Barack Obama won the great tax-cut showdown of 2010 – and House Democrats don’t have a clue that he did. In the deal struck this week, the president negotiated the biggest stimulus in American history, larger than his $814 billion 2009 stimulus package. It will pump a trillion borrowed Chinese dollars into the U.S. economy over the next two years – which just happen to be the two years of the run-up to the next presidential election. This is a defeat?
If Obama had asked for a second stimulus directly, he would have been laughed out of town. Stimulus I was so reviled that the Democrats banished the word from their lexicon throughout the 2010 campaign. And yet, despite a very weak post-election hand, Obama got the Republicans to offer to increase spending and cut taxes by $990 billion over two years. Two-thirds of that is above and beyond extension of the Bush tax cuts but includes such urgent national necessities as windmill subsidies.
No mean achievement. After all, these are the same Republicans who spent 2010 running on limited government and reducing debt. And this budget busting occurs less than a week after the president’s deficit commission had supposedly signaled a new national consensus of austerity and frugality.
Some Republicans are crowing that Stimulus II is the Republican way – mostly tax cuts – rather than the Democrats’ spending orgy of Stimulus I. That’s consolation? This just means that Republicans are two years too late. Stimulus II will still blow another near-$1 trillion hole in the budget.
At great cost that will have to be paid after this newest free lunch, the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points. That could easily be the difference between victory and defeat in 2012.
Obama is no fool. While getting Republicans to boost his own reelection chances, he gets them to make a mockery of their newfound, second-chance, post-Bush, Tea-Party, this-time-we’re-serious persona of debt-averse fiscal responsibility.
And he gets all this in return for what? For a mere two-year postponement of a mere 4.6-point increase in marginal tax rates for upper incomes. And an estate tax rate of 35 percent – it jumps insanely from zero to 55 percent on Jan. 1 – that is somewhat lower than what the Democrats wanted.
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Obama’s public exasperation with this infantile leftism is both perfectly understandable and politically adept. It is his way back to at least the appearance of centrist moderation. The only way he will get a second look from the independents who elected him in 2008 – and abandoned the Democrats in 2010 – is by changing the prevailing (and correct) perception that he is a man of the left.
Hence that news-conference attack on what the administration calls the “professional left” for its combination of sanctimony and myopia. It was Obama’s Sister Souljah moment. It had a prickly, irritated sincerity – their ideological stupidity and inability to see the “long game” really do get under Obama’s skin – but a decidedly calculated quality, too. Where, after all, does the left go? Stay home on Election Day 2012? Vote Republican?
No, says the current buzz, the left will instead challenge Obama for the Democratic nomination. Really now? For decades, African Americans have been this party’s most loyal constituency. They vote 9 to 1 Democratic through hell and high water, through impeachment and recession, through everything. After four centuries of enduring much, African Americans finally see one of their own achieve the presidency. And their own party is going to deny him a shot at his own reelection?
Not even Democrats are that stupid. The remaining question is whether they are just stupid enough to not understand – and therefore vote down – the swindle of the year just pulled off by their own president.
Heckuva deal, fellas.
Obama is playing chess. McConnell and Boehner are playing Sorry. Fortunately, the House Dems are playing with themselves.
Kill this deal. Or we shall despair. Again.
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update: Yes, Krauthammer’s numbers include the “cost” of the “tax cuts” — which is rather silly — but the point I want to make here is that the deal is a big winner for Democrats, and they don’t (or at least, they are ACTING like they don’t) even realize it.
The only objection I have with Krauthammer on this is he keeps framing keeping the current tax rates in place as a stimulus. One might argue that the government continuing to spend way too much money and not having as much tax revenue if they keep the current rates in place (debatable) works out the same as if they spent more money and let the rates increase, I don’t see them as the same thing.
On FauxNewz, he was advocating a short-term measure to keep taxes at the current rates, and then an overhaul of the tax system. I think that would be a good idea. Apparently one needs to overhaul it every now and then because our representatives keep loading up the tax system with credits and deductions as the years go by, and every now and then one has to clean it all up again.
