Pres. Obama announced Monday night that the White House had struck a deal with Capitol Hill Republicans to end the Democratic-Republican standoff preventing the extension of full Bush tax cuts on one hand and unemployment insurance on the other. Despite public railing and hand-wringing over the deficit, Washington will give out cash both to the wealthiest Americans and to the unemployed.
MSNBC reports that the total cost of the deal will be in the range of a trillion dollars. Bush tax cuts: $800 billion. Unemployment insurance extension: $60 billion.
The Bush tax cuts reportedly will be extended by two years; federal unemployment benefits will stretch to the end of 2011.
Ed Brayton at the Michigan Messenger reports that Democrats reacted with disappointment. Rep. Anthony Weiner criticized Obama for “punting on third down” and failing to use his office to lobby for a more progressive package that would have extended the unemployment benefits and all the tax cuts except those for the wealthiest taxpayers.
Democrats were rebuffed on two tries this weekend to pass a trimmed down version of the Bush tax cuts. The packages would have delivered breaks to the middle class that, Democrats argued, would act as direct economic stimulus, in effect paying for themselves because middle class people need the money in the recession just to pay for things immediately, like for rent and mortgages and car payments and medical bills and Christmas shopping, pouring the money back into the economy. Tax cuts for the wealthy, meantime, go into bank accounts. The rate wealthy Americans would have paid should the cuts have been stripped would be the same rate they paid in the Clinton years, still an historically low rate for the top 1 percent of the nation’s earners.
New York Times politics-economics columnist Paul Krugman captured the sentiment of much of the left blogosphere Sunday in a piece entitled “Let’s Not Make a Deal.” His premise was that the Republican position was in fact to make the low tax rates permanent.
If G.O.P. intransigence means that taxes rise at the end of this month, so be it… [W]hile raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils….
America cannot afford to make those cuts permanent. We’re talking about almost $4 trillion in lost revenue just over the next decade; over the next 75 years, the revenue loss would be more than three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis — a crisis that could be resolved only by making savage cuts in federal spending.
And we’re not talking about government programs nobody cares about: the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare.
As Brayton puts it, the “internal incoherence of the Republicans’ positions” on the uemployment extension and the tax cuts has become clear:
Position 1: We support extending unemployment benefits but only if an extension is offset by budget cuts so it doesn’t increase the deficit.
Position 2: We’ll go along with extending unemployment benefits but only if you agree to extend tax cuts for the rich that will increase the deficit by an additional $700 billion.
There’s an old saying in D.C. and it goes like this: No one cares about the deficit and those who complain about it the most care about it the least. It seems to be coming true before our eyes.