PrintDecember 7, 2010
Obama's Tax Triangulation
Channeling Dick Morris, President Obama last night announced his compromise deal with Republicans on the expiration of the Bush tax rates, caving in on a 2 year extension of income tax rates, a 35% estate tax rate with a $5 million exemption, and a 2% reduction in payroll taxes, all for 2 years. In return, he will get a 13 month extension on unemployment checks for workers hitting the 99 week limit. Thus, for the first time in American history, workers will be able to remain unemployed for 3 years with checks arriving from the government for doing nothing.
Andrew Malcolm of the LA Times expressed Obama's tone in his televised remarks perfectly:
Obama painted himself as a presidential presider, who sure didn't like all of the Republican demands, knew he'd take heat from his own side, got some necessary progressive goodies but, by golly, was determined to do what he thought was right for the country, especially the beloved middle class and the struggling economy.
The Democrat left is predictably outraged over his failure to stick a tax increase to those Americans earning more than $200,000 a year, but like President Clinton before him, Obama will gain popularity and electoral strength from this nod toward pragmatism. The economy will respond positively to removal of uncertainty over tax increases in a stagnant economy, and Obama will be able to position himself to voters as no socialist, but rather a leader capable of staring down his own party's radicals.
Of course, the earlier failure of the Senate to achieve cloture on the Democrats' tax hikes on the upper income group left Obama little choice. Even a leftist understands that letting the Bush rates expire and imposing tax rates hike for everyone would be an economic and political disaster. So Obama blinked and gave in to the very same Republicans he vilified during the campaign.
The deficit will climb, and Social Security will be further imperiled, but Obama will reap political benefits, and the economy will be helped, assuming this deal can be passed by the lame duck Congress and signed into law.
