JONATHAN CHAIT DECEMBER 10, 2010
I'm really having fun watching the conservative movement try to sort out its line on the Obama-Republican tax deal. Just watching the Wall Street Journal editorial page is dizzying fun. The Journal's immediate treaction, like that of its columnist Karl Rove, was to gloat: the president was "repudiating the heart and soul of Obamanomics as the price of giving himself a chance at a second term," and "implicitly admitted that his economic strategy has flopped."
Wow, "repudiating the heart and soul of Obamanomics" sounds like the kind of thing a Democrat might not want to support. Indeed, House Demlocrats indicated their displeasure yesterday, voting against the deal and trying to negotiate to move it further in their direction. If, indeed, this was a total repudiation of the Democratic economic agenda, they might have a point, no?
Republicans should hang tough because the deal in fact makes enormous concessions to the Democrats:
As for Republicans, they have already given up an enormous amount to get what is essentially the status quo on tax policy...
Republicans have risked offending tea party voters by agreeing not to offset $56 billion more in jobless benefits with spending cuts. They've also agreed to extend most of the Obama-era tax credits that do nothing for growth and merely redistribute income to Americans who already pay no income taxes.
The two percentage point cut in the payroll tax is only for one year and gives no incentive for businesses to hire because it only affects what employees pay. It is merely another demand-side Keynesian gambit to temporarily lift consumption
So it turns out to mostly consist of Keynesian stimulus. That doesn't actually sound like a repudiation of the heart and soul of Obamanomics.
Meanwhile, also on today's Journal editorial page, columnist Kimberly Strassel expresses astonishment that Obama would be in favor of some elements of the deal and against others:
The president takes absolute credit for forging this deal; he also absolutely blames Republicans for forcing it to happen. The president wants the nation to know that this is a good example of "compromise" and 'bipartisan agreement"; he also wants the nation to know that Republicans are "hostage- takers," that they cannot see beyond their "Holy Grail" of tax cuts, that their position is "wrong," and that he takes exception to the whole process.
This tax package, says the president, "is the right thing to do for our economy"—except for what Republicans demanded (most of it), which won't "be good for the economy."
Is this really so hard to wrap your head around? There were some provisions Obama wanted that provide a significant stimulative boost to the economy. In return for these, Obama had to agree to other provisions with very little stimulative kick that the Republicans insisted on because they enrich people with high incomes.
Obama's position is that the bad parts of the deal that he had to agree to are bad, but that the good parts of the deal are good, but the good outweights the bad and so the overall deal is good. It's perfectly fair to disagree with this judgment, but I don't see why it's so hard to simply understand.