Krauthammer should have the decency to show his math. He never has that I’ve seen.
Krauthammer did a quick verbal on the math on the special report panel, and it leans on CBO numbers for increased revenue when the tax rates go up again.
For as much as I try to remain the rah-rah cheerleader for the ongoing throw-the-bums-out effort, there are days when I want to just throw up my hands in disgust and encourage the little bastards to go ahead and implement everything they’ve ever wanted.
Then I realize that I’m falling into the same population-reduction fantasy that my leftist friends so readily engage in, and that I’m making the same assumption that I’ll be among those who pick up the pieces. That’s not a path I care to tread.
They must be made to learn. They must be made to understand. I don’t want to consider all the Fallout 3 I’ve been playing is really a training exercise.
Team R be all proud of themselves
he keeps framing keeping the current tax rates in place as a stimulus.
Agreed, this is rhetorical sleight of hand at best. If he wants to decry the Congressional Republicans for failing to rein in spending then by all means have at it.
But calling taxpayers-getting-to-keep-their-own-money a stimulus?
Fuck him with a swordfish.
Yup, they’re proud, and they have no right to be proud.
I’m tired of this “we have to pass this now or the world will end” crap. Let those tax rates expire, Democrats. Enjoy! Hopefully the new R blood will knock some sense into the dusty R drones currently screwing things up.
I think Alan West can do it all on his own. If that guy doesn’t put the fear of doom into them, nothing will.
I wish I’d have caught that cranky-d. D’ya think it has been posted somewhere maybe? Though I note, nothing prevents him from bringing to bear greater precision in this column, unless perhap it might be that he has some unstated reason to be intentionally obscure.
From the Obama ‘confident’ piece we see a plain reversal in the namecalling:
Doesn’t look like that’s what they have in mind though, does it? Looks rather more like the Dems want to so alter the terms of the deal that it’s the Republicans who end up walking away, and in turn get slapped with the obstructionist label once again by a compliant press.
I think the 2/3 above and beyond the tax cuts is what he’s suggesting is the problem here.
Boren is an idiot for falling into the tax ‘cut’ spin verbiage. Even squishy Lamar Alexander, who appeared last night on NPR, called out the interviewer for peddling that horsepile. They are pending tax increases, in the middle of a recession no less.
#9 – That’s still framing the tax rate extension as stimulus, albeit ‘only’ a third of the total.
He could have left off the third that represents real economic freedoms, still have a massive number for increased borrowing/spending, and still decried it as son of porkulus.
Here. Some perspective into the numbers Krauthammer cites. I’ll add a new post.
Russ Roberts over at Cafe Hayek tackles his doubts about Keynesian ‘stimulus’ at some length. It’s a good read, even if suffering from a few typos and the want of an edit or two. Anyhow, long story short, I think Roberts’ doubts point in a different direction — or say rather, to a different predictive outcome — than the facile analysis Krauthammer invokes for the case of economic recovery fit to see to the reelection of Barry Obama.
Better yet he could have juxtaposed Democratic rhetoric versus Democratic reality. They’ve been saying that due to the deficit crunch the Feds cannot forgo the added revenues ($330B per K’s numbers) from the pending tax increases. Yet they will willingly give those up in exchange for twice as much ($660B) frank borrowed money.
What tax cuts are we talking about?
sdferr, I don’t think he has posted his figures anywhere, and I doubt he will. Historically he seems to build on a premise for a few days and then it solidifies near the end of the week. He’s probably ready to move on to the next thing. In either case, I get the feeling that this was a quick back of the envelope kind of calculation. I believe that his numbers include the projected revenue increase from the expiration of the tax cuts across the board, and not just for the highest bracket, but don’t quote me on that because I’m not sure.
Jeff, it may be in this piece that he wasn’t saying that keeping the current tax rates was a stimulus, but I was already biased to believe that’s what he meant because after a few FauxNewz panels it was pretty clear to me that he thinks doing so is a stimulus. However, I agree that he also had something to say about the other spending in the framework.
That word ‘cost’ again. After awhile, this gets to be beyond tedious.
That cost is the Congressional estimate. See the new post.
