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Obama, tax cuts, and principle
Obama can't risk a middle class tax hike that would damage the recovery and hand power to a cynical GOP. So he'll cave on extending tax cuts to the wealthy instead
Robert Shrum
Robert Shrum
I

f the President and Congressional Democrats are ready to compromise on a temporary extension of all the Bush tax cuts, for the rich as well as the middle class, then they ought to heed Macbeth’s advice: "If it were done, when it’s done, then were well it were done quickly."

The House has voted and let Republicans register themselves as champions of the few. Now, move on to the final compromise, tied to extending unemployment compensation and an agreement from Republicans to abandon their unconscionable hostage-taking of the New START treaty, which they’ve threatened to block unless they get their way on tax giveaways to the wealthy. The episode has revealed the partisan depths of a GOP that would re-ignite the Cold War and raise the risks of nuclear war to make sure the wealthiest get their unfair share. They would leave the long term jobless without help or hope at Christmas time.

JFK acceded to a big tax cut for the wealthy too.

This is the cynicism of a political party that this year appealed to populist anger in order to serve plutocratic avarice. Progressives, aflame that Obama might yield to such extortion, could point out that in his haste Macbeth was up to no good — and that what is contemplated here is the murder of the Democratic ideal of tax justice. Blogger Atrios has suggested that Democrats should just "let all the damn tax cuts expire…[and then] Obama can create his own shiny new tax plan."

That course might make progressives feel better, but it would make the economy worse — and play into the Republican strategy of economic stagnation as the lever for a conservative takeover in 2012. The President’s "shiny" bill wouldn’t pass—and he and his party would be blamed for an economy body-slammed by a tax increase on the middle class and loss of benefits for the unemployed, whose spending helps drive the growth that can put them back to work. Presidents are held accountable for economic conditions; Obama can’t afford to jeopardize a recovery that finally seems to be picking up steam. Do progressives really want to sacrifice jobs, and perhaps the Presidency, on an altar of unattainable principle?

JFK acceded to a big tax cut for the wealthy too

Democrats have been here before. In the early 1960s, the economist John Kenneth Galbraith, serving as JFK’s Ambassador to India, objected to tax-cutting as a means to stimulate the economy. It was "reactionary Keynesianism" — less effective dollar for dollar than direct federal spending on public needs. Kennedy probably bought Galbraith’s argument in the abstract, but calculated that a tax cut was almost certainly the only proposal that could pass; his plan not only cut tax rates for middle income Americans, but, to the dismay of liberals, was sweetened with a 20 percent reduction in the top rate. Following the recession-scarred 1950s, the Kennedy tax cut sustained what became the longest uninterrupted period of growth in American history, one that made possible the Democratic landslide of 1964 and the legislative triumphs of the Great Society — from Medicare to Head Start to federal aid to education.

For Obama and the Democrats, the stakes are equally high. The party should have drawn a sharp dividing line on the Bush tax cuts in the midterm campaign — the many versus the few. House Speaker Nancy Pelosi was ready for that fight.  But Democratic Senators, including Majority Leader Harry Reid, pressed the While House to heed the conventional wisdom that the tax issue invariably helps Republicans. It was a mistake, but it’s made — and while the only way forward now gives the GOP too much, it also gives the President the chance to keep the economy moving.

Once the deal is in place, there are other fights in the lame duck Congress and beyond that are right on the merits and right politically. The Dream Act — a path to citizenship for young undocumented immigrants who finish college or serve in the military — should be pushed in the lame duck session; comprehensive immigration reform should be a priority next year. The latter surely won’t pass, but the GOP’s racist-tinged fulminations will deprive their 2012 nominee of the 40 percent of Hispanic votes the party needs to recapture the presidency. Similarly, the repeal of "Don’t Ask, Don’t Tell," whether it succeeds or not, can reverse the drift of gay and lesbian voters away from the Democrats; according to exit polling, 31 percent of them voted Republican in 2010 compared to 19 percent in 2008 — and their turnout was down sharply.

There’s a wildcard on the table too — the report of the Deficit Reduction Commission, which has called for tax increases and reductions in Social Security and Medicare benefits for future retirees. The President seems determined to tackle this intractable political challenge, which traverses an entire depot of political third rails. To put it mildly, few in the Democratic base will be entirely happy with the outcome — assuming there ever is one.

It is to Obama’s credit that he’s prepared to take this on — politically, it’s mostly pain and little gain. By 2012, for example, voters will care far less about the deficit if there’s a clear and credible recovery. But the effort is economically imperative as long as it’s coupled with policies to promote growth, particularly long-term investment in education and training. Retrenchment alone, with cuts too sharp and too soon, is the course the Commission proposes; that could stall the economy and make Obama a consequential, worthy, and one-term President.

Instead, even here, Obama can advance policy while safeguarding his politics. Why not support raising the retirement age for future Social Security recipients — except those with harder, manual jobs and lower life expectancy? And what’s wrong with lowering all income tax rates — if as a result of closing loopholes, the wealthy actually pay more and federal revenues increase?

Few Presidents have confronted so many relentless challenges as Barack Obama. Indeed just over the horizon are fateful decisions about Iraq and Afghanistan. So far, this President has made more history than most of his predecessors. As he moves ahead, he’ll be progressive — which will anger his opponents — and pragmatic — which will discomfort his base. But that’s the only way to govern, to lead, to advance change. It was the way of FDR and JFK — and on the other side of the spectrum, of Ronald Reagan. Those who at times doubted them for straying from the true faith ultimately made them its touchstones.

Today, in a fraught economy, in a world of unresolved danger, we see Obama through a glass darkly. A generation from now, long after he traverses the enmities of the next two years, and long after he finishes his second term, I suspect we will see him, in Arthur Schlesinger, Jr.’s phrase, as someone "who met great crises [and] led our society to new possibilities of justice."

 

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