Well, Barack Obama finally did something to fire up the Democratic base,... but it's probably not the result he wanted. There's a lot of anger out there, and a general belief that he gave away a lot more than he got in that "compromise" with Republicans.
That's the perception, though I don't know if it's true. For example, here's Ezra Klein in the Washington Post:
If you look at the numbers alone, the tax cut deal looks to have robbed Republicans blind. The GOP got around $95 billion in tax cuts for wealthy Americans and $30 billion in estate tax cuts. Democrats got $120 billion in payroll-tax cuts, $40 billion in refundable tax credits (Earned Income Tax Credit, Child Tax Credit and education tax credits), $56 billion in unemployment insurance, and, depending on how you count it, about $180 billion (two-year cost) or $30 billion (10-year cost) in new tax incentives for businesses to invest.
But that's not how it's being understood. Republicans are treating it as a victory, and liberals as a defeat. Which raises two separate questions: Why did Republicans give Obama so much? And why aren't Democrats happier about it?
Let's start with the Republicans. For one thing, the things they wanted were things they really, really wanted. A number of sources with direct knowledge of the negotiations have fingered the estate tax as the major player in the size of the deal. "Republicans were extremely eager to get benefits for the top tenth of a percent of Americans," says one senior administration official.
Republicans have been ranting and raving about the federal deficit (ironically, since it's largely the result of their policies - Bush's tax cuts, two wars waged without a tax increase to pay for them, interest payments on all that, and the economic collapse on their watch and as a direct result of their actions). Their Tea Party supporters have also been yelling deficit, deficit, deficit.
But what does the GOP actually do with its power? It cuts taxes on the rich - which happens to greatly increase the deficit (exactly as it did last time). And in order to get those income tax cuts for the wealthy - and the estate tax decrease, which also benefits only the wealthy - they're willing to give the Democrats anything they want, including other measures that also increase the deficit, at least in the short term.
Despite their rhetoric, it's very clear what the GOP really wants:
In all these cases, Republicans have argued that it's not the policies they oppose -- it's that Democrats aren't paying for them. But perhaps the most important enabler of the deal is that Republicans don't care about paying for them, either. The basic deal was that if the Obama White House would give the Republicans their unpaid-for tax cuts, Republicans would give the Obama White House their unpaid-for tax cuts.
To put this in perspective, consider that last week, all Washington could talk about was the potential for a deal on deficit reduction. This week, it actually got a big deficit deal -- but it was a deficit-expansion deal. In the world that politicians claim they live in -- where the deficit is the overriding issue -- the deal couldn't have worked. But we don't live in that world. In this world, tax cuts, not deficits, are the Republicans' central concern, and stimulus, not deficits, obsesses the Democrats.
The deficit is very definitely a danger, though it's a long-term danger. I don't like seeing it increased, but the greater danger right now is this terrible economy with its very high unemployment. And fixing that would do more to improve the deficit numbers than anything else. (Even long-term, I don't think the deficit is our biggest problem, but I'll leave that for another post.)
The thing is, like most Democrats, I'm more concerned with getting economic stimulus than lowering the deficit right now. You pay down deficits in good economic times, not during the worst economic collapse since the Great Depression. Unfortunately, because of terrible mistakes in 2000 and 2004, we dug ourselves a deep hole even before the economy collapsed.
Of course, cutting taxes - especially on the rich - is a very expensive, and not very productive, way to accomplish this. But we've moved so far to the right in this country that even Democrats push tax cuts as the cure-all for everything that ails us. Some of the stuff in this agreement is definitely worthwhile. Is it worth the cost? I just don't know. But the whole point of compromise is that you do get part of what you want - and so does the other guy.
And in this case, again, it's obvious what the other guy - the Republicans - want. They want to help the wealthy, even if it makes the deficit skyrocket.
Tom Toles puts it well:
Remember when the deficit was the most terrible, dangerous, threatening, catastrophic, calamitous, insidious, irresponsible, impending existential disaster striking at the root and foundation of the Republic and its citizens? That was way back a month ago before the election when that line of argument could be used against the Democrats. With my wizard-like powers of prediction I foretold the screamingly obvious that AFTER the election, when the GOP caravan rolled in, deficits would disappear as an operative concern.
And now, lo and behold! We have a budget "compromise" in which the president agreed to make the deficit BIGGER to get some money to the unemployed, and in exchange the Republicans agreed to make the deficit BIGGER by extending tax cuts for the rich. In case you missed it, this chart from Ezra Klein gives a pretty clear idea of the proportions of those tax cuts. Follow that big bouncing ball at the bottom as the GOP sings its song about fiscal rectitude.
As for Obama? Oh, the craven cave-in! Unless it's just the way he got an imperfect form of the second-round-of-stimulus that he wanted anyway.
Let me post that chart from Ezra Klein, since it so clearly makes my point (click to embiggen):
As Klein points out:
The term "tax cuts for the middle class," which Democrats like to use, has misled. As you can see from the left side of the chart, the "tax cuts for the middle class" also cut taxes on the rich. A family that makes $750,000 a year would pay lower taxes on the first $250,000 of their income. The question has never been whether only middle-class workers should get a tax cut. It's how much income the tax cut should cover.
