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Is Obama’s tax deal the lesser of two evils?

December 8, 2010 by  
Filed under News, Politics, Weekly Columns

(Akiit.com) President Obama has reached a compromise with Republicans in Congress to extend the Bush tax cuts for the wealthiest Americans for two years, in exchange for a 13-month extension of unemployment benefits. The question is whether Obama’s deal on taxes is the lesser of two evils, and whether this will be a good thing for black America.

These are the highlights of the plan, which will add $900 billion to the nation’s deficit:

13-month extension of unemployment benefits ($56 billion)

Middle-class tax cuts for people making under $250,000 ($300 billion)

2-year extension of tax cuts for the rich, reduction in estate tax ($130 billion)

2 percent payroll tax cut/tax holiday ($120 billion)

Obama tax credits, including the child tax credit, earned income tax credit, and college tuition credit ($40 billion)

Obama tax cuts for business ($30-180 billion)

The plan contains a combination of things that both Republicans and Democrats like. Democrats are champions of unemployment benefits for millions of suffering people, which tend to stimulate the economy far more than tax cuts. However, these stimulative measures, essentially giving money to the unemployed to spend, are a small, though important, part of this package.

An extension of unemployment checks will benefit African-Americans, who are disproportionately unemployed and hurting twice as much in this economy. However, not covered in this jobless benefit plan are the “99ers”, those individuals who have been unemployed 99 weeks or more, and whose unemployment insurance has run out — apparently forever.

The Obama tax credits are also designed to help everyday people. Meanwhile, ideas such as the payroll tax holiday, the extension of the Bush cuts for the wealthy, and the reduction in the estate tax are Republican pet projects. Tax cuts for middle class folks will likely have a more positive impact on the economy than the extension of the Bush tax cuts for the wealthy, as people of meager means are more likely to spend the money, while the rich are more likely to save it.

President Obama argued that he had no choice in the matter. He said that he doesn’t like parts of the compromise, including the extension of the Bush tax cuts for the wealthiest 2 percent of Americans. Appearing defiant, the president lashed out at Republicans for worshiping the holy grail of trickle-down economics.

“I’ve said before that I felt that the middle-class tax cuts were being held hostage to the high-end tax cuts,” Obama said. “I think it’s tempting not to negotiate with hostage takers, unless the hostage gets harmed. Then people will question the wisdom of that strategy. In this case, the hostage was the American people, and I was not willing to see them get harmed.”

Depending on your point of view and political perspective, the tax plan is either the best the public could have expected under the circumstances — perhaps even better than expected — or the worst thing imaginable.

Predictably, Congressional Republicans rejoiced over the plan. “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,” said the upbeat Senate Minority Leader Mitch McConnell (R-Kentucky). Arizona Sen. John Kyl said “It is true that this issue has to be resolved now. And we think it’s being resolved — all else being equal — in a positive way…. I can say that there was a general positive reaction to the agreement.”

Meanwhile, Democratic lawmakers expressed emotions ranging from concern to outrage. Some conservative Democrats object because the tax cuts are not paid for. Meanwhile, progressives argue that these cuts, unlike unemployment benefits, hurt the economy and do not create jobs. And they fear that if the president can cave in to a two-year extension of the tax cuts for the rich today, he will bend over backwards in two years and allow the cuts to become permanent. Louisiana Sen. Mary Landrieu called the tax plan “morally corrupt.”

The Progressive Caucus called for an extension of the middle class tax cuts, but an expiration of cuts for the top-earning Americans. Rep. Peter Welch of Vermont plans to fight Obama’s compromise plan, calling it “fiscally irresponsible” and “grossly unfair.” He also argued that Republicans would use the deal to oppose spending for helping the middle class — arguing that we can’t afford it because of all of the increased debt — and will paint him as a budget buster. Welch has assembled a group of 30 democratic members to oppose the plan.

Further, Sen. Bernie Sanders (I-Vermont) vowed to filibuster, saying “I will do everything that I can to defeat this proposal,” adding that “I think we can come up with a much better agreement that is much fairer to the middle class and our kids and grandchildren.”

Defenders of Obama’s compromise with the GOP submit that it could have been a lot worse, given the perceived Republican advantage now that they are about to take control of the House. The tax cuts for the rich amount to only $130 billion of the total. The President could only garner 53 votes in the Senate for his own plan — 60 votes are needed to break a filibuster — so he had to make a deal with the ascendant Republicans because the math didn’t add up for him. Plus, his supporters would say that the president must look towards the 2012 election. Playing nice with the Republicans, the conventional Beltway wisdom goes, appeals to the ever-elusive independent voters that Obama lost in the midterms. Cynics would argue that the Obama camp is betting that the plan will not pass, which will still make the president look good because at least he made the effort.

However, according to some observers, Obama has lost the Democratic base. Citing this plan with the GOP as another example of the president’s poor negotiation skills, they argue the White House compromised too much, even before getting to the negotiating table. The result is that Republicans got what they wanted in this tax plan. Public opinion is against the tax cuts for people earning over $250,000 per year, as polls have shown a majority wanting them to expire.

Elements of the base fear that the president does not have the fight in him, that he lacks backbone, and is willing to rollover and sell out his base. He appears to flip-flop by supporting a Republican tax policy he vehemently opposes, and some would argue a policy that, along with the wars in Iraq and Afghanistan and the economic crisis, helped create much of the deficit. The White House moving away from the base is what critics attribute to the lack of voter enthusiasm that led to Republican victories in 2010.

Moreover, Obama has embraced tax cuts, the Republicans’ foremost policy tool. There is a concern that Republicans plan to bankrupt the states and wreck the economy for political gain in 2012. The GOP has identified making Obama a one-term president its main goal, and one could reasonably argue that you can’t negotiate with people who call for your downfall. And although the black community is widely perceived as among the president’s most ardent supporters, it is now a source of considerable vocal opposition to his policies.

The compromise between President Obama and the Republicans is not a done deal. But it is certain that it gives many Americans something to like, while leaving much to be desired for many others.

Written By David A. Love


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