I have to say, sdferr, that — the question over “cost” aside — Krauthammer is right that Obama wins big from this deal. If the economy doesn’t improve, he can run in 2012 on the fact that the GOP’s mantra of cutting taxes as a means to economic recovery doesn’t work. He can say he bucked his crazy sanctimonious base to “compromise,” being the moderate pragmatist he is.
If it does work (and it won’t, in the aggregate — there’s nothing really stimulative about this deal), he can take credit for it.
The GOP gets to keep the status quo on most rates, increase spending, allow a tax hike on death taxes (even more, now that the House is making adjustments), and get no real stimulative effect for what will be seen as a compromise to them, with angry Democrats then decrying the increase to the deficit that these “tax cuts” caused.
I agree that this is a winner for Obama and a loser for the Republicans. Hopefully they see the light (yeah, right) and vote no and blame it on the changes made after the fact.
There is an argument being bruited about in various places (I think Limbaugh articulated it yesterday in fact, though I don’t know that he actually adheres to it himself) that, all other things being equal [the economist’s sempiternal hedge] the economy will eventually recover on its own, without anything further needing to be done by government or god [read: the Fed], just on the strength of a characteristic human inability to restrain themselves from productive activity. And further, that no matter from where or from what the source of this recovery should issue, that the sitting President will be credited with the event.
Trouble is, no one knows how this works (in detail), nor what meddlings, which humans are also incapable of restraining themselves from undertaking (persistent and bold experimentation!), will interfere with, exacerbate or prolong the (uncertain) period prior to this (self)-healing stroke of economic behavior taking off.
As to Barry escaping blame should the economy remain mired in high unemployment and very low if not negative growth? I haz my doubts. Prez’s we tend to think, get both the good and the bad of it, though in both cases, absurdly. (but I should think more on 19, and say more too, that’s just a quick react, in other words)
Obama won’t escape blame. But all he has to do is convince enough independents and “moderates” that the GOP’s ideas don’t help — and further enrich “the rich” — and he’ll win.
It is very hard to see the political dynamics of the impending Congress within itself (out in March, April and May next, for instance), let alone with regard to our socialist administration and its bureaucracy, so let me stipulate I’ve no possibility of detailing the speculations I’m undertaking here.
Still, can there be any doubt at this point that the major players in the Republican ranks who have the better say in the formulation of ‘economic policy’ (for these now somewhat more conservative ranks), such as it is, will be profoundly committed to paring away the size and scope of the federal government? How these proposals to wrestle the deficit to the ground take hold with the people; how suggestions to reform and simplify the system of taxation seizes the imagination of the people (or doesn’t); how Congressional attempts to rein in over-regulation by the ABC departments meet with the approval of the people? And how these efforts, should they come, will move the remaining more moderate Democrats (at their constituent’s insistence, I assume) to join with Republicans in opposition to their own party’s President? How, further, the public comes to understand Obama’s vetoes certain to come, whether favorably or disfavorably, that is?
All that is a roundabout way of saying I’m not so sure that the GOP gets to “increase spending” under the rubric of this tax deal. I could be wrong, of course. But in even the short term, I’d be amazed if the bottom line could be drawn to maintain that they had (drawing the bottom line just as loosely as Dr. K has himself undertaken to draw this ‘stimulus’ bottom line in its blithe fungibility).
I’m not sure but that we may not have a useful analogy at hand, taking the frozen housing market on the one hand and the macro-economy of the nation (if not the globe, considering the troubles in Europe anyhow) on the other? That is, it seems to me that the long term recovery of the housing market can be plausibly predicated on the fall in externally propped housing prices to market clearing lows, painful to be sure, but necessary before any timely advance can occur. So also, the macro-economic prospects of the nation will be dependent on the painful withdrawal of the uneconomic propping up of our various ‘entitlement’ programs and ‘public service’ programs, all purchased with promises outside the reach of any plausible ability to pay the debts incurred in the promising.
– Well at least that area of the economy is not going to provide Obama any salvation.
– They are projecting another 1.7 trillion loss in value for housing in the next two years.
“favors renting” lol