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Obama and Republicans Compromise on Tax Cuts to Keep Everything at Status Quo

12.03.10

With Obama essentially conceding the tax cut extensions for everyone including the richest Americans, he’s given into the situation that the Republicans set up into where he’s damned if he does, damned if he doesn’t.

If he pushed for the tax hikes against the rich, then he’s the socialist that they claim he is; but, if he extends the tax cuts and adds $700 billion to the national deficit, then he’s the spend-happy left-winger who has no regard for the massive debt that they claim he is.

Let’s just look at the facts of the story:

QUICK RECAP:

Republicans are all for fiscal austerity when it’s for a $56.4 billion tab that affects the middle class but not when it’s a $700 billion bill for the top one-percent, wealthiest Americans.

I still don’t get how anyone can say that the GOP is the fiscally responsible party doing the bidding for the average American based on these positions they’ve taken.

Now, there will be negotiations in the final bills that are passed.  The one thing different about the tax cut extensions that will most likely end up passing would be that the GOP wants them to be permanent while the current plan would have them be temporary — probably two to three years long, at which point I’m sure we have this same argument to look forward to (unless it’s a Republican president at that point, which could be what the GOP is planning on so that they can then make them permanent at that time).  Dems are also looking to add in help for people paying back tuition and for small businesses who hire the unemployed.

These concessions by Obama haven’t gone over well with his fellow Democrats in Congress:

Sen. Tom Harkin, D-Iowa, said he would oppose legislation that cuts taxes for upper-income taxpayers, even if it includes an extension of unemployment benefits and the accompanying tax cuts for the poor that the administration is seeking.

I get Harkin’s frustration, but he’s doing nobody any favors by digging his feet in to combat the Republicans digging theirs in.

So after all of this political theater, I predict:

  • Tax cuts extended for everyone

  • Unemployment benefits extended for another year

  • GOP continues to blame Democrats for being spend-happy liberals

  • Debt and deficit keeps ballooning out of control because no one in either party will take the political heat associated with the anger and negativity that will come from all sides when the drastic cuts and tax hikes that are necessary to balance the budget need to be made

Pretty much status quo.

Photo courtesy of snty-tact via Wikipedia Creative Commons.

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8 comments

  1. If Obama backs to extend the current tax rates for all Americans he will be guilty of listening to the majority of Americans. Wow, a president doing what the majority of the people want, what a novel idea.


    • Hi, mcoville — thanks for jumping into the convo.

      It’s extremely difficult to gauge just what the American people want on any given topic on any given day. Most of these issues are in the 50% approval rate, which means it’s almost a coin toss. (Except DADT, which is like 70% of Americans favor a repeal. Yet they still can’t act… but that’s a separate issue.)

      According to the polls, though, majority of Americans want the tax cuts extended for everyone BUT the top echelon. So it wouldn’t be a president doing what the majority of the people want actually if he did extend them to everyone.

      http://tpmdc.talkingpointsmemo.com/2010/12/poll-only-26-percent-want-all-bush-tax-cuts-extended.php

      Then again — it’s a poll and who knows how much you can rely on it. I’m not a huge fan of polls myself, but the one thing we can glean from it is that it’s not cut and dried at all.


  2. Ryan, you know I respect you and I have refrained from adding any comments to your site until now. Your facts seem to be incomplete. As I have said from day one when I, a republican(or so I have been told), voted for Obama. He would model his presidency after Clinton’s. In simple terms, he would do what it takes to shut up the extremist in his own party for two years then do what it takes to get the nation on track and get re-elected. The extensions of the Bush tax cut are on the same scale and will have the same impact as the Cliton tax cuts; they will allow money to move at lower cost throughout the market place. They more money moves, the more tax revenue is generated. Combine the extension with the tax credits that were eliminated or reduced for 2010 and you have a recipe for great tax revenue. This will have a positive impact on our federal budget, small business/investor confidence, and consumer confidence: all import factors in a healthy/job creating economy. Increasing taxes to cover the deficit will never work because it always leads to decreased tax revenue as the movement of money for investment, hiring, and business as usual is reduced or stalled. Business as usual for big business, small business, and individuals becomes more expensive leading to reduced spending ultimately reducing tax revenue.


    • These tax cuts, theoretically, should speed up money flow. Then again, an excess of speculative capital from the tax cuts during the Bush administration may have had something to do with the recession. The results are difficult to predict. I think that, as Ryan mentions in the article, one of the key issues is that Obama has been maneuvered into an unenviable situation by a combination of lack of support from his own party and extreme, unwarranted derision from the Republicans. Most fiscally responsible Republicans should agree that an extension of the tax cuts is a good thing. Let’s see how they spin it – will they commend Obama for making the (as you point out) fiscally responsible choice?


      • I will thank President Obama for supporting the Republicans in trying to fix the economy all over the blogosphere if he supported the extension of the current tax rates.


    • Palmer! Thanks for commenting, bud. Great to hear your POV.

      I’m not sure where I was incomplete in my facts. But I do know that the extension of the Bush-era tax cuts wouldn’t be going back to the Clinton era — it’d be back to Clinton-era tax rates if we DIDN’T extend the current tax cuts beyond 2010.

      And you’re basically explaining supply-side economics a la Reagan. But again, this is theoretical – taking a look at the last thirty years when Republicans were in charge and went with the economical model, the country ended up in debt. Tax cuts haven’t been proven to pay for themselves — otherwise we wouldn’t be having this debate about the whole $700 billion being added to the deficit in order to enact the tax cuts.

      The economy has issues more than just the tax rates. Sure: ideally, the healthier economy, spurred by low tax rates, will increase production and consumption thereby increasing overall revenues because there is more business being conducted than might otherwise if the tax rates were higher. But the change in tax rates from Bush-era to Clinton-era isn’t exactly stifling — business was doing just fine back in the 90s. But the burden that the tax cuts will have on our national debt and deficit over the years (especially if made permanent) will likely have drastic, negative effects.


  3. If the majority of Americans had a grasp of macroeconomics and cared about the functioning of society as much as they cared about their individual lives, that would be a comforting thought. The president’s role is not simply to be an extension of public sentiment, but to negotiate with and mediate that sentiment. I think Obama is doing a fair job, and I think that if the democrats want him to get anything done they need to back him up. As far as I can see it, that is why the GOP looks so strong and the Democrats so weak no matter what either party does. As vapid as the goal of removing Obama from office is, it’s clear and unified.


    • I wish the elected officials had a better grasp of economics in general rather than basing policy on ideology — but that goes for more than just economics (and that’s another story entirely).

      I give Obama a hard time sometimes, but I get it: he’s pragmatic. It’s frustrating sometimes – like how he’s been handling DADT – but, he’s a long-game strategist, not a short-term tactical politician like most in the Congress.

      I appreciate the diversity in the Democratic party — it just ends up being a liability when the GOP ends up a unified front of lemmings that just follow what Karl Rove/Rush Limbaugh/Glenn Beck by way of Boehner/Cantor/McConnell (or is it the other way around) tell them to say. If both parties truly had moderates that were allowed to actually vote the way they would on specific issues rather than be forced to adhere to the party line stance, we’d be able to deal with these real world issues easier since things are black and white like the GOP would have us believe them to be.



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