Let's be clear; compromise for the sake of compromise is pointless. On any economic issue, one group will be right and one group will be wrong -- or, at least, more right and more wrong. Compromise insures that bad ideas from the cult of the wrong find their way into the final product. As a result, the "solution" is no solution at all. It's just not completely wrong. When you meet someone who's crazy halfway, the result is halfway crazy.
What do Democrats get out of this? More than we expected, frankly. We get an extension of unemployment benefits and we get payroll tax cuts -- the latter seems to have come out of the blue and will help the lowest income workers. If you don't get paid enough to have taxable income, you'll still get a tax break. There's an obvious Keynesian effect from this.
But even now, Barack Obama is setting himself up for future blame. Paul Krugman points out a bit of "overpromising" in the President's announcement:
"It's not perfect, but this compromise is an essential step on the road to recovery," Mr. Obama said. "It will stop middle-class taxes from going up. It will spur our private sector to create millions of new jobs, and add momentum that our economy badly needs."
"Millions of new jobs? Millions?" Krugman asks. "Not by my arithmetic." Why? Because "we're awash in excess capacity, and likely to stay that way for years, so I don't expect business investment to be noticeably affected by tax breaks that give an incentive to move spending up in time."
Worse, this may represent an electoral miscalculation on the part of the President. "Both the payroll tax break and the unemployment extension are for the first year only," Krugman explains. "So, a bigger boost next year, fading out in 2012. Since all the evidence says that elections depend on the rate of change of unemployment, not its level, this is actually bad news for Obama: he's setting himself up for an economic stall in the months leading into the 2012 election."
"But the most pernicious piece of this deal is the estate tax cut," writes Pat Garafolo for Think Progress. "It will amount to another $7 billion in tax breaks in 2011 that benefit no one but the ultra-wealthy."
Again, this is just a way to increase deficits and blame it on Obama. It's the "starve the beast" strategy -- cut taxes to reduce revenues and grow the deficit, then use that as an excuse to cut spending. At a time when we should be soaking Wall Street to close up the hole they blew in our economy, we're cutting them a break. And it's the GOP's plan for you to pay for their sins later, in the form of cuts to Medicare, Social Security, public school funding, etc.
For his part, Senator Bernie Sanders is livid:
Can a Democratic filibuster succeed? McClatchy reports that it could.
In the Senate, liberals led by Sen. Charles Schumer, D-N.Y., have been adamant that they don't want to extend tax cuts for the rich. Though they fell short of blocking such an extension Saturday, they have more than enough votes to launch a filibuster to block the new deal.
The numbers are easier in the House -- Democrats control 255 of the 435 seats. But the House tends to be a more liberal-dominated chamber, and House Speaker Nancy Pelosi, D-Calif., has been adamant that she doesn't want cuts extended for the wealthy.
The White House is sending Joe Biden to congress to straighten out any ruffled feathers, "hoping to draw on his long personal relationships with many of his former colleagues," according to Chris Cillizza. Whether he'll be successful in heading off a Democratic revolt remains to be seen. Biden is somewhat more to the left than his boss, so his arguments may suffer from the fact that his heart isn't in it.
I'd like to believe that the White House is hoping for a filibuster, so Obama can say to Republicans, "Look, my hands are tied -- you're going to have to give me more." But I don't. I think they're hoping this goes off without a hitch.
And I'm hoping Democrats give them that hitch and force Obama back to the negotiating table. We can get a deal with a lot less stupid in it, so there's no reason not to shoot for it. Democrats have the public on their side here. There's no reason they should be the ones to blink.
-Wisco
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