This morning I read that some conservatives are claiming that the GOP gave away the store in dealing with Obama on the tax cuts - the only good news I've hear din weeks. Of course it's not true - they're just upset that the GOP gave away anything at all. Evidently the Tea Partiers are all in a huff about extension of the 100 year old Estate Tax, which they call the "Death Tax" that they say "ruins small businesses" and "double taxes savings." These little-minded people who know nothing! At the same time, they are angry about the deficit. Huh? My fear is that the GOP will scuttle the tax deal, then come back in the new year and demand even more, which Barack Obama will give them, since he seems to be spineless at this point. The only good thing about the deal is the payroll tax temporary reduction which is a very good thing for middle class people and will totally stimulate the economy. If only, again, this weren't blowing a hole in the deficit. I think calling this the "Obama Tax Deal" rather than the "Republican Tax Deal" is a way of setting up the President for another defeat. Wait for it.
Responsible government would put in the payroll tax holiday and keep the tax rates low on the first $50,000 of income, but would allow other rates - and especially the tax on estates - to rise back to their levels in the 1990s. Remember the 1990s? Balanced budgets, even surpluses, and economic growth? Instead, more supply sider crap.
Tuesday, December 14, 2010
The GOP-Obama Tax Deal
Posted by The Law Talking Guy at 12:10 PM
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I am confused by the liberal vitriol directed at Obama over this deal. While it is true that between 2006 and 2008, Democratic leaders in Congress (Reid and Pelosi) caved completely on issue after issue, this instance is one of genuine compromise. For the first time in years a Democrat actually GOT SOMETHING from the Republicans. In fact, he got quite a lot. He got an extension of unemployment benefits which Republicans loath. He got a GOP concession the inheritance tax as well which the Tea Parties are all in a twist about.
If liberals accuse their representatives of caving completely when there were actually concessions won from the opposition, it makes liberal complainers less credible when such accusations are more valid.
Republican rank and file are not feigning outrage about these features of the compromise. They really don't like them. True, the Tea Partiers who demand ever lower taxes, ever higher military spending, no cuts to benefits to the rural or elderly citizens of our country and then demand a balanced budget are incoherent. But I do not think their outrage is simply spin or a strategy for setting up future demands. I do not doubt that Republican members in Congress will use it to their advantage in future negotiations but the outrage from the rank and file is genuine.
If this outrage is genuine then we have to admit that Obama did indeed get something from the opposition that previous Democratic leaders did not get. He should be given due credit for it rather than be called "spineless."
I guess the point is that if Obama did nothing at all, the tax cuts would automatically expire. He was in the driver's seat. The GOP was deseprate to get this done. Obama should have had a fireside chat and explained to the American people that we can't afford big tax cuts for rich people right now, and offered a special new tax cut for people earning less than $250,000. Then let them choke in rage. Or at least, for God's sake, demanded a repeal of DADT as part of the deal. Or made the fed employee paycheck freeze something they had to bargain for, rather than give it away for free before negotiations even started. He needs to seize the agenda; instead, he gives the GOP something they want after they spent 2 years blocking EVERYTHING the Democrats wanted no matter what.
I think LTG has it backwards here. If Obama does not secure another tax cut for the middle class, he is the one who will get raked over the coals for "raising" taxes. Most people won't pay attention to politics or listen to fireside chats... They would just see their paycheck shrink and vaguely blame the President. The GOP really has most of the leverage here now, which is why they pretty much are getting what they wanted.
If Obama and the Democrats wanted to win this battle, they needed to have fought it before the last election. They should have passed LTG's "special new tax cut" earlier in the year as a standalone plan. Instead, they waited and lost the initiative.
What I find laughable is that this isn't a compromise at all--it's just a cop-out. Let's see... She wants the lobster but he wants the steak? Hey, no problem! Just order both--surf n' turf! That's all that happened here. No hard choices were made. Everyone pretty much got all that they wanted, and they put it all on the national credit card.
I agree with Dr. S. This was a fight to have back in September. But Harry Reid did not want to be seen playing Liberal Hardball in the middle of his desperate bid to get reelected. At the time he was behind in the polls.
