I confess to being dismayed at the Obama-hate going on around here since the deal was announced last night. I think those views are extremely short-sighted (possibly), and I want to explain why.
(I also want to give a shout-out to the rec'd diary Umm... We're playing chess, not checkers. And we're winning. I'm making different points than he is, but our diaries support the same basic premise.)
Remember the following:
41:1 ratio of tax hikes to spending cuts
The problem that some are complaining about is that Obama lost/has given away his leverage . . . I don't think so, and I'll explain why after the orange artwork of my daughter...
First, consider what was in the deal:
1. Ending the Bush tax cuts to the rich. Yes, we would have liked the threshold to have been lower, but, one ought to consider that this is the first time in 20+ years that the GOP voted for a tax increase. (Anyone hear from Grover yet today?).
The chess strategy:
Either Grover's spell is now broken -- or some of these GOPers who voted for it will get primaried from the right, and lose in the general election.
2. The more important stimulus in the package: unemployment extended for another year
3. More stim: a 5 year extension on tax credits for college education and the working poor, a five-year extension of the college tuition tax credit, the child tax credit and the earned income tax credit, which were part of the 2009 economic stimulus package.
4. Increases cap gains and dividends tax rate to 20 percent, from 15 percent. Capital gains and dividend income would be taxed at 23.8 percent for singles earning above $400,000 and families earning over $450,000, according to a White House fact sheet. Yes, again, we'd have liked that threshold to have been lower. But, again, I'll respond: GOPers voted for a tax increase for cap gains. When's the last time that happened.
5. It reinstates the Clinton-era limit itemized deductions for individuals earning over $250,000 and families earning over $300,000.
6. It permanently patches the Alternative Minimum Tax and extends a variety of expiring business and energy tax provisions for one year, including the research and experimentation tax credit and 50 percent bonus depreciation.
So, here's the question:
Did Obama give away his leverage for the next round?
That is, indeed, one way to look at it. But I want everyone to consider the following tautology that the Obama critics are using:
The more Obama got in this deal, the more the complainers are saying that he lost his leverage.
So, my first message to the complainers is: would you have preferred the alternative, where Obama got a lot less in this deal? Where we got cuts to SS and Medicare? Cuts in the social safety net?
Or would you have preferred the alternative where there was no deal, and tens of millions lose their unemployment, the sequester kicks in, and economy starts to go off the rails? Look, like it or not, the Dems will get re-elected, or not, in 2014 based on one main criteria: is the economy finally improving or not. A sequester would tank the economy, which is one of the things the GOP wants, so they can take over Congress and, in 2016, the presidency.
But, here's another way to look at it:
Obama pocketed tax hikes, and almost no cost, and the GOP will be starting from scratch in two months.
I hope everyone noticed that during the day yesterday, Obama repeated, like four or five times, that future cuts (sequestration) are going to come with future "revenue increasers".
In other words -- Obama is pocketing this 41:1 ratio -- and is demanding a 1:1 ratio for cuts in the future.
That sounds like a pretty good darn deal to me.
Picture two months from now -- the GOP is going to have to name some specific cuts. And even if they have the cojones to do so, Obama will appeal to the public: "we want this to be balanced, we need revenue enhancers, too."
Bottom line: Obama didn't give away leverage -- he pockets some gains and took them off the table, all while getting the GOP to do what they swore to St. Grover what they would never do: raise taxes.
(See also, from WaPo: Tuesday’s tax increase is the biggest in decades -- and consider that the GOP voted for it.)
(Another bottom line: millions were going to lose their unemployment insurance. Today. That would have hurt those recipients immensely -- as well as hurt the economy, because UI money gets spent immediately back into the economy).