W. Bush's tax cut bonuses for the well-to-do had to go. Perhaps even worse, Obama had reached this hard-to-swallow accommodation without forcing the just-say-no GOPers into a showdown. (Former Labor Secretary Robert Reich denounced the deal as an "abomination.") But after talking to several top administration officials, I've become a tad more sympathetic regarding Obama's decision to negotiate this pact.

The agreement is indeed ugly. In exchange for decent policies that can help mid- and low-income Americans -- temporarily extending the Bush era tax cuts for middle and lower brackets, continuing a variety of refundable tax credits, cutting payroll taxes, extending unemployment insurance -- Obama accepted a high price: a two-year extension of the Bush tax cuts for the wealthy and generous breaks on the estate tax for the well-heeled. Essentially, the swells will benefit much more than hard-pressed commoners.

Here's how it breaks down: Obama's desired provisions will provide about $214 billion in tax cuts and benefits to 156 million people, and the GOP's treats will dole out $133 billion to 4 million. You can do the math without a calculator and see that those poor rich folks will be handed oodles more than the rest. One comparison: On average, people with more than $1 million in income will end up with an extra $140,000. A taxpayer in the $40,000-to-$50,000 range will receive $1,679. You may ask yourself, why do millionaires and billionaires warrant more pocket money, particularly when it's generally accepted that spreading cash among the rich is not effective economic stimulation? The answer: That's what Republicans want. And Obama is right: They held the rest of America hostage -- no cuts and benefits for you, unless there's "relief" for the gazillionaires.

Liberal House Democrats and other progressives are enraged about this -- and rightly so. The House D's on Thursday passed a non-binding resolution that decried the deal; dozens of them have vowed not to accept it unless amended. They want a fight. And they yearn to see Obama be at least as ticked off at GOP obstructionists as he is with his on-the-left critics (whom he testily chastised at a press conference earlier this week).

I'd like that, too. The White House and the Dems should have gone after the Republicans on this months ago -- before the election (even if some D's thought such a brawl would not boost their reelection prospects). Obama has not succeeded in an important mission: depicting the Republicans as extremists who routinely block attempts to revive the economy and who care mostly about easing the tax burdens on millionaires. This accord would have been far more palatable at the end of a fight, rather than as a substitute for confrontation.

But come this point, Obama had to play a lousy hand -- even though it was a hand he had a hand in dealing. And here comes the sympathy.

In meeting after meeting, during which the president and his aides discussed his options, Obama repeatedly asked if anyone could guarantee that were he to put up his dukes, go to the mat, and play chicken with the GOPers, mid- and low-income Americans would end up with the breaks and benefits he believed they need. If he went nose-to-nose, mano-a-mano, and the R's didn't blink, they'd be nothing for nobody -- and the Bush tax cuts would end for the middle class, mean that come Jan. 1, hard-working Americans would see a smaller paycheck. To make matters worse, this might have an anti-stimulative effect on the economy.

Then what would happen? He might be able to win the blame-game against the Scrooge-ish Republicans -- which would be a significant victory, especially heading into the next Congress. But there would be no action until next year, and any tax-related bill would have to originate in the Republican-controlled House and pass a Senate with a larger and more tea party-ish GOP caucus. It could take weeks or months to hammer out a package. What were the odds it would contain as much assistance for the non-rich? In the meantime, working-class Americans would be contending with less money. That is, hurting more.

So at this late stage of the game, in the dwindling moments of the 111th Congress, should Obama have been willing to put those Americans on the line in order to do battle with the nefarious Republicans? Had he done so and won (forcing the GOPers to forgo the the tax bennies for the rich and to accept tax cuts and benefits, including unemployment insurance, for others), he would have saved the nation a lot of money and not established some dangerous precedents (such as the more generous exemptions for the estate tax). He would have served several valuable principles: We don't pay off the rich to help struggling Americans; we don't negotiate with hostage-takers. It would have been glorious. But had he failed, he might not have been able subsequently to work out a deal with the benefits of this one. As the nation has learned, the Republicans cannot be shamed into supporting measures that help besieged Americans -- but they can be bought off.

Of course, no one can say how such a titanic clash would have climaxed. But Obama is the lonely-at-the-top fellow who is responsible for the well-being of the citizenry. It's his job description. If you consider this moment from that perspective -- even if he miscalculated his way to this, uh, decision point -- it's a tad bit tougher to pummel him. Sure, this deal is causing havoc, dividing the Democratic Party as well as his base. (As I was tweeting Obama's press conference this week, half of the responses were vituperative denunciations from past Obama supporters now accusing him of selling out; the other half were hurrahs from Obama backers who cheered him as a pragmatic hero doing his best to overcome ungodly GOP intransigence.) Yet once again, Obama appears to have lost the narrative war. The immediate storyline, right or wrong, was that the Republicans rolled the president.

It's not hard to see why the guy who had to make this difficult call opted not to go nuclear. Obama was engaged in asymmetrical warfare, He apparently worried about what would happen to the unemployed and put-upon Americans without a deal. The Republicans didn't. This put Obama at a disadvantage. I don't counsel anyone not to criticize the package (and how Obama steered himself and his party into this corner). But I can almost feel his pain.

