The tax deal: Who outmaneuvered whom?

Go ahead—“approve the lousy deal,” said Eugene Robinson in The Washington Post. Congress is still wrangling over the details of President Obama’s “really quite awful” compromise with Republicans—a two-year extension of the Bush-era tax cuts for every income level, including those making more than $250,000 a year—in return for a 13-month extension of unemployment benefits. But Democrats might as well complete their surrender and “live to fight another day.” Repealing Bush’s reckless tax cuts for the rich was a cornerstone of Obama’s 2008 campaign, a principle “so important that it was non-negotiable—until he negotiated it away.” Obama’s caving on the tax cuts may boost his standing with independent voters, or it may just weaken him further by suggesting that he has no spine. Either way, “it’s a sad story, for the country and especially for the Democratic Party.”

Actually it’s Republicans who just fell for the “swindle of the year,” said Charles Krauthammer, also in the Post. Obama conned the GOP negotiators into giving him what is effectively a “massive new stimulus” package, even more exorbitant than the first. In addition to extending the Bush tax cuts, Obama worked into the deal a one-year, 2 percent cut in the Social Security payroll tax—good for an extra $1,000 to $2,000 in most workers’ pockets. All told, the tax cuts will pump more than $900 billion into the economy, shaving 1.5 percentage points off the unemployment rate and boosting GDP by 1 percent. The U.S. government will once again have to borrow all that money from the Chinese, but Obama knows that in 2012, an improved economy could “easily be the difference between victory and defeat.” Strategically, this was “shrewd” on every level, said Andrew Sullivan in TheAtlantic.com. By angering the liberal base, Obama gives the center a reason “to take a second look” at him; if he can compromise with Republicans on tax cuts, then he really isn’t a “dreaded commie Muslim alien,” is he?

Republicans are now in a fascinating bind, said Jonathan Chait in The New Republic Online. They usually support any “debt-financed tax cut” without hesitation. This time, though, right-wingers like GOP presidential candidate Mitt Romney are panicking. They can’t come out and say it directly, but they oppose this particular tax cut for the sole reason that it might improve the economy just in time to win Obama re-election in 2012. The Left comes off looking pretty bad too, said Jeff Jacoby in The Boston Globe. Their president just won a tax cut for the middle class, and more relief for the unemployed, but they’re enraged because of their “envy and resentment” of the affluent. Evidently, punishing “the rich” with a tax increase is more important than “a compromise a majority of voters like.”

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The tax-cut deal is a win for all sides, said Ross Douthat in The New York Times, “except the U.S. Treasury.” Republicans and Obama got to please voters with another “deficit-financed” handout. Future generations get stuck with the bill. That’s grossly irresponsible. It depends, said Paul Krugman, also in the Times. The White House is betting the stimulus effects of the deal will be enough to “jump-start the recovery.” If it does, then tax revenues will rise, and the cost of the deal will be defensible. If it doesn’t spark a real and lasting recovery, and I don’t think it will, then come 2012 the president and his party are “in for a rude shock.”