Wednesday, September 08, 2010

A tale of two tax cuts

With Republicans poised to retake control of the House and possibly the Senate, if not likely the latter, it can hardly be said that this is the best of times. And with a Democratic president who has alienated much of his liberal-progressive base, failing to govern up not just to the overly lofty expectations of his most enthusiastic, and enthusiastically deluded, supporters but even to the reasonable expectations of those of us who at least thought that he would stand up for basic liberal principles and advance a solidly liberal reform agenda, it feels even worse.

It is frustrating that Obama has been so inconsistent, consistent only in being overly cautious and overly friendly to a Republican Party that is obstructionist and trying to bring him down, often through a nefarious smear campaign that has sought to destroy him. It is frustrating that he can do the right thing and then the wrong thing, say the right thing and then the wrong thing, in rapid succession. To wit:

Obama has admirably come out against "any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year," as the Times is reporting. Those tax cuts are not just unfair but also deeply irresponsible, not least in a time of fiscal difficulty.

And yet, as Robert Reich notes, Obama will "reportedly will propose two big corporate tax cuts this week," as if to counter his responsibility over the Bush tax cuts for the wealthy with yet more irresponsibility.

On the face of it, it would seem to make perfect political sense. Whatever his personal views, and whatever the views of his fellow Democrats struggling for re-election in November, Obama knows that the Bush tax cuts are deeply unpopular and that he can present himself, and his party, as populist at a time when angry, anti-establishmentarian populism would seem to go a long way. And with the corporate tax cuts, which are too technical to arouse much popular interest, let along outrage, he can present himself, and his party, as pro-business and presumably pro-growth at a time when the economy is struggling, there is widespread distrust of government, and government's ability to turn the economy around (even if it was the stimulus that pulled the country back from the brink and made the current recovery, however fragile, possible), thereby appealing to independents, conservative (Blue Dog) Democrats, and moderate Republicans who aren't comfortable with the direction their party has taken and who would vote Democratic but who have been scared off by the Republican propaganda about how Obama is a socialist.

So, yes, I get it. But do the corporate tax cuts make sense? Are they worth it -- not in political terms but in terms of long-term economic health, as well as in terms of jobs? No, says Reich:

Obama's proposed corporate tax cuts (1) won’t generate more jobs because they don't put any cash in worker’s pockets (as would, for example, exempting the first $20,000 of income from the payroll tax and making up the difference by applying the payroll tax to incomes over $250,000); (2) will subsidize companies to cut even more jobs; and (3) will cost $130 billion -- money that could better be spent helping states and locales avoid laying off thousands of teachers, fire fighters, and police.

Reich is politically savvy, though, and also gets what's going on:

So why is Obama proposing them? To put Republicans in a bind. If they refuse to go along he can justifiably say they have no agenda other than obstruction. After all, the only thing they've been arguing for is lower taxes. On the other hand, if Republicans agree to support these corporate tax cuts, Obama can claim a legislative victory that will help Democrats neutralize their opponents in the upcoming elections.

The proposals also make it harder for Republicans to argue the Bush income tax cuts should be extended for the richest 3 percent of taxpayers because small businesses need it. Obama's corporate tax cuts would appear to do the trick.

The White House probably figures even if Republicans agree to the proposed tax cuts, nothing will come of it. Congress will be in session for only about two weeks between now and the midterm elections so it’s doubtful these proposals would be enacted in any event.

But this cynical exercise could backfire if Republicans call Obama's bluff and demand the corporate tax cuts be put on a fast track and get signed into legislation before the midterms.

More troubling, Obama's whopping proposed corporate tax cuts help legitimize the supply-side dogma that the economy's biggest obstacle to growth is the cost of capital, rather than the plight of ordinary working people.

Reich's analysis, it seems to me, is right on the mark. In a way, this is typical of Obama. He is simultaneously too calculating and too cautious for his own good. Why not just make the populist and economically sensible argument against both the Bush tax cuts and against irresponsible corporate tax cuts generally? Why not stick to the basic liberal principle of fairness, or even to the supposed conservative principle of fiscal responsibility (a principle that many liberals endorse and that many conservatives, including Bush, ignore)? Why not stand with the people at a time of economic crisis, at a time when so many people have lost their jobs and can't put food on their table, instead of sucking up to an oligarchic establishment that hardly needs any help?

It's possible, of course, that Obama actually thinks he's doing the right thing. It's more likely, though, that he's just too political, that he filters everything, with Rahm Emanuel's help, through a political filter that slashes any and all sense of social and economic justice, or even policy consistency. The result is that he just seems weak and opportunistic, whether it's on health-care reform, the Afghan War, immigration, the Park51 community center, or any other issue, including tax cuts.

Which is not to say that Obama shouldn't think politically or make decisions without taking politics, including his own and Democrats' electoral well-being, into consideration, because, of course, the democratic reality is that you can't get anything done if you're never elected or if you get voted out of office. But enough is enough, and it's time, long past time, for this president, who remains fairly popular, to be not a pollster but a leader, to be attuned to what is politically expedient, sure, but more importantly to be willing to do what is right -- and actually to do what is right -- whatever the short-term implications of the moment.

Democrats, and especially the Democratic base, would respond to such leadership, based on those principles they hold dear and that supposedly Obama does too, by closing the enthusiasm gap and boosting their party's fortunes in November, but I suspect that many others would be appreciative as well, finally finding in Obama, still less than two years into his presidency, the voice of hope and bringer of change from whom so much seemed possible when he was elected to the White House.

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