The deal is done, and it’s no compromise:
… As I’ve said ad nauseum they want the tax cuts to be temporary because they want to have this fight over tax cuts to continue into the presidential campaign. If the President agreed to extend the tax cuts permanently, the issue would be off the table and that’s not to their advantage. (Believe me, the business community is not really *uncertain* about anything at this point.)
Yes, it’s better that they didn’t extend them permanently, but are liberals looking forward to this argument two years from now? (And will there ever be any circumstances that will make it easier for them to expire than there were in the spring of 2009?) It’s a missed opportunity, and one which I suspect was always planned to miss. The Bushies knew what they were doing when they rigged this one and it would have taken a Democratic party and a president much more brave and populist than the ones we have to undo it.
Ezra Klein also believes this deal is largely about 2012, but unlike Digby he thinks Democrats will be able to use it to their advantage:
… Democrats are negotiating toward a two-year extension of the tax cuts. They’ve rejected a three-year extension. That means the next fight over the tax cuts will be part of the 2012 election. And the White House believes that an improved economy and a bigger deficit will make it much harder for Republicans to support extending tax cuts for the rich. If they try, that gives Democrats both a populist cudgel and a way to take hold of the deficit issue.The White House’s problem is that they handled the politics of this argument so poorly in 2010 that their allies on the Hill don’t trust them to do better in 2012. One Senate staffer summed up his reaction to the deal in one word: “Nausea.” Another said the deal is fine — but it was getting hard to trust the White House. “Will they actually have that fight in 2012?” He asked. “They dropped the ball this time around.”
The irony of the situation is that the White House may strike a better deal because they handled the politics so poorly. If they’d showed more backbone early on and publicly demanded that the Republicans extend a package of tax breaks from the much-hated stimulus bill, it might’ve made it impossible for Republicans to agree to anything of the kind. As it is, the White House defined an extension of the tax cuts for the rich as a loss for them — and now they’re going to extend those tax cuts, and lose. They were not playing for this outcome.But though they’re coming out on the wrong side of the short-term politics and the wrong side of the tax policy, they may be coming out with a win on stimulus that no one expected, and that may ultimately matter much more for both the economy and Obama’s reelection campaign.
I have to say, I’m not following Ezra’s reasoning here, and I don’t share his optimism. Obviously, I hope he’s right, but as far as the likeliest outcome is concerned, I’m with Digby (above) on this one.
Obama won the White House on a pledge to pay for needed social programs (like health care reform) in part by raising taxes on the wealthy. He broke that promise. But there’s an extra knife twist to this broken promise (link added):
Before Obama said most of those things, he made a Kinsley gaffe in an interview with the Reno Gazette-Journal. He argued that Bill Clinton hadn’t been a transformative president in the way that Ronald Reagan had been. This irritated Bill Clinton for obvious reasons, one of them being that the line was true — Clinton had not shifted the center toward his views, while Reagan had. Americans ended the Reagan years believing that supply-side tax cuts always grew the economy; they did not end the Clinton years agreeing that increases in marginal tax rates could close the deficit. But Obama won the 2008 election promising to raise some tax rates. Game over.
And this is why liberals can’t stomach a compromise on tax rates. They were promised by Obama — by every Democratic candidate, really — that the tax rates would be restored to pay for social programs. They thought they proved in the 1990s that these were fair tax rates under which the economy could grow wildly, and that Bush proved in the 2000s that lower marginal tax rates for the wealthy didn’t spur real economic growth. It was an important debate, and they won it. They have polls telling them they won it, and most Americans are find with restoring the top rates. And here’s Obama, about to throw the game, affirming the conservative line that tax cuts of any size at any time are good for the economy.
In other words, Reagan was a transformative president in that he persuaded Americans to believe that “supply-side tax cuts always grew the economy” when the truth was they did no such thing. So in agreeing to extend the Bush tax cuts, Obama implicitly endorsed the idea that emulating Reagan’s success at convincing Americans to believe a falsehood — that tax cuts for the wealthy always lead to economic growth — is preferable to doing a better job than Clinton did at convincing Americans to believe what is far closer to the truth: that tax cuts — for the wealthy OR for the middle-class — are not always, in all situations, and simply by definition, the best way to fix an economic crisis.