Obama, Republicans reach tentative deal on Bush tax cuts, unemployment insurance

By Michael J.W. Stickings

Well. Let's pause for a moment.

(Pause.)

I still think Democrats, caving when they should have stood firm, lost the Bush tax cut issue to Republicans this year, an issue they could have used to portray Republicans for what they really are, the party of the rich, in the lead-up to last month's midterms, but...

I must admit, the deal President Obama and the Democrats have apparently reached with Republicans to extend all the tax cuts for two years, along with a regressive estate tax adjustment (favouring the super-rich), in exchange for a 13-month unemployment insurance extension and a kind of stimulus boost isn't so bad. As Ezra Klain explains:

There's some new stimulus in the form of the payroll-tax cut and the expensing proposals. The older stimulus programs that are getting extended -- notably the unemployment insurance and the tax credits -- probably would've expired outside of this deal. The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious.

It's bad news for the deficit, though the White House and Congress are right to make the deficit less of a priority than economic recovery. And speaking of that economic recovery? This isn't enough, and it's not well targeted. The deal amounts to the White House throwing some bad money after good. But the end result is between $200 and $300 billion more in tax breaks, tax credits and unemployment insurance than there would've been if not for this deal (I say $200-$300 billion because of the uncertainty over what would've been extended in the absence of this package). That's better than nothing -- or to be more specific, better than backsliding.

He's right, of course, that the "stimulus" elements are really just "anti-contractionary," as "[m]ost of the money just keeps programs that are currently in effect from expiring," but at this point, with Republicans prepared to block everything, it's tempting to take what one can get.

In this case, something is indeed better than nothing, which is what it looked like Democrats would get before this deal.

And while the Democrats lost the issue this year, the obvious calculation is that they can win the issue in 2012, when they can run on extending middle-class tax cuts while letting the highly unpopular tax cuts for the wealthy expire, forcing Republicans to campaign as the party of the rich.

But here's the thing. If Democrats were too cowardly to make an issue of the Bush tax cuts this year, that is, if they recoiled from challenging the Republicans because they feared they'd be labelled pro-tax, why should we believe that they'll find the courage to do so in two years?

Whether or not the economy improves by then, the politics will essentially remain the same. Republicans will still try to make the case -- and, given how the media roll over for them, they'll be successful -- that a failure to extend all the Bush tax cuts (including for income over $250,000) constitutes a tax increase and, yes, that Democrats are big-government tax-and-spenders. True, there will be fewer Blue Dogs around, but it seems unlikely that suddently Democrats will want to engage Republicans on an issue they're so scared of losing -- and so instead lose by refusing to engage and allowing Republicans to get what they want.

The difference may be that Obama will be running in two years, and maybe he'll be able to make the case in the absence of Democratic fortitude, but, again, how can we be sure of this? If Obama finds himself down in the polls, might he not just abandon even the pretense of progressivism and run ever further to the right in the hope of capturing all those celebrated independents?

As Klein notes in a separate post, the deal "is looking more and more like the White House's opening gambit in the 2012 campaign."

Yes, but at what cost? And is this all just about Obama's re-election bid?

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Adam Serwer writes that the deal amounts to "a tremendous capitulation for Democrats and a huge win for Republicans" but that there's another side to it:

The good news is that a deal on tax cuts will pave the way for the Democrats to move forward on other important parts of their agenda -- repeal of don't ask don't tell and the START Treaty, since at least two Republicans have indicated a willingness to vote to repeal DADT if a deal on tax cuts is reached. Passage of the DREAM Act would make turn the lame-duck session into a significant net victory for Democrats, but even with substantial revisions to the bill and a CBO score showing the bill reduces the deficit, passage seems like a long shot.

Well, maybe, but the Republicans may make the case that the deal was more than enough compromise and cooperation and that they're not prepared to do anything more during the lame-duck session.

Given what we know of them, isn't that likely?

Klein suggests that "this process suggests that the next two years might be a bit more productive than some of us have been predicting," but to me that's just wishful thinking at best.

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And, again, what have Obama and the Democrats accomplished with the deal? A 13-month extension of unemployment benefits is better than nothing, but it's still only 13 months. What happens after that? Won't Republicans just let the benefits expire again?

As Taylor Marsh points out, it's "one year for workers" but "two years for bosses." The wealthy, as usual, would win out, while those who need help the most, also as usual, would get screwed.

And, meanwhile, there's this horrendous estate tax win for the Republicans -- also another win for the rich.

All Obama and the Democrats have succeeded in doing is postponing having to deal with the Bush tax cuts politically for two years.

You can call that "caving" or not, but it's certainly not leadership.

And won't Obama's takeaway from this just be that the only way to get anything done is to give Republicans what they want? Won't that be his "bipartisanship"?

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But perhaps it won't matter. Or, rather, perhaps we'll soon find ourselves back where we started. There may be a deal, after all, but it may not pass.

As David Dayen reports:

Senior Administration officials tried to cast their deal on the Bush tax cuts in a positive light, even as forces on the left and right were mobilizing against it. The deal is so shaky that the White House officials and the President would only call it a "framework." Several Democrats and Republicans in the House and Senate are already either simply opposed, or dedicated to mobilizing for defeat of the package, and the Senate Majority leader delivered a terse one-line statement only agreeing to discuss it with his colleagues. The biggest news here is that this deal isn't done.

So we'll see. I suspect that significant changes will have to be made to appease enough opponents on both the left and right to sign on. And, even here, I suspect that most of those changes will be to appease Republicans, leaving the deal's Democratic opponents -- those progressives Obama doesn't much care for, those with the fortitude to stand up to the Republicans and the decency to stand up for the non-wealthy -- out in the cold.

And the resulting package will turn out to be even more Republican-friendly than this deal.

I don't really need to ask this question -- we've answered it already -- but how is it the Republicans can get what they want, more or less, even without controlling the White House and Congress?

And how is it the Democrats are so utterly lame?

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Okay, it's not all bad... not all bad... not all bad... and there are things to like in the deal.

And, yes, something may be better than nothing.

But is that really the new standard? And is that supposed to make us happy?