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Democrats upset, but Obama made the best deal possible

  • Blog Post by: Doug Stone
  • December 8, 2010 - 11:00 PM

 

My first inclination upon learning of the giant tax deal negotiated by President Obama and the Congressional Republicans was to agree with progressive Democrats and other critics that it was a bad deal and that the President had caved.

Why in the world would he go back on his campaign pledge to end the Bush-era tax cuts for families making more than $250,000 a year, the top two percent of the country’s wage earners? The cost to the treasury is more than $60 billion a year.  And, according to most economists, wealthier people tend to save these reduced taxes providing little help to the stagnant economy and to needed job creation. And polls showed that the majority of Americans supported ending the tax breaks for the wealthiest citizens.
 
But tax cuts are Republican dogma and the Senate Republicans were willing to hold up all other legislation, including an extension of unemployment insurance to millions of out-of-work Americans. While a shameful ploy in the face of nearly 10 percent unemployment, it was an effective tactic.
 
The New York Times reported that the average period of unemployment currently is nearly 34 weeks, and 6.2 million Americans have been out of work for six months or more, according to the National Employment Law Project, a group that advocates for the assistance.
 
Obama, after the disastrous (for Democrats) mid-term elections and facing cocky Republican leadership, decided to make the best deal he could. He agreed to extend the tax cuts for everyone–middle Americans as well as the wealthier Americans–in exchange for extension of unemployment benefits that could help up to seven million people who stood to lose their weekly subsistence checks while looking for jobs. The deal also reduces payroll taxes and includes a number of other tax breaks for working class families as well as businesses.
 
According to the Center for American Progress, a Washington, D.C., think tank, about 2.2 million jobs would be saved or created under the deal. The most beneficial elements for the economy are the unemployment benefits because recipients spend the money for things like rent and food and the payroll (Social Security and Medicare) tax reduction for the middle class. The analysis notes, however, that even more jobs could be created if the money spent on the high-end tax cuts were spent on payroll tax reduction instead.
 
I am sympathetic with Democrats who want to fight against the tax cut for the wealthy and who think that Obama didn’t fight hard enough with Republicans. But I think they’re wrong. He couldn’t have gotten a better deal. There is simply no guarantee that Republicans would have relented and agreed to extending unemployment benefits without an across-the-board extension of tax cuts. Are critics willing to take a chance that those out-of-work Americans searching desperately for a job in this economy would go without any safety net to prove a point? Obama wasn’t willing to take that risk. He got a number of positive elements in the deal and lived to fight another day.
 
And I don’t think it serves the interests of Democrats and other progressives to attack the President for allegedly being weak or a poor negotiator. He’s their President for two more years and possibly another term. Why do the Republicans work for them?  Healthy debate and skepticism are appropriate. Saying the President is a weak leader or a man without a core is counterproductive.
 
The tax cut debate will be rejoined in two years. Hopefully, the economy will be better. The Democrats will still be able to argue, perhaps even more forcefully and effectively, that spending billions on tax cuts for the wealthiest Americans is costly, unfair and not terribly beneficial. The other day the New York Times provided a glimpse of what $60 billion a year–the cost of the tax cut to those making above $250,000–would buy if used for other purposes. Here are some examples:
 
A tripling of federal funding for medical research.
 
Universal pre-school for three and four-year-olds.
 
A national infrastructure program to repair and upgrade roads, bridges and transportation systems.
 
A 15 percent cut in corporate taxes.
 
Free college, including room and board, for about half the students at four and two-year colleges.
 
As much deficit reduction as the elimination of all earmarks, Obama’s federal pay freeze, a 10 percent reduction in the number of federal workers and a 50 percent cut in foreign aid, combined.
 
It is a question of priorities.
 

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