Tuesday, December 7, 2010

The Tax Deal

I'll stick with what I said yesterday, but I'll try to make it more concise: whether this deal is better for the Democrats than passing nothing depends, it seems to me, on how one counts the "middle class tax cuts" portion of the deal -- the extension of Bush-era rates for people below the line that Barck Obama set for where "middle class" ends and where "rich" begins.  If you count that portion of it as a significant win for the Democrats, then the whole package looks pretty good: at the cost of losing a campaign pledge on taxes for the rich (including the inheritance portion of the deal), Obama fulfills a major campaign pledge on taxes, gets the UI extension, and gets some other economic stimulus.

Beyond that, I have just some notes-style comments, some of which are a bit crabby, so I'll put those last (and apologies for the first two points, which I made this morning already -- they go here better):

1.  I do think that the big failure here for Obama is the lack of assistance to the states -- first, because it means people are going to lose jobs, and second, because in my totally uncredentialed opinion a state budget meltdown is probably the biggest downside risk out there. 

2.  And I agree with Mike Konczal that the Democrats should have insisted on a debt ceiling extension, if possible through the 2012 election. 

3.  That said, beware of anyone who confidently claims that Barack Obama did a lousy job of bargaining at this point.  We don't know what more he could have had.  I'm more sympathetic to long-range critiques (such as that the Dems could have passed a tax bill in spring 2009), but once you get to a bargaining session, we're going to need to know a lot more than we have now to know how well anyone played their hand.

4.  Jonathan Chait is right about uncertainty, but it won't keep Republicans from continuing to pretend they care about uncertainty -- nor will Republicans stop pretending that they care about the deficit. 

5.  Don't miss a good intra-polisci dispute between John Sides (deal is good because it'll help the economy) and Seth Masket (will it?).  I think I disagree with Seth's formulation.  He says John's take is "predicated on the idea that maintaining tax cuts for the wealthy will stimulate the economy."  I don't think that's right.  I think the question is: given that the GOP was willing to cut a deal, how much did the Dems get in return?  It's not as if anyone thinks that the upper level tax cuts are going to actively hurt the economy in the short run, right?

6.  Here's the nitpicky part, part one.  Chait puts way too much emphasis, I think, in the permanence of "permanent" tax cuts.  Yes, there are parliamentary reasons to care about it, but really: if Republicans have unified control of government after 2012, does he really think it matters what happens before that?

7.  And nitpick, part two.  I like the first half of Matt Yglesias's reaction post, and given that he's flying around the world and all this is probably a bit of a cheap shot, but I really hate the ending:
In a non-optimistic vein, though, this is really kind of sad statement on where Washington is at the moment. What you can say in favor of this deal is that it is a kind of expansionary fiscal policy. But if expansionary fiscal policy is the order of the day, then this is a mighty ineffective way to go about. And if the reason we can’t have a real robust jobs program is that deficits are evil, then why on earth is it that we need huge deficit-expanding tax cuts for the children of the hyper-wealthy?
C'mon.  This isn't a statement about "Washington."  "Washington" didn't set the conditions for this deal; in my view, the irresponsible parties here are the Republicans, but if he wants to call out Ben Nelson Democrats, or Barack Obama, or whoever, well, let's have it.  Blaming "Washington" for things is what we have people like David Broder for. 

5 comments:

  1. It's not as if anyone thinks that the upper level tax cuts are going to actively hurt the economy in the short run, right?

    To read some of the liberal blogs, you'd think that this is exactly what they believe. But I don't see any evidence that upper-income tax cuts would hurt the economy.

    Now, you could of course argue that the upper-income tax cuts are bad because they increase the deficit. But last time I checked, liberals (like me!) are perfectly willing to let the deficit widen if it means putting people back to work. And they certainly don't subscribe to the "starve the beast" theory whereby tax cuts inevitably lead to spending cuts. So this should be a good bargain for those left of center.

    I think this deal may be a harbinger of things to come in the 112th Congress, because it clarifies exactly where Obama and Republicans can find common ground. Obama wants economic stimulus, but Republicans (and Blue Dogs) won't agree to more spending, so what do you do? Can anyone say "two-year income tax holiday"?

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  2. Jonathan:

    I'm almost shocked that you said this:

    "2. And I agree with Mike Konczal that the Democrats should have insisted on a debt ceiling extension, if possible through the 2012 election"

    Since it was a post by you a couple of iterations ago of this debt-limit "debate" that convinced that the only real issue is who is responsible for whipping which majority caucus to pass it.

    It will pass. The only question is whether Boehner has the stones to make his Tea Party crazies eat it, eat it raw, rah rah rah, or whether he has to beg Nancy Pelosi for votes.

    Either Tea Partiers get a two by four upside the head or Nancy Pelosi gets to pocket a favor from Boehner.

    I don't see a downside.

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  3. That seemed kind of atypical of Ygelsias.

    The whole tax deal makes me want to give a Kirk-like yell of "MADISONNNNNNNNNNN!!!!!!"

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  4. And let's not forget the MOST responsible party for all this mess......the amercum people. Frankly, after the two elections we just had ('08 and '10) I think people are just plain damned stupid. And why shouldn't they get things out of washington that don't make sense?

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  5. jfxgillis,

    I do think they'll eventually get a debt extension, but I think it's likely that unless the Republicans badly misplay it (certainly possible) that it'll be at least a hassle for Obama and at worst a chance for Republicans to bargain successfully for stuff they want. I'm trying to remember what I wrote (!)...I think both debt ceiling and budget/appropriations stuff are big dangers for Boehner, but that doesn't mean that it'll necessarily be a plus for Obama & the Dems.

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