The Obama Tax Deal: Compromise or Surrender?
Last week President Obama reached an agreement with the Republican congressional leadership on extending the Bush tax cuts for an additional two years for all taxpayers. As part of the compromise, the Republicans agreed to extend unemployment benefits, currently set at two years, for an additional year. The President’s tax deal with the Republicans is viewed as unpopular with the Democrats in Congress and those chiming in from across the country. Angry members of the President’s party are lashing out at what they consider to be a total capitulation by the White House on the much-maligned Bush tax rate reductions.
During his presidential campaign, Barack Obama spoke out loudly and repeatedly against any extension of the Bush tax cuts. Almost two years later, he has not only agreed to continue the tax cuts for middle-class tax payers, but to the consternation of the left, he has agreed to allow the richest Americans to keep their tax cuts as well. Certainly the extension of unemployment benefits for an additional year was important to the President, but most political observers believe the President gave away to the Republicans much more than he got in return. So, the political question of the day is: why did President Obama decide that his best political option was to reach this compromise with the GOP? Did he have any other options?
The Democrats have been grappling with this issue since gaining the majority in the House in 2006. The Bush tax cuts, which were passed in 2001 and 2003, have been set to expire on December 31. Absent action by Congress to extend the cuts, the federal tax burden on every American taxpayer was set to dramatically increase. The rates, which significantly lowered the marginal tax rates for nearly all U.S. taxpayers, would have reverted to the rates which existed during the Clinton administration.
But even among many Democrats who opposed the Bush tax cuts when they were enacted, there was reluctance to raise taxes on Americans during the longest recession in more than half a century. After the death of Ted Kennedy and the surprise election of Republican Senator Scott Brown, the Democrats no longer had complete control of the playing field. The threat of a Republican filibuster stopped the Democrats from enacting a modified version of the tax cuts more suited to the views of their constituency.
After the November election, which saw historic Republican gains in Congress, the Democratic plan to keep the cuts for middle-class taxpayers but not for Americans making over $250,000 became unachievable. The President was faced with a dilemma. He could allow the tax cuts expire on all taxpayers and possibly take the blame if the economy continued to sputter, or he could agree with the Republicans on an across-the-board continuation of all of the Bush tax cuts for an additional two years and face the wrath of his own political party.
Forum Question of the Week:
Did the President make a smart political deal with the Republicans and prove that he is willing to reach across the political aisle to find common ground, or has he capitulated to the GOP on an issue that is central to the philosophy of the Democratic Party and received little in return?