Monday, December 6, 2010

Cutting Crew: Obama & GOP Extend Bush Tax Rates

Late word has it that Obama and the GOP have agreed to a compromise to extend the present tax rates as set by George W Bush in exchange for an extension in unemployment benefits. After two years of life under the political heel of smug progressives, it feels good to know how much it is killing all of the leftists who thought Hope and Change meant a fundamental redistribution of wealth in the United States:
President Obama and congressional Republicans agreed Monday to a tentative deal that would extend for two years all the Bush-era income tax breaks set to expire on Dec. 31, continue unemployment benefits for an additional 13 months and cut payroll taxes for workers to encourage employers to start hiring.

The deal has been in the works for more than a week and represents a concession by Obama to political reality: Democrats don't have the votes in Congress to extend only the expiring income tax breaks that benefit the middle class. The White House estimates that the proposed agreement would prevent typical families from facing annual tax increases of about $3,000, starting Jan. 1.

Obama was able to extract an agreement from GOP leaders to support an additional 13 months of jobless benefits, a 2 percent employee payroll tax cut and extensions of several tax credits aimed at working families that were included in the stimulus bill.

The deal also would revive the estate tax, but it would exempt inheritances of up to $5 million for individuals and $10 million for couples. Democrats on Capitol Hill are strongly opposed to setting the cap at that high a level and to the 35 percent rate discussed by Obama and Republicans that would apply to the taxable portion of estates.

I've been reading Radical In Chief by Stanley Kurtz, which lays out in detail Pres. Obama's roots in the world of American socialists and social democrats. If he really is a socialist at heart, this has to be a painful day. Certainly the progressives who were his most ardent supporters believed he was "one of them" and would stand firm on raising taxes on "millionaires and billionaires." They are right to feel betrayed. Then again, these wild promises to primary Obama are a bit much. He only delivered health care reform and a trillion dollar stimulus.

Of course, if you do not live within the left wing bubble, this was (finally!) the sort of thing Obama promised to do during the campaign: work with the opposition to pass common sense, bi-partisan reforms. Acting to stop a massive tax increase - one which everybody knew had a seven-year head deadline - fits that bill. Because, you see, this is one area where liberals are wrong and conservatives are right. Raising taxes only works if you are trying to redistribute wealth or hobble the economy. But, if you are worried about jobs jobs jobs, then a tax increase is not the way to go. All the Krugman columns in the world won't change that.

Hugh Hewitt and others have already declared themselves to be dispirited by the supposed failure to combine the tax deal with some spending cuts. I would be dispirited too...if this deal were reached after January 2011 when all of the Tea Party candidates take office. But, right now, we still have the 42 seat Senate and 189 seat House minorities we've been stuck with for the last two years. That the GOP could extract a concession of this level is close to a miracle.

One thing I would remind people feeling "dispirited:" this rhetorical idea that the Bush "tax cuts" should be "made permanent" does nothing to make the GOP look rational or serious. For one thing, we were never talking about tax cuts, only about maintaining the same tax rates that have been in place since 2002/3. No one is getting a tax cut now. Second, why the emphasis on making the cuts "permanent?" Tax rates are never permanent, only the fact that a tax must be paid at some point by somebody. This talk of permanent tax cuts frankly makes no rational sense, even if it does make political sense.

What happened today was all we could hope for from the 111th Congress. It's up to the 112th to begin the process of shrinking the government and reigning in spending. If they fail at that, they will have failed to keep a fundamental promise, as much as Obama has failed to keep the promises he made to his base.

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