So, it looks like Obama following Bill Clinton's idea of compromise. Should I be worked up about this? First, I don't know if the deficits are so big they matter. I know that tax cuts during a war are stupid and unprecedented and stupid; I know that our biggest problem is unemployment; but I don't really know if I should be bothered by deficits. Second, it seems to me that this is a golden political opportunity--not the first--to pit the pro-business wealthy Republicans against the cultural Republicans. Why isn't Obama saying, "No tax cuts for incomes over $250K. If you cut taxes for them, I will veto the bill. They don't need it. We can't afford it. Make the tax cuts for incomes under $250K permanent, or I'll veto that bill too."? It just seems like stupid political strategy. But, on the other hand, I don't know that I care that much about lower taxes for the top 1-2%. I guess mostly because I don't think now is the time to worry about deficits. Liam, the NYT respects your opinion on economics, any thoughts?
I suppose it doesn't matter. At least we closed Quantanimo Bay and are out of Iraq and have ended the domestic spying programs . . . .
2 comments:
On policy:
Rumor mill among those of us fluent in economish is that the tax cuts will be stimulative to the extent of about 0.75% of GDP or so. Is that as good as stimulative spending? Probably not, but politics is the art of the possible, and more spending is off the table. So he took the deal he got -- and it was a decent deal. The EITC expansion, the PROgressive payroll tax holiday and the unemployment extension. That's actually a good deal in the short team, as Obama's political fortune (re-election) depends a lot on whether the economy is growing in 2012. And it's a good deal for the Dems in the short term -- of the several hundred billion $ the compromise represents, the democratic proposals account for about 66% or so.
I still don't think it's a policy win, though. First problem: it implicitly concedes the argument that tax cuts are inherently stimulative. Which means that in 2012 the GOP's rhetorical position that the tax cuts should be made permanent will be that much stronger (especially if the economy is in a decent recovery by then). Second: it fails to decouple the middle class and wealthy tax cuts. Third: it puts social security at great risk. SoSec is funded through the payroll taxes. A reduction in payroll taxes for a couple of years is a great deal for middle income folks, but the problem is that in 2012 there will be pressure to freeze them at the lower rates. Now SoSec is tenuously funded at the moment, and may require a small INCREASE in payroll taxes for its long-term solvency. So if Congress predictably yields to the "Tax cuts good" argument in 2012 and keeps payroll taxes low, SoSec becomes dangerously underfunded and the pressure mounts for major cuts in benefits. So this may become a trojan horse for the eventual gutting of the New Deal.
Also, you know, deficits really do matter, and this adds $4 trillion to the national debt and worsens our structural deficit problem.
I thought deficits only mattered when one's party is out of office.
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