Obama’s deal with the GOP: Tax cuts for everyone

What happened

In a compromise that set off shock waves in Washington, President Obama struck a deal with Republican congressional leaders this week to keep all Bush administration income-tax cuts in place for two more years. In exchange, Republicans agreed to extend benefits for the long-term unemployed through the end of 2011, sharply reduce Social Security payroll taxes on all wage earners for the coming year, and restore the expired estate tax, although at the lower rate of 35 percent, instead of 55 percent. Since his election in 2008, Obama had vowed to block extending the Bush tax cuts for those earning more than $250,000 a year, but he reversed his position when Republicans threatened to block extension of the middle-class tax cuts, too.

The tax-cut plan would add $900 billion to the national debt over two years, and 25 percent of the tax savings would go to the wealthiest 1 percent of the population. Liberal Democrats vowed to fight its approval in Congress; Rep. John Conyers of Michigan, for one, said he would “do everything in my power” to stop it. But Obama said he had little choice, arguing that Republicans considered tax cuts for the wealthy “the holy grail” and were willing to hold the rest of the American people “hostage” to keep them. Obama also cited the anemic economic recovery, saying the new tax relief “will spur our private sector to create millions of new jobs and add momentum that our economy badly needs.”

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What the editorials said

Obama was complicit in the liberal demonization of the Bush tax cuts, said National Review Online, so his new stance amounts to ideological “capitulation.” He’s vowing he’ll fight against extending the cuts for top earners in 2012, but these are “sweet nothings” aimed at appeasing the “jilted” Left. If he didn’t have the courage to fight for raising taxes now, why would he “when he’s on the ballot?” With this deal, said The Wall Street Journal, the president repudiates “the heart and soul of Obamanomics.” It has finally dawned on him, thanks to 9.8 percent unemployment and a midterm electoral debacle, that tax cuts are a better stimulus than spending and that he can’t get a recovery by treating businesses like “robber barons.”

Does anyone remember the deficit? said the Chicago Tribune. Everybody gets a nice Christmas present in this deal, “but nobody is reducing the cost of government to make up the lost revenue.” That’s true, said Newsday, “but efforts to stimulate the economy are more urgent right now than limiting red ink.” Obama had two options, “gridlock and compromise,” and he made the right choice.

What the columnists said

“This deal makes me feel like I live in an oligarchy,” said Joan Walsh in Salon.com. It furthers the vast transfer of wealth to the richest 1 percent of Americans. And please, don’t talk to me about the onerous tax burden: As a percentage of the GDP, taxes are the lowest they’ve been in 60 years. By accepting this deal, said Katrina vanden Heuvel in The Washington Post, Obama is committing “political self-immolation.” After three decades of conservative dominance, Obama had a historic mandate to lead the country out of “gilded-age inequality.” His unwillingness to stand up to Republican blackmail augurs “a failed one-term presidency that the nation cannot afford.”

Actually, Obama made this compromise primarily to avoid that fate, said Ezra Klein, also in The Washington Post. The economy needs “all the extra help it can get right now,” and this deal injects as much stimulus “as seems politically possible” into the economy between now and 2012. The simple reality is that Obama won’t be re-elected if unemployment remains above 9 percent.

Giving all Americans a tax break may infuriate his liberal base, but it was the right strategic move and will raise Obama’s approval ratings, said Andrew Malcolm in the Los Angeles Times. All of a sudden, “this aloof Harvard fellow” looks like someone who can “get into the huddle and call the plays.”