Our view on the economy: Tax deal shows the parties can compromise ... on giveaways
usatoday.com
In any circumstance other than the current dangerously weak economy, the tax deal between President Obama and congressional Republicans would be indefensible.
It borrows money the nation doesn't have — unofficial guesses range from about $700 billion to $1 trillion in the next two years — from creditors such as China to shower tax breaks on Americans who are eventually going to have to pay more. Concern about the deficit? Warnings from the debt commission? Apparently, that was so last week.
Most objectionable are the continued tax breaks for the wealthiest Americans. The argument that restoring their marginal rates to Clinton-era levels would seriously damage the economy should embarrass those who make it. The fact that Republicans made this their price for extending jobless benefits for the long-term unemployed is appalling.
Nor should the feckless Democrats get a pass. They put off this showdown over taxes until just a few weeks before the Bush tax cuts were set to expire on Jan. 1. Could they have had this fight before the election that severely weakened them? Certainly. Would they have prevailed? Well, they'd certainly have had a stronger hand than they do now, with their majority in the House set to vanish and their margin in the Senate about to become narrower.
Moreover, kicking the tax can down the road for one or two more years comes with a risk. At the end of next year, when the proposed 2-percentage-point cut in Social Security taxes is to expire, you can count on hearing a chorus of howls about the dangers of "raising taxes" in the middle of a fragile economic recovery. And, in 2012, the argument over raising income tax rates will take place in the middle of a presidential election, when pandering is at its apex and responsibility scarce. Great.
All that said, the deal could have been worse, by extending the Bush tax cuts permanently instead of by two years. It also shows that bipartisan compromise in Washington is still possible, if only on things that don't require sacrifice. And it reflects the political realities of the moment. As Obama said at Tuesday's news conference, a long fight and continued gridlock would be counterproductive.
Complaints by some Democrats that Obama didn't fight hard enough ignore the fact that the Senate voted twice over the weekend on whether to reverse tax cuts for those making at least $250,000 or those making at least $1 million a year — and Democrats lost both times. Anyone who could count votes should realize the president had a weak hand. Republicans were prepared to play chicken with the economy to get their way — and blame Obama if everyone's taxes went up on Jan. 1. This agreement, or something like it, was inevitable.
The best case for the deal is that the economy is perilously weak, growing too slowly now to even begin replacing the 8 million jobs lost during the recession. The number of those out of work for more than six months is at record post-Depression levels. Tax cuts could provide more fiscal stimulus to complement the Federal Reserve's monetary policies, and extending unemployment benefits throws a lifeline to some of the jobless.
So, on balance, a distasteful deal is better than no deal at all.
But this massive backwards step on the debt makes it imperative for Obama and the Republicans to offer serious long-term deficit-reduction plans next year that will start reining in the excess as soon as the economy is growing securely. Two big, credible proposals from bipartisan commissions are on the table.
The president can signal with his State of the Union address in January and his budget in February that he takes the debt threat seriously. Republicans, who will control the House and have virtual veto power in the Senate, will have to demonstrate a sense of fiscal responsibility that was totally absent when they last held power in Washington.
Both sides will need to show the same fervor for takeaways that they do for giveaways. On that score, the tax cut deal provides little reason for optimism. |
