Liberals are furious about the Tax Deal that Obama cut with the Republicans. Republicans are signaling consent for the deal should it be brought to a vote in both Houses of Congress. The House Democratic caucus vowed to defy the President and not even consider bringing the matter to a vote on the House floor (where such financial appropriation bills must be first introduced). Why?
Well taking a look at the deal:
The bone of contention for the Dems is that 13.5% tax cut for the wealthiest 2% and the Estate tax exemption that was raised to $5 million per individual at 35% (too high a limit, too low a rate they say), all in place for two years, with the likelihood of permanent extension. Essentially what they’re saying is that this top group get the largest share of the pie (hedge fund managers et. al keep their tax rate at 15%), and that it’s not the best bang for the buck because this measure (1) will not significantly lower the unemployment rate, and (2) significantly adds to the deficit (the whole proposal is financed by deficit spending).
On the other hand, the Dems got significant concessions in the deal. Unemployment insurance, college tuition credit, payroll tax reductions, earned-income tax credit, child and dependent care credit. Only problem is most of these provisions last 13 months, so they’ll be back to 1st & 10 all over again in 2011/2012 for Part Deux if the economy wouldn’t have been bolstered appreciably.
Obama came out fighting, with a schooling of “leftist purists” that want a deal-on-their-terms-or-nothing. Some have quipped, that this “self-indulgent” ire should have been channeled to the Republican negotiators instead.
Given the hand he’s been dealt – only 2 weeks left on the jam-packed legislative calendar for this lame-duck Congress before Republicans take over the House and increase numbers in their Senate caucus, plus the need to not let middle-class income tax cuts expire at the end of this year which it’s agreed across the board will have adverse effects in this economy – I think the pot is sweet enough to take. Dems have been painted into a corner. They run the country right now. Not doing anything about this situation will come back to hurt them in 2012. It’s time to make a deal.
Interesting to note: the Republicans didn’t bat an eyelid about financing all $900 billion in cuts and exemptions by adding to the deficit. A case of aligned interests, perhaps. Meanwhile, a decision to raise the national debt ceiling or go into default is coming up early 2011.