December 19, 2010

Debate Continues on Obama Tax Deal

Below is a comment of mine on the December 17 Episode of "WakeUp AM" podcast (Episode 239). Brian of WakeUp AM had taken the position that Obama's tax deal with the Republicans was effectively the only pragmatic alternative. I, and others, took an alternative view:

Good discussion on the tax legislation. Brian made an argument worth noting; if the economy continues to do poorly in two years, then the Republicans would blame it on Obama for raising taxes on upper income earners.

Brian is right that the ultimate outcome was that the Republicans would get tax cuts for the rich; however, we could have done better, both in substance and in process (MLK would argue that process matters and I'll leave it at that for process).

On substance, he didn't drive a good bargain. For example, Obama could have sought to decouple the upper and lower income tax cuts by giving a three-year cut to lower earners and two-years for upper earners. Decoupling the two taxes would allow Democrats to vote separately on extending tax cuts for high-earners. This would avoid the potential for hostage-taking.

So, it might be true that tax cuts for the rich were inevitable, but Obama caved way too early. As you alluded, Obama might have been pissed at Congressional leaders for not using the tax cut legislation as a campaign issue; he might feel this was partly to blame for the bad mid-term election results. He might be unwilling to let it happen again. However, I think he erred in judgment on this one.


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