President Obama's deal with Republicans to
temporarily extend the Bush-era tax cuts is under withering attack from
liberals. One congressman likened it to "Gettysburg.'' But Democrats
have actually won a major battle over public spending: in exchange for
tax cuts for the rich, they've come away with hundreds of billions of
dollars in new stimulus, something that seemed impossible a week ago.
Given the general drift of politics since last month's election -- the
elevation of the Tea Party, the deficit obsession -- this is a remarkable
turn of events.
The agreement is far from the most efficient way to revive the economy. The $100 billion in income tax cuts for wealthy families and $30 billion reduction in estate taxes -- the Republican contributions -- will generate very few jobs, while adding to the deficit. But the Democratic contributions -- $120 billion in payroll-tax reductions; $56 billion in unemployment insurance; $40 billion for the poor and middle class through the Earned Income Tax Credit as well as child and education tax credits; and the accelerated depreciation for business investment -- while also growing the deficit, will produce a real effect on the economy. The Center for American Progress estimates the entire package will create or save 2.2 million jobs.
This amounts to an expensive but significant economic jolt. JP Morgan analysts estimate that the full package will add a half a percentage point to the economy's rate of growth next year; Goldman Sachs foresees a full percentage point gain. In light of the recent fears about deflation and a Japanese-style "Lost Decade,'' these are encouraging projections, if only in the near term. (Deficit hawks are the only clear losers.)
But these advantages have been eclipsed by criticism from liberals eager for a fight and certain that the disruption caused by ending the Bush tax cuts would focus public attention on the injustice of further breaks for the rich. At a testy press conference Tuesday, Obama made clear that his main concern was helping the economy, even if that entailed bargaining with Republicans -- an approach apparently as foreign to the assembled media as to liberal activists.
It shouldn't have been. The deal is consonant with Obama's demonstrable tendency to heed the advice of experts on most policy issues, often ignoring liberal opinion and forgoing the strategic political advantage of the moment. He's a policy pragmatist, pure and simple. In the financial crisis, he pursued the unpopular strategy of recapitalizing ailing banks because that was the quickest way to get the economy growing again; during the health care debate, he adopted nearly every cost-containment measure laid out by the Congressional Budget Office, only to be attacked for the one he had to abandon (the "public option''); and again, this time disastrously, he expanded offshore oil drilling in the Gulf of Mexico before the BP explosion in the mistaken belief that doing so was safe and would facilitate a climate bill.
This makes Obama nearly impossible to see coherently through the eyes of anyone captive to Washington's binary view of the world as composed of liberals and conservatives who "win'' or "lose''-- a dissonance fully on display at Tuesday's press conference, when question after question implied that he had broken faith with liberals by agreeing to the extension. In the end, Obama bristled because by his own reckoning he had vigilantly kept faith by insisting on the best policies: "Every economist I've talked to suggests that this will help economic growth and help job growth.''
Obama and his detractors are unlikely to remain at odds for too long because the practical and ideological cases for ending the tax cuts will eventually converge. Most of the proposed cuts expire in 2012, when the whole thing must be relitigated. Republicans think they've won the philosophical battle, and that these measures, once enacted, won't be repealed. But even while defending the extension, Obama claims that two years hence the economy will be stronger, the middle class healthier, the deficit larger, and the case for raising taxes on the rich therefore more compelling. It's true that this sounds a bit like the problem gambler's pledge to quit, only not until after the Super Bowl. But the debate will coincide with a presidential election, where ideological conflict is guaranteed and compromise impossible.
Joshua Green writes a weekly column for the Boston Globe.
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