“Mitch, I think this is the beginning of a beautiful friendship.”
Well, after what TPM’s Brian Beutler termed a short-lived “Kabuki Tax Revolt” by House progressives, the McConnell-Obama tax cuts for the richest of the rich have passed Congress. The progressives could have stopped this cold, but they didn’t. The final vote was 277-148. “Yeas” about evenly divided between Democrats and Republicans.
Here’s what we’re getting in exchange for adding $858 billion to the National Debt over the next two years:
An incredible deal. President Obama’s capitulation to the Republicans and the corporations demoralizes the 63 million Americans who voted for him in 2008 (won’t he need them again in less than two years?) and does nothing to help economic recovery. It does deliver a full (and probably permanent) extension of the Bush income tax cuts, plus an extension of the 15 percent rate on most capital gains and dividends. It creates the lowest estate taxes since 1931 (excepting 2010 when there was no estate tax), at a ten-year cost of $115 billion. One quarter ($225 billion) of these tax breaks will go to the richest one percent.
There’s an extra special deal for the corporations (PDF). They can take advantage of 100 percent bonus depreciation and refundable tax credits for 2011. Potentially, this could zero out corporate income tax for the entire tax year.
That’s not all. The McConnell-Obama deal undermines Social Security by robbing $120 billion from the trust fund and converting it from an insurance to a welfare program funded out of general revenues. That plays right into the hands of Republicans and right-wing Democrats bent on destroying Social Security.
Wait, there’s more. A third of working Americans, about 50 million people, won’t get a tax cut– their taxes will go up slightly next year. “It is just kind of an absurdity that we’re making so many low income and moderate income workers suffer,” says economist Dean Baker. Unemployment insurance is only extended for a one year period, inviting the Republicans to take economic hostages again next time.
Satisfaction guaranteed. Republicans won’t take responsibility for the McConnell-Obama tax cuts. Next year, they will blame President Obama for irresponsibly adding to the National Debt. Using deficit hysteria as an excuse, the GOP will demand draconian non-defense spending cuts. Democrats and progressives will be forced into retreat.
This was arguably President Obama’s best and last chance to kill the Bush tax cuts that are starving government of money necessary to run its most vital functions. Why do the news media keep saying President Obama is “moving to the center?” It’s not true. He would have to go far left of his present position to get to the real political center.
You want to hear something really depressing? If John McCain had won the presidency, there is almost no chance he could have gotten the Bush tax cuts extended for the rich. Think about it. How was a Republican president going to get an overwhelmingly Democratic Senate and House to pass those tax cuts that they hated under Bush?
No, only a Democratic president could get a Democratic Congress to agree to tax cuts for the rich. So, in this sense, progressives are worse off for having a Democratic president than a Republican one.
Richard Eskow on HuffPo:
There’s a real bipartisan consensus in the nation — to protect Social Security, tax the wealthy, preserve Medicare, improve banking regulations, and ban big bonuses at banks which were rescued by the taxpayers. The ersatz ‘centrism’ being peddled in Washington is on the wrong side of every single issue.
A Yale/Rockefeller Foundation report released Tuesday concluded than more than 90 percent of Americans experienced a substantial drop in wealth or income during the 18 months between March 2008 and September 2009. Nearly a quarter saw their income fall by 25 percent or more.
The official unemployment rate has been above 9 percent for 19 months. Long-term unemployment is at record levels. New college graduates can’t start a career. We need help, we need jobs. Tax cuts simply do not create jobs. If tax breaks for the rich resulted in job creation, we wouldn’t be in the mess we’re in a decade after the Bush tax cuts.
Jacob S. Hacker and Paul Pierson point out what’s missing in the bill the Senate and House just passed:
What about a major effort to create jobs to rebuild our crumbling roads, bridges, and transportation system? Nope. What about giving more relief to struggling states that are laying off teachers and first responders? Nada. Perhaps we could step up the implementation of the health care law to provide expanded Medicaid benefits during this weak recovery, when millions of Americans are still losing their jobs and health insurance. Are you kidding?
This is an epic fail if there ever was one. What little economic stimulative effect McConnell-Obama is likely to have will be canceled out by budget cuts next year, as Republicans target Social Security and other social spending.
UPDATE: Robert Kuttner writes in Politico:
The tax deal negotiated by President Barack Obama and Senate Republican leader Mitch McConnell of Kentucky is just the first part of a multistage drama that is likely to further divide and weaken Democrats.
The second part, now being teed up by the White House and key Senate Democrats, is a scheme for the president to embrace much of the Bowles-Simpson plan — including cuts in Social Security. This is to be unveiled, according to well-placed sources, in the president’s State of the Union address.
…Obama is already in trouble with older voters. Republicans have succeeded in convincing seniors that the health care reform bill diverted money from Medicare.
Consider what the right will do when Obama moves to cut Social Security. Republicans, with no sense of contradiction or hypocrisy, will whack Obama once for not being sufficiently serious about deficit reduction — then whack him again for cutting Social Security.