I know, yet another diary about Obama and the tax cuts. I'm going to try to make this relatively short and sweet but there's a point that I think is getting missed in other diaries I've seen.
The general gist of the pro-Obama diaries is that we got some valuable stimulus measures out of this compromise. That yes, it's bad for the deficit, but that's not the critical problem right now and we need to address unemployment first. That is true and all well and good, but HOW he is doing this is fundamentally flawed.
Obama's flaw, in a nutshell, is that he is using Republican economic policies to deal with our current problem. This is an obvious problem on partisan grounds, but step aside from that for a moment and realize that cutting taxes is the least effective form of stimulus we have. By selling this compromise as stimulus it reinforces the meme that this is the proper way to fix the economy. It isn't.
The proper way to enact stimulus is direct spending programs by the government. Rather than handing money back to tax payers and hoping they spend it in stimulative ways, the government needs to be spending it directly. Creating jobs building infrastructure, etc. THAT is stimulative. THAT addresses unemployment directly.
So Obama, in this compromise has:
- Made the deficit far worse than it should have been
- Created a stimulus bill that is even more inefficient than the first one
- Reinforced that tax cuts are the way you stimulate the economy which is provably false
- Angered the Democratic base, yet again, by caving to Republican demands for tax cuts for the wealthy
- Implemented these cuts for two years, ensuring that it will be another election football in two years
What's frustrating is that clearly Obama was negotiating to add things in to sweeten the deal, so why couldn't he have done so in a way that provided better stimulative effects. Why not push for spending rather than more tax credits? What about block grants to the states? It would allow borderline bankrupt states patch the holes and avoid layoffs (stimulative) and help better off states build infrastructure (stimulative). What about more investment in green energy infrastructure?
I think you can reasonably argue that the compromise could have been worse, and that at least Obama got some stimulus out of this bill. On some level it was a pretty clever move. But at what cost? As much as I'm for deficit spending to boost the economy, this deal comes at a very high price. Worse, it sets up this same debate to happen again two years from now, seriously risking further extensions and blowing an even larger hole in the deficit.