For a more measured post-partisan take on the Obama tax cuts, check out the official HyperVocal party line here: “DEAL ON TAX CUTS: Compromise Means Obama’s Gettin’ Sh!t Done“
When asked why President Obama cobbled together a deal on the Bush-era tax cuts, a White House aide reportedly said we’re “in an era of compromise.” Someone should tell that to the Republican Party.
The Republicans’ obstinacy and lack of willingness to compromise seems to have paid off, and President Obama, not content with his winning hand, has struck a deal with Senate Republicans.
Before we get to the details of the compromise that follow below, let’s examine how we got to the president’s folding his full house. At issue are the Bush-era tax cuts, which are due to expire at the stroke of midnight entering 2011. The White House, Democratic and Republican leadership all agree there should be an extension of these tax cuts for almost all Americans. Where the parties diverge is on the issue of tax cuts for couples making more than $250,000 per year and individuals making more than $200,000. Democrats say let ‘em expire; Republicans don’t want to let that happen.
Republicans then publicly issued a sternly-worded letter saying they would hold the entire lame-duck legislative agenda hostage until those tax cuts for the wealthy were passed. That meant no extension of jobless benefits, no repeal of Don’t Ask Don’t Tell, no ratification of the nuclear arms deal with Russia, no new clean energy or food safety measures. The Republicans did their best Judge Smails: “You’ll have nothing and like it.”
House Democrats, at that point, passed the Bush-era tax cuts for everyone making under $250,000. The Senate tried, but four Democrats and a Lieberman sided with the Republican caucus to block it. Senator Chuck Schumer offered a similar bill but put the number at $1 million, and that failed, too.
As of the weekend, here’s where the chips fell: The Republicans — who like to say they “listen to the will of the American people” more than President Obama says “Look” — were ignoring the will of the people who overwhelmingly say that they don’t want tax cuts for all: “Just 26 percent of Americans say they support extending the cuts for all Americans,” according to Thursday’s CBS poll.
Republicans had been painted into a corner. They stood up and told the country, told the 17% of those who are unemployed or under-employed, told everyone making under $1 million, that they would rather give millionaires and billionaires a tax cut then extend unemployment benefits. And, on top of that, they told everyone concerned about our unsustainable deficit that they don’t really give a damn: It’s entirely convenient to say you won’t pass an extension of jobless benefits because they aren’t paid for, but now here’s another $4 trillion worth of tax-cut debt to choke on, suckers.
That’s a literally indefensible position. And House Democrats knew it. You want to hold our legislative agenda hostage? Well then you go tell those who are unemployed it’s your fault you won’t be seeing any unemployment benefits come Christmastime. You tell the working and middle classes that their tax rates are increasing in 2011 because you’re holding out for the wealthiest few. That’s on you, GOP, they’d say.
But the White House and this inexperienced president panicked, cowered and caved. And now we have a deal in place between President Obama and Senate Republicans, who must be giddy at the thought of preventing tax rates *and* forcing a “liberal” president into a serious expansion of debt.
President Obama on Monday stepped up to the podium and said he flat-out disagrees with the Republicans’ plan, but he is “not willing to let working families in this country become collateral damage” in the current political fight in Washington DC. So instead of a fight, President Obama compromised.
President Obama, to be clear, got a decent deal — some important tax credits, static tax rates, the extension of unemployment benefits. The frustration for many stems from the facts on the ground that he likely didn’t have to do it in order to get what he wanted for the middle and working classes.
So here’s the deal, and take a moment to feign surprise that it benefits the wealthy: In exchange for a two-year extension to the Bush-era tax cuts for the wealthy, President Obama secured a 13-month extension for jobless benefits, as well as an extension of several other tax credits. The deal also ensures that “the Social Security tax paid by workers would drop temporarily by 2 percentage points, to 4.2% from 6.2%, a person familiar with the proposal said. For a worker earning $40,000, the tax savings would be $800,” according to the Wall Street Journal. More goodies for the wealthy: The estate tax will be set at 35 percent for two years, with the first $5 million exempted, first reported by The Daily Caller. That estate tax rate is the lowest in history, save 2010 when there was no estate tax.
President Obama made it clear they he hates the deal he helped cobble, but he made it anyway for the working and middle classes. Nobody facing a tough recession wants to see a fight lead to no action and higher tax rates, but the Democrats and the White House could have absolutely stood tall and won the pot. Instead, the working and middle classes will see benefits, but it will come at the expense of long-term fiscal sanity and health. President Obama just didn’t know when to hold’ em.
It’s time for everyone to realize that when a presidential candidate promises something on the campaign trail, that he or she can’t do anything without Congress.
And, to put this in perspective, for anyone who thinks your taxes are too high, consult today’s Felix Salmon piece in Reuters, where Salmon points out via chart called “Federal taxes as a percentage of GDP” that “Federal taxes are the lowest in 60 years” and “There aren’t any wealth taxes, but the closest thing we’ve got—estate and gift taxes—have shrunk to zero.” Summarizing he says “If you were structuring a tax code from scratch, it would look nothing like this.”