"Politics is the art of the possible." — Otto von Bismarck
This mid-December week will have much to do with our fates in 2011. Coming out of November elections focused on the need to reduce public deficits and debt, our political leaders are headed at least temporarily in the opposite direction. We also face growing discord about the United States' continuing involvements in Iraq and Afghanistan. Political polarizations appear to be widening, rather than narrowing, despite a broad public consensus favoring non-partisan problem solving.
Things to watch this week:
• The U.S. Senate was scheduled to begin debate Monday (Dec. 13) on the tax-cut agreement earlier negotiated by President Barack Obama and congresional Republicans.
The extension of Bush-era tax cuts, scheduled to expire Dec. 31, is at the core of the agreement. But the package also is a complex jumble of items which, together, would add $1 trillion in new debt over 10 years (on top of $14 trillion in existing national debt). It also is a de facto second economic stimulus package, at least equal in size to the 2009 original, which could cut unemployment by 1 percent and add l percent to GDP growth by the end of 2011 — or maybe not.
House Democrats, left out of negotiations on the issue, have voted not to bring the package to a House floor vote, although that in the end will happen. Obama, last week, presented the package in a curiously peevish and diffident way. deriding extensions of upper-income tax cuts (his advisor David Axelrod characterized them as "odious" in a Sunday TV appearance) while at the same time scolding House Democrats for questioning his negotiated deal. He thus succeeded in alienating GOP leaders with whom he had made the deal and, at the same time, liberal legislators and leaders who questioned several aspects of the package. If the provisions were so bad, the liberals said, why had Obama bought into them.
The extension of the upper-income cuts is, in fact, not a major component of the package. The Washington Post estimates that the upper-income extensions would account for only $79 billion of the package's two-year cost of $990 billion — or 8 percent of the total.
There also is a provision, though, to lower estate taxes on the wealthy, costing $68 billion. A majority of the provisions, however — including unemployment-benefit extensions (at $56 billion), extending cuts for the middle class ($280 billion), and reductions in the employee payroll tax ($120 billion) — could be counted as victories for the Obama/Democratic agenda. As I see it, Obama got the better of the deal, although neither he nor Democratic dissidents appear to recognize it.
Whether the package bestows favors on the rich, poor, or middle class; on big or small businesses or working people and consumers; or on investors, it is "unpaid for." That is, it all will add to the deficit without reducing spending accordingly elsewhere in the federal budget. And the package keeps growing as new subsidies and sweeteners are added to the bill to attract key congressional votes.
Several tactical stumbles led Obama and the Congress into their present box.
There was the inexplicable decision by Obama, in forming the so-called Bowles-Simpson Deficit Reduction Commission, to require that a weighted rather than simple majority of commission members would be needed to give official approval to its recommendations. (Its membership was then constituted so that a weighted majority would in practice be impossible).
The Deficit Commission's recommendations, if approved, were to be submitted to the Congress for an up-or-down vote. Thiat would have made it easy for legislators of both political parties to buy into taxing and spending decisions which, if separated, could never be approved. Since the weighted majority was from the outset impossible, the Commission's report thus stands only as a set of recommendations without any real juice behind them. A lot of good work as a practical matter wasted. The prospective approval in January of the deficit-reduction proposals would have minimized the importance of this month's tax package.
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