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Tagged: Tax cuts

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I viewed the white board presentation on the components of the deal. Goolsbee tried to claim that the President got more than twice as much as the Republicans. It's hard to see how. For one, it's rather odd that tax breaks for businesses (writing down 100% of new capital purchases, subsidies for green energy businesses, evidently to include 'clean coal') have to be fought for against Republicans. Moreover, in what sense is extending the middle class part of the Bush tax cuts a win for Obama? The Republicans never said they were against them, just that they wanted the whole enchilada. Boehner even let slip that if he had to, he'd vote for the middle class tax cuts alone. Of course, Obama successfully negotiated against himself so Boehner would not have to make such a bitter decision. The tax credits for kids and education, and the expanded EITC add up to $60 billion, not inconsiderable, but again hardly the kind of thing you have to jam down a Republican throat. The biggest chunk is the Social Security tax cut, an idea that no doubt warms the heart of George W. Bush. Now, when the time comes, just slide that share over to a personal account, and voila, the Bush plan is in place. The unemployment extension for some 2 million workers is about it, folks. In no previous recession has Congress refused to extend unemployment benefits. Nor does this do anything about the 2 million long term unemployed who have exhausted their benefits. So to provide temporary, bare-subsistence relief to a small share of the vast number of unemployed, it is necessary to lavish $140,000 per millionaire. And how much stimulus is in this? Most of it continues the dismal status quo. The Social Security tax cut, a mixed blessing at best, appears to be the only really new stimulus. For the most part, the best that can be said is that the bill won't make things worse. Hard to see how that boosts Obama's re-election chances. With the lost enthusiasm in his own party, the politics seems to run the other way. Maybe he did not expect that. More likely, his team expects that this will blow over, and they can crank up the populist economic rhetoric in September 2012, just in time to squeak back in to give us yet more 'compromise'.

December 13 2010 at 1:13 AM Report abuse rate up rate down Reply

The filibuster rules in the Senate cripple the majority party's hands. The president's position was greatly weakened because Congressional Democrats didn't bring a tax package of their own liking well before the election. Obama was stuck in a very bad position for those two reasons. The Republicans really only care about tax cuts for the top. Their domestic agenda doesn't consist of much more than that. With the clock running til the House changes hands Obama had to cut a deal. The Estate tax provision is obnoxious but besides that the package is about as good as you could expect. If everybody's taxes went up in January Obama and the Democrats would be taking the blame. Our best chance to advance progressive policies is to win the next election. We need a faster growing economy with more jobs to get that done . This package with the addition of the payroll tax cut I think will do that. This deal also takes the tax issue off the table for now. If by chance the economy doesn't perform as well as we would like The Repubs can't say that a raise in taxes on the top was the cause. The top end tax cuts will be an issue in 2012 but with the taxes in place it will be easier to deal with politically . This also makes a mockery of Republican arguements about the deficit. If they can get rid of the Estate Tax portion great , if not the deal is still worth passing. We can't wait til the Republicans control the House. We will really get screwed then.

December 12 2010 at 9:25 PM Report abuse +1 rate up rate down Reply

I cannot see how Obama is always on the defensive when his proposals routinely gain over 50 percent of the vote in the Senate and he is considered the loser because of arcane Senate rules. Isn;t it about time for senators to fix their own workplace and make this country a democracy again where the majority rules.

December 11 2010 at 8:42 PM Report abuse +1 rate up rate down Reply

This Obama catalyst (tax agreement) has initiated a much needed debate in our country so that the American people can see how a small group of people (the Rich) control this country, do not pay taxes or their fair share due to tax loopholes and tax shelters, leaving the tax burden on the middle class and working poor, and that the GOP talking points that tax cuts create jobs is false, because for the last 10 years that we have had these tax cuts, we have lost jobs. And the debate also highlights one party, the Republican, refusing to vote on any legislation to help the little people, the people they are supposed to represent -- 911 responders, unemployment benefits, etc.,(like spoiled children) until they get their way -- tax cuts for the rich! And this ability to not vote on legislation, to hold up the people's business (or hold them hostage) is this legal? We know it is not fair. This debate will give the American people a chance to decide if they want to extend the tax cuts to the rich so that their taxes can go down or if they want the tax cuts for the rich to expire knowing that their taxes will go up and they will be paying more come January than they do now. Do they want to make that sacrifice? Let's not forget that in order for us to forge new healthy pathways for the country, the dark, the outworn, the negative and false must be exposed. And by the way, Sen Mary Landrieux you were for the Bush tax cuts and voted for them, before you were against them!

