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Tax Cuts: A Bitter Bill for Democrats

Submitted by on December 7, 2010 – 2:34 pmNo Comment

Last night President Barack Obama and Republicans reached an agreement on the expiring tax cuts. The deal will cost America $900 billion over next two years, which will be added to the national debt. The most important provisions include:

• Tax cut extension for all Americans including the top 2% [R]
• Estate tax at 35% for assets over $5 million [R]
• 13-month extension of Unemployment Insurance, does not include an extension for 99ers (those suffering from long term unemployment) [D]
• 2% reduction in Social Security payroll taxes [R & D]

The compromise comes after all 42 Republican Senators signed a letter vowing to block all Democratic legislation until tax cuts were extended for the top 2% of American wage earners. So while Republicans do not hold a majority in the Senate, they do have enough members to filibuster, which would stop all legislative procedures.

The deal is rife with hypocrisy. In a year when Republicans mopped the floor with Democrats running on lowering the national debt, this plan adds $900 billion to the debt over the next two years and is unpaid for at this point. The Republicans cut Unemployment Benefits this past week because it wasn’t paid for, but cut them in order to receive unpaid tax cuts for the wealthiest Americans.

The biggest problem for President Obama will be selling this to his own party. Essentially, Republicans received everything they wanted in this plan, while the President seems to be the only one to have compromised, making this deal not really a compromise. This has drawn sharp criticism from the Left who complain Obama capitulated to Republicans demands. Many Democrats argue that time and time again the administration has caved under the weight of Republican pressure and aggressiveness. It remains to be seen if House Democrats will support the President. It is to be noted, however, that the White House was calling for a debate on taxes before the mid-term elections and Congressional Democrats wanted nothing to do with it during election time. Next month, Democrats lose control of the House and lose seats in the Senate.

If the President had not reached an agreement, he most likely would have had no chance in moving forward on a “Don’t Ask, Don’t Tell” repeal, a nuclear weapon disarmament treaty (START), the Dream Act, and a litany of other items on the Progressive agenda. Democrats have a right to be upset, but if they want any of their legislation to see the light of day, the President probably needed to make this move. Because the fact of the matter is, unlike Democrats, when Republicans say they won’t budge, they don’t—a trait those on the Left wish the President would mirror more.

Lost in the politics of this are the real lives that will be affected through this deal. The President argued that while he was not pleased with everything in this compromise, he has kept a campaign promise to never raise taxes on those making less than $250,000 and got a 13-month extension of Unemployment Insurance. Without an extension, the average American was looking at a $3,000 tax hike and according to the Congressional Budget Office, every $1 spent on unemployment aid yields $2 in return to the economy.

In the short term, President Obama did the right thing for unemployed and middle-class Americans. As President, he isn’t allowed to play ideological chicken with Republicans. However, this plan does nothing to lower the debt and further alienates his base. Politically speaking, the President better have a long-term plan for his own job safety. If not, he will most assuredly be a one-term president and at this point, isn’t far from inviting a primary challenge from his own party.

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