Thursday, December 09, 2010

The Potential GOP-Obama Tax Deal

This is a stunning lay down by the President. Yes, unemployment benefits were extended for select individuals, but what exactly did the GOP give up? Nothing. They got it all tax wise and even some extra goodies (2% payroll tax break). What I find shocking is that Obama could not even get the highest tax bracket marginal rate to go up 3% (back to the Clinton era rate) nor move the capital gains tax rate up to 20%. This is being hammered by the mainstream media as weakness, by the liberal netroots as a betrayal, and by lame duck Democratic congressmen as unacceptable. It is also the only thing Obama could do.

I would not defend him if I didn't see the position he is in (by his own making), but Obama is in a rough position. It is weak that he could not negotiate a better deal with a party that was in the minority by a considerable margin, but what is he going to do in a few months when the GOP has the House of representatives under control and many more senators. Does anyone seriously think the GOP won't get a better deal then? If the Democrats reject this deal in Congress it makes Obama look isolated and very very weak. I don't recall a time where a president brokered a deal to see it rejected by his own party. It would also make the GOP look good as they could say in 3-4 months that they tried to work with the President but the sour grapes, lame duck Democrats sabotaged the deal.

As a running theme in my writing, this falls into the poor priorities/bad decisions of 2009 realm of Obama. In early 2009 when Obama had the wind at his back and lots of good will, an effective 'stimulus' program could have been a temporary extension of Bush tax cuts (to alleviate uncertainty in America of their end result) except for the highest earners combined with a slight payroll tax break just as is inserted now into this deal. He also could have expanded that payroll tax break or had some of stimulus spending (build nuclear reactors) that was based on real things not just welfare extension programs. This is the fiscal difference between the GOP and Dems. Both are bad at runnign deficits, but the GOP reduces taxes and let's you decide how to spend that money while the Democrats create goodies to hand out to earn your favor and create a voting bloc. Maybe in addition to the original stimulus, as ill written as it was, figuring out a future for the Bush era tax cuts would have been a good idea instead of the suicidal health care reform. This period in time, pre-Scott Brown election GOP, was when the GOP was at its weakest. Making a tax policy change the focus would have removed health care reform out of the Massachusetts special election, helping Martha Coakley. Obama could have negotiated a much better deal in late 2009/early 2010. He and his policy advisors made a mistake and read the economy poorly. They are paying for it to this day.

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