I disagree with Dr. S. There were hard choices made. There was a choice made to continue Keynesian style stimulus at the expense of deficit control. That's an easy choice in the short run but a hard one from a medium term perspective.
In any case, I don't see how this can be interpreted as Obama being "spineless." To me, "spineless" would be Obama simply giving in on the tax cuts for the wealthy without also getting the two side deals he wanted.
I agree that it was an easy choice to make in the short run. Rather too easy, I would say. Accepting (or more likely, largely ignoring) hard consequences in the medium term is not at all the same thing as having made a hard decision.
But I agree this should not be interpreted as a "spineless" decision by Obama. The temporary payroll tax deduction is a win for the middle class, as LTG notes. The unemployment benefits extension was too. The fact that the estate tax did not vanish entirely was also a good thing. And perhaps most of all, if this goes down in the papers as the "Obama Tax Deal" then I think he will have won a political victory as well.
It's fair of LTG to fear that some Republicans are calling it the Obama tax deal in hopes of defeating it and thereby handing Obama a defeat. Many Republicans, especially in the Senate (I'm looking at you, Chuck Grassley...) do not negotiate in good faith. But I think LTG is also right that the GOP really is desperate to get this tax cut, and they know that a bird in hand is better than two in the bush--so they should grab it now, before the next Congress, where who knows how it will play out. No doubt that was the leverage Obama used to win the parts of the tax deal he wanted.
Fair enough. Of course if the Republicans do want to kill this compromise to hand Obama a defeat it would be mistake for them. I looked at pollingreport.com and 49% say they want the compromise passed. Only 32% want it defeated with 18% unsure.
In two years, Obama can say he kept our taxes low DESPITE the brinksmanship of the Republicans and if anyone complains about the deficit Obama can blame that on the Republicans' insisting on extending the tax breaks for the wealthy.
One thing that is being left out of this discussion is all the other legislation and presidential appointments that hung in the balance on this deal.
Obama had to give in order to get, not just on taxes and stimulus spending, but on things like his new Arms Control Treaty and the upcoming fight over tax code reform. The opposition to that treaty is so lame and perfunctory as to be laughable. I swear it is nothing more than political theater with two bit actors.
Obama has taken on big challenges, and he is walking a seriously thin tight rope.
What I think is telling about this deal is how clearly it illustrates the difference in political party values. The fact that the Republicans were willing to do just about anything to protect tax cuts for the rich amazes me. So how much more could Obama have gotten out of them if he had pushed?
Considering the current situation, where CEOs and market men screwed the general public, is it downright crass to say that trickle down has any possible legitimacy. But that is the Republican party for you. Feudalistic Capitalists first, Americans second.
US West raises an interesting possibility about what other legislation may be connected to this.
In the past couple of weeks the Democrats have won (off the top of my head - I may have left something out):
Extensions on unemployment benefits
Extensions on tax cuts for people making under $250,000.
Repeal of DADT.
Expanded powers for the FDA to regulate food safety.
Republicans won:
Extensions on tax cuts for people making over $250,000.
They compromised on:
Estate taxes.
And it looks like the Senate will ratify the new START treaty with Russia.
From my perspective it looks like Obama has gotten a pretty good set of legislative wins lately and for all their bluster all the Republicans got was few tax cuts for the supper rich. And those tax cuts will balloon the deficit and may well split the Republican party down their traditional "deficit hawk vs tax cutter" division.
For all this success Obama is being depicted as a spineless and indecisive leader who sold out for the sake of avoiding conflict.
I have to say, he cut himself a great deal. Now with the START treaty approval, I would say he actually understood perfectly well how badly these people wanted that tax cut for the rich.
Now with tax reform, I am perfectly willing to pay a flatter tax IF deductions are eliminated for everyone and dividend income is taxed like all other income and if it is fair. If everyone pays a fair share, fine with me. It would put a lot of accountants out of business,but I hold that the current code is just illegal because it's not transparent and it's too hard for the average citizen to be in compliance. Wouldn't that qualify it as arbitrary and capricious?
Big business is lobbying for the revenue they make overseas to be tax free if they repatriate it. I am not surprised by this, but I am surprised that they are to blatant in asking for it. They think the happy trade off is more capital returning home. But on the other hand, talk about an incentive for all businesses to move overseas!
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