Both plans will give tax cuts to the wealthy, just like everyone else. But the difference between them is entirely about the rich. The Republican desire to benefit the wealthy has long been their overriding goal. And it's abundantly clear that concerns about the deficit, if it's a Republican concern at all (and it wasn't throughout the Bush administration), comes far below helping the wealthy. It's useful politically, of course, but that's nothing but talk.
How about that last line from Toles? Did Barack Obama just get "an imperfect form of the second-round-of-stimulus that he wanted anyway." Yes, probably. And although it's very definitely "imperfect," it might have been all that he could get. As Jonathan Chait says, "Republicans love them some rich folk. They're willing to bargain away a lot to help the very rich."
But there are a couple of problems with this. The first is that it makes our president look weak. Despite the numbers, the overwhelming perception of this agreement is that Obama got taken to the cleaners - again - by the GOP.
Perception means a lot in politics. When the right and left both agree that Republicans were victorious, it hardly matters what the truth is. And there's more than perception here. The fact is, even the Democratic proposals were too conservative. This was pretty much a battle between the moderate right and the far right. Personally, I didn't fully support either side. (But note that I did support some parts of this agreement.)
We need more stimulus, but tax cuts are a terrible way to do it. Yes, tax cuts are politically popular. Even Democrats have finally accepted that. And, of course, they're way too spineless to fight against anything that's popular. But if no one will fight for what's right, what happens to us then?
And given all the screaming about deficits, couldn't the Democrats have decided to stand for economic sanity? How about letting all of the Bush tax cuts expire - explicitly as a deficit-reduction measure - and countering the effect on our economy (because, yes, there would be some detrimental effect) with cheaper, but much more effective, forms of stimulus? Why not at least start from that position, before compromising with the Republicans?
OK, yeah, they'd be killed politically, no doubt. If we Americans were economically literate, we wouldn't be in this mess in the first place. But I'm afraid that the Democrats will be killed politically anyway, and we'll get nothing but a higher deficit out of this deal.
Anyway, there's another big problem with this. Let me go back to Klein:
Which brings us to the liberals. My conversations with various progressives over the past 24 hours have convinced me that the problem is less the specifics of the deal -- though liberals legitimately dislike the tax cuts for the rich, and rightly point out that Obama swore to let them expire -- than the way in which it was reached. Put simply, Obama and the Democrats didn't fight for them. There were no veto threats or serious effort to take the case to the public.
Instead, the White House disappeared into a closed room with the Republicans and cut a deal that they'd made no effort to sell to progressives. When the deal was cut, the president took an oblique shot at their preferences, saying "the American people didn’t send us here to wage symbolic battles or win symbolic victories." And this came a mere week or two after the White House announced a federal pay freeze. The pattern, for progressives, seems clear: The White House uses them during elections, but doesn't listen to, or consult them, while governing. In fact, it insults them, and then tells them to quiet down, they got the best bargain possible, even if it wasn't the one they'd asked for, or been promised.
If you're worried about stimulus, joblessness and the working poor, this is probably a better deal than you thought you were going to get. "It’s a bigger deal than anyone expected," says Bob Greenstein, president of the Center on Budget and Policy Priorities. "Both sides gave more expected and both sides got more than expected." The White House walked out of the negotiations with more stimulus than anyone had seen coming. But they did it in a way that made their staunchest allies feel left behind, and in many cases, utterly betrayed.
This is going to be a huge problem for Obama. It's not this particular agreement that's the problem, at least not for me. As I said previously, it's the pattern of the Obama presidency, where he doesn't seem to fight for anything.
I want a progressive leader in the White House, a president who'll use that bully pulpit to the limit, pushing progressive policies publicly - and boldly. I want a president who's clearly on my side.
I have no problem with a president making deals with Republicans. In fact, I want compromise. But I want a Democratic president who makes a strong case for his own side and never stops fighting to get the best deal he can. All too often, Obama seems to make unilateral concessions that give away much of what we want, only to "compromise" away most of the rest of it when he gets down to actual negotiations.
That's not how you haggle. And accurate or not, this is the impression we're getting. So he's ending up with a dispirited, discouraged Democratic base, which will be a disaster for our country no matter what happens to the economy. Right now, the only people happy are Republicans. That's the perception, and these kinds of things matter in politics. Obama is seen as weak, and timid, and only willing to fight against his own side.
This will not turn out well.
But there's still a chance. The Republicans are, after all, giving the Democrats a huge political issue on a platter, with their continued concern for the wealthy, at the expense of the federal deficit. But it won't be easy. The GOP has already convinced the whole country - somehow - that they care more about the deficit than their opponents do (even though it's regularly been Republicans who've increased the deficit, and only Democrats who've tried to pay it down).
So it's going to take skill, and it's going to take boldness. It's going to take courage. Yeah, we're doomed, aren't we?
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