December 11 2010 at 8:14 AM Report abuse +2 rate up rate down Reply

Mr.Corn this is just plain corny. You liberals for 2 years have been screaming that the right should be more bi partisan and now that we have bi partisan ship you reject it. Is it because the only compromise you like is one where conservatives agree with your proposals? Now as a conservative I hate this piece of legislation. The budget gets blown out of the water again. There seems to be no fiscal responsibility here. I would rather have my taxes go up than continue piling on debt. The Republicans didn't learn from the last election either. They should offset these cost with spending cuts or not do them. On a week were the deficit commission makes it's recommendations we blow a bigger hole in the budget, these politicians can't seem to give enough away at our country expense

December 11 2010 at 5:45 AM Report abuse +3 rate up rate down Reply

Yesterday, MSNBC did an interview with Barney Frank. Frank, who infamously said that Freddie and Fannie were okay, said that the SS fund was in surplus. If that is true, why are seniors being denied ANY increase to their SS check, when the cost of everything is rapidly rising, including Medicare, and government workers did receive COLA, along with "step" increases. Alan Graham, recently defeated Congressman out of Florida, once said that Republicans want seniors to die quickly. Seems to me he was talking about his own Party.

December 10 2010 at 12:12 PM Report abuse +4 rate up rate down Reply
1 reply to ettu's comment

They aren't recieving an increase due to the formula that is used to determine a rise in the cost of living. Democrat's wanted to give a one time check of $250.00 to make up for it, but Republicans blocked it in the Senate. Alan Graham had his Parties right. Republicans only care for the rich. You need to watch more than just FOX NEWS.

December 12 2010 at 4:36 PM Report abuse +2 rate up rate down Reply

'But Obama is the lonely-at-the-top fellow who is responsible for the well-being of the citizenry. It's his job description.' It's also the job description of the entire government of We The People - to 'provide for the general welfare.' Obama deserves no sympathy. He volunteered for the 'lonely at the top' job. He should have stood up to the GOParty of the Upper Class. If that meant nobody got nothing, then, well, maybe - just maybe - We The People would have finally reached a breaking point and gotten up off our lazy, passive butts and revolted.

December 10 2010 at 8:55 AM Report abuse +7 rate up rate down Reply

If Democrats had half a brain when it comes to messaging they would be able to hang this noose around the Republicans' necks just like Clinton did when he took them up on their dare to shut down the government. I cannot believe the public would sit still for it when they saw their taxes going up and unemployment benefits disappearing just like they did not sit still for having their Social Security checks stop when Gingrich got his way. In fact this would have affected even more middle and low income people directly making it all the more likely that come January the Republicans would be forced to back down. The risk is that the Republicans would manage to place the blame on Democrats, which is quite likely in the fantasy land we now live in. After all supply-side Republicans have been allowed to get away with claiming that tax cuts do not raise our debt ever since Reagan started that destructive myth. Recently Republicans have been making that claim with increasing frequency but I have not seen them challenged by the media of by Dems. In fact I just heard Joe Scarborough say that supply-side economics has won because he is hearing some Democrats say that the tax cuts won't add to our debt! That Democrats and the media have not been shouting from the rooftops the fact that tax cuts NEVER pay for themselves is beyond belief. David Stockman, Reagan's economic adviser, says all the tax cuts should expire to get our debt under control. Alan Greenspan has said they should go. Heck, even Bush's own economic advisers admitted that, at best, we might recoup half of the revenue lost to some tax cuts, but that the return is usually much, much lower than that. Google the Washington Post article "Mr. Guiliani and the Tax Fairy" to get the details. It is a must read for anyone concerned about this issue. Then start repeating to yourself - and everyone else - "TAX CUTS ALWAYS ADD TO OUR DEBT". Our country will continue to flounder until the public understands this and stops demanding balanced budgets through tax cuts.

December 10 2010 at 8:37 AM Report abuse -5 rate up rate down Reply

Mr. Corn feels Obama's "pain" because he erroneously assumes that Obama is a progressive at heart. Such assumptions are unwarranted because one need only recall Obama's praise of Reagan during the campaign to win the Democratic nomination. Many people only saw what they "hoped" to see during this campaign, listening to rhetoric rather thans substance. If the party and pundits had been better critical thinkers, Hillary would have been president. She harbored no illusions that the Republicans could be worked with, unlike Obama the Spineless.

December 10 2010 at 6:56 AM Report abuse -4 rate up rate down Reply

What this drama demonstrates is the folly of last-minute, hurry-up legislation. I suggest that everyone read yesterday's Charles Wallace article, posted on AOL Daily Finance, entitled "Who Loses Under Obama's GOP Tax Compromise? The Working Poor." Mr. Wallace notes that the losers--the only losers, it turns out--under the proposed deal are the working poor. A couple earning under $40,000 would pay more in taxes under the compromise than they do under the current tax scheme. . . .This is but one example of the dysfunctional nature of our legislative process. Proposals need to be vetted and discussed on the merits, with gradual bipartisan give-and-take occurring over the duration of the process. But due deliberation cannot take place during the legislative equivalent of the two-minute drill and hurry-up offense at the end of the game. The result is almost always bad legislation with unintended consequences, and that makes losers of us all.

December 10 2010 at 6:29 AM Report abuse -1 rate up rate down Reply
1 reply to jocelynfanger's comment

We will all be losers under the Tax Cut Compromise. This is just more deficit spending, and there WILL be the piper to pay. Both parties have sold us out.

December 11 2010 at 11:45 AM Report abuse +1 rate up rate down Reply

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