I'm ready to fall on my face, after too many chores and too much solo parenting, but I wanted to throw out a quick post on today's tax compromise.
President Obama announced a tentative deal with Congressional Republicans on Monday to extend the Bush-era tax cuts at all income levels for two years as part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy.
This is utter rubbish, and my twitter feed is loaded with bile about giving the super rich another year of low taxes, increasing our deficit, and borrowing even more from China. There is a lot of bile directed at Obama himself. A sample:
RBReich Robert ReichIs it time to begin a third party — a Peoples' Party — to get Americans back to work & break the lock of Big Money on politics?
»RBReich Robert ReichThis isn't just a matter of "liberal" indignation. All Americans should be appalled that politicians are so clearly controlled by the rich.»RBReich Robert ReichBush's 2003 tax cut gave those with incomes over $1 m and average tax cut of $90K per year. And O & Dems extend it without a fight?»RBReich Robert ReichUnless you stand up to bullies they will be encouraged by your unwillingness to fight. Yet O refuses to fight on matters of core principle.»RBReich Robert ReichConcentration of income and wealth at the top is the single biggest economic reality of our era, yet O allows them a tax cut w/o a fight.»RBReich Robert Reich
Another White House cave-in. How many more cave-ins before nothing's left to cave in on? A president who looks weak IS weak.
Is Obama in trouble?
UPDATE: Reactions from pundits and bloggers by Andrew Sullivan.
Apt. 11d 
Yes, he’s in trouble. I don’t see how he could win one vote with it that he couldn’t have won with a fight and I see plenty he could lose. I don’t see how this will help Republicans that much either since it is double-plus stupid for budget hawks. Just like Europe is doing for bonds, everybody in office is trying to dodge problems for a couple of years.
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I have to say I did a fair amount of yelling at the tv last night. I’m a die hard Dem, but I have not seen a lamer Democratic president in years. It seems to me he is really hurting the Democratic senate and congress. He’s stepping on a lot of toes.
I actually didn’t vote for him in the primary and if I get another option, I’m inclined to do the same. He’s bankrupting my kids.
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Obama had to make a deal with the devil to get the unemployment benefits through. He did what had to be done. Of course, none of us want to see the Bush tax cuts continue… but none of them wanted to see unemployment extended.
It’s lousy anytime you have to deal with kidnappers, and that’s what happened: the repugnantkins held unemployment benefits hostage. Now it’s up to Obama and the Democrats in congress to unite so that this can’t happen in the future.
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I’m pretty angry that Obama didn’t even try to sell this better, but you could argue that he did try to sell it, and the midterm elections were the people’s response, and that’s that.
Laura/Geekymom, I’m really not convinced that the pushback against Obama is any worse or even that much different than the pushback against Clinton. I think my ears are still ringing from the outraged howls that followed the welfare reform act of 1996, which was blatantly passed to help Clinton win re-election. And aren’t we SO GLAD that Clinton had another four years to … defend himself against sex charges, triangulate like crazy, and fail to tackle Al Qaeda head on.
(In other words, I’ll need to be convinced that Obama is the lamest Democratic president in years. After all, in the last 40 years, there have been THREE.)
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“Now it’s up to Obama and the Democrats in congress to unite so that this can’t happen in the future.”
Given how heavily Obama has leaned on the Democrats in Congress to do his dirty work for him (for instance with health care), my personal expectations for him are 1) more golf 2) lots more visits with foreign dignitaries 3) trips abroad.
With regard to raising federal taxes right now, in the depths of what is going to be a very, very long economic downturn, I have a few things to say:
1. We have a word for people who make more than $250k. They’re usually called “employers” and their confidence in the economy and their income is what leads them to take on the headache and expense of hiring new employees.
2. Federal revenue seems to be rather insensitive to tax rates. I was just having a quick look at the Wikipedia entry for Hauser’s Law. Here it is:
http://en.wikipedia.org/wiki/Hauser's_Law
If you look at the chart provided for the article, there’s one that shows federal tax receipts as a percentage of GDP between 1945 and the present (actually to 2015, but I wouldn’t bet the farm on that sort of projection). Anyway, what the chart shows is that tax receipts as a percentage of GDP are actually extremely insensitive to tax rates. No matter what the policy (and in the past, we have had 90% marginal rates), the percentage of GDP collected as federal tax oscillates very reliably between 15 and 20 percent.
http://en.wikipedia.org/wiki/Hauser's_Law
On the bright side, from my reading of the chart, it looks like federal tax receipts as a percentage of GDP shoot up during boom times (the late 1960s, the dot com bubble, the housing bubble–there’s an upward blip right around 1980, too) and (surprise) plummet during hard times (after the dot com bubble and after the housing bubble), so it might not be that irresponsible to give everybody a breather during hard times (the current US unemployment is still over 9%).
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As someone who was hoping that all of the Bush-era tax cuts would expire, was hoping the deficit panel would succeed in eliminating the mortgage interest deduction, and wasn’t especially sorry to see the unemployment benefits end, I’m more than a little disappointed.
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The truth is that this is probably bad policy (assuming that dealing with the deficit/debt is what we should be making policy for right now).
But how is this bad politics? If this has any kind of stimulative effect on the economy, won’t it help win over independent voters and propel Obama to re-election in 2012?
And if there is a political consequence to the impact of this deal on the deficit, won’t that mostly be manifested on the Republicans who will have to answer to the Tea Partiers (who ought to feel betrayed by this)?
And while Democrats/liberals may not like the deal, they really ought to think long and hard about “President Palin” before withholding political support over the next two years or electoral support in 2012. Obama may not be as progressive as you like, but do you really want the alternative?
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