It took a little over a month…but there are now tangible results from the midterm elections.
In a remarkable turn of events, President Obama yesterday came to a compromise with Congressional Republicans on the Bush tax cuts, unemployment benefits, as well as a new tax cut temporarily reducing the payroll tax. Bush tax cuts would be extended until 2012 for all Americans. The deal also includes a payroll tax cut for workers in 2011 — trimming the Social Security tax rate by 2 percentage points and saving $1,400 for a family earning $70,000. Republicans agreed to renew jobless benefits for an additional 13 months without paying for them, a policy Republicans were weakly fighting.
All in all, this is a broad based capitulation by Mr. Obama. The victories?
1. The Republicans campaigned on extending the Bush tax cuts for all Americans, and did all that. There one compromise was that for the top earners, this is only a temporary cut. But the bonus? It expires in 2012…right after the next elections. I can see the political ads already.
2. The payroll tax cut is a bonus. Many Republicans have asked for this for a long time, including John McCain who campaigned on this exact policy in 2008. Obama argued that this was a hard fought victory over Republican opposition. It was nothing of the sort. Republicans happily capitulated on this. If Republican equivalent of compromise is to agree to more taxes with this President, it is going to be a very good 2 years for Republicans in Congress.
3. Republicans never wanted to really fight on unemployment benefit extentions. Even hard core conservatives who don’t want this added to the deficit admit that there is an economic benefit to unemployment benefits. Additionally, the political damage to making this a fight between tax cuts for millionaires versus no benefits for the unemployed should have been a losing proposition. The only problem is, this president is not astute enough to take advantage of it.
4. The estate tax only goes up to 35% after the first $5 million, rather than 55% after the first $3.5 million, as would have happened without any intervention.
You know it is bad for the President when the only praise he is getting…is from Republicans. From the Politico:
Senate Minority Leader Mitch McConnell, a central figure in the talks, was positively effusive. “I appreciate the determined efforts of the president and vice president in working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth,” McConnell said in a statement. “I am optimistic that Democrats in Congress will show the same openness to preventing tax hikes the administration has already shown.”
“This is the president’s Gettysburg,” Rep. Jim McDermott, a leading progressive and a subcommittee chairman on the tax-writing Ways and Means Committee, told POLITICO Monday. Referring to Obama’s choice about whether to compromise or stand firm against Republicans on the question of higher taxes for the wealthy, the Washington Democrat said: “He’s going to have to decide whether he’s going to withstand Pickett’s Charge … I worry.”
Outspoken Democrat Anthony Weiner of New York compared it to “punting on 3rd down — it seems the president is not seeing the value of being on [the] offense.”
“You can’t let Republicans win on this. There’s no more central campaign promise made by President Obama than to repeal the Bush tax cuts for the wealthy, and he needs to be willing to fight on this,” said Adam Green, co-founder of the Progressive Change Campaign Committee, which on Monday circulated quotations from some of Obama’s 2008 campaign organizers who are threatening to pull their support in 2012 over the tax cut.
Actually, the Democrat opposition is right, in a way. Other than the Iraq War, there was no policy that Obama was more adamant was wrong for America than the Bush tax cuts. He stated that is was not only bad policy, but actually destructive to the American economy. And he is now willing to sign that same policy into law.
Is this a political victory for Republicans? Absolutely. They basically got everything they wanted, and had to give up the unemployment benefit extention. That is not the best conservative policy in the world, but politically it less damaging to allow for it than to fight it tooth and nail.
Additionally, this puts both the President and Congressional Democrats in quite a quandary. Obama agreed to this for his own self interest. Congressional Democrats, who have already taken a hit for Obama’s policies, see no reason to capitulate on this as well. And remember: those Democrats who remain in Congress are even more liberal than the group that existed before.
If Congressional Democrats don’t approve this, then they will further weaken Obama’s already precarious position. They also discredit themselves: for two years, they have argued that Republicans have been the obstructionists and refused to work with Obama. Now the positions are exactly reversed.
Every one of the Democrats catch phrases that won them election in 2006 and 2008 is slowly falling apart. If you can’t claim that is a Republican victory, what is?