Tax Deal Passes: Great Politics but Lousy Policy?

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President Obama may have scored a big political victory with Congress's passage of his $858 billion tax compromise with Republicans. But in terms of policy and substance, renewing a previous Republican president's tax cuts for two years and extending unemployment benefits is not the stuff of legislative lore.

By design, this bill is only a temporary measure, a case of simply kicking the can down the road to 2012.

Welcome to reality, says Rep. Bill Pascrell, D-N.J., a House Ways and Means Committee member. He suggests Obama's deal to keep tax rates from bumping upward for another two years, even for the wealthy, may be "a preface to the book of the [upcoming] 112th Congress."

Pascrell said he thinks the deal is "an indicator" of how the White House and a new Congress with a Republican-led House will be forced to engage on issues, against pressures from the extremes of both parties. Neither side will have the leeway needed to have its own ideologically pure budget, or "have everything else your own." Pascrell warns: "See how far that gets you."

The tax package, which just passed the House 277-148, certainly does accomplish the urgent aims of avoiding a January 1 rise in income-tax rates for the middle class and keeping unemployment benefits flowing. But to get that, Obama said he had no other choice than accepting a deal fashioned with Senate Minority Leader Mitch McConnell, R-Ky., to set aside his own opposition to renewing the higher-end tax rates enacted under President Bush in 2001 and 2003. A tough decision, says Obama.

A closer look at the bill reveals a few other tough decisions were made.

No offsetting, only new spending, helped grease the skids toward its passage. That includes accepting the Republican-preferred estate tax rate of 35 percent on estates worth more than $5 million, rather than a higher one preferred by many Democrats; Democrats' protest amendment to increase it failed.

And along the way, Obama alienated many members of his own party, particularly liberal Democrats in the House, who opposed renewing the tax cuts for the wealthy. He essentially left them out of the loop while forging the package with Senate Republicans -- although there arguably is no group of people who've helped Obama and his agenda more than these House Democrats.

One House Democrat, Rules Committee Chairman Louise Slaughter of New York, called the legislation a "piece of crap," even as she was busy devising the rules under which it would be voted on upon reaching the House floor.

And soon-to-be House Minority Leader Nancy Pelosi, D-Calif., was either unable or unwilling to expend what political capital she has left with her Democratic Caucus to openly embrace Obama's deal, or kill it. The deal was part of the president's inexorable move to the middle in advance of his reelection campaign, or maybe it reveals his true inner centrist, and perhaps there's a political victory in that.

Not surprisingly, it was Republicans who saw it as much.

"I think the victory may be political -- it hardly his 'Sister Souljah moment' -- but at least he is moving to the center. And that, politically, will be good for him" heading into 2012, says Rep. Jeff Flake, R-Ariz.

Flake's reference was to the 1992 confrontation between then-presidential candidate Bill Clinton and rapper Sister Souljah, which is widely thought to have helped solidify Clinton's standing among centrists. Clinton called out the entertainer for saying, among other things, that "black people kill black people every day; why not have a week and kill white people?"

"But in terms of the substance, and the policy," Flake said of Obama's tax package, "I don't know how anyone sees this as a victory."

Rep. Vern Buchanan, R-Fla., notes that public opinion polls show wide support for the deal and argues that Obama deserves credit for reaching out to Republicans, even if he and Democrats didn't shape everything the way they wanted.

"It's provided a little bit of a sense that we're [Republicans and Democrats] working together on the economy," said Buchanan. "I think that's a big victory."

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Billy House

Bill House is a staff writer (Congress) for National Journal.

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