Why the Tax Cut Deal Makes Sense for Democrats

There has been outrage from both sides of the aisle at the deal that Obama has worked out with the Republican leadership to extend the Bush tax cuts. Some Republicans complain that they should agree to extend unemployment benefits in exchange for tax cuts on income over $250,000. Many Democrats, meanwhile, are galled by the fact that Obama consented to tax cuts on income over $250,000—as well as a new low tax on very large estates—when polls show that the public is favors letting the tax cuts on high incomes expire as a way of reducing the deficit. Sen. Bernie Sanders (I-VT) held the floor for more than 8 hours to delay passage of the bill. "Republican colleagues want huge tax breaks for the richest people in this country, but the reality is that the top 1 percent already—today—owns more wealth than the bottom 90 percent," Sanders said. "How much more do they want? When is enough enough? You want it all?"


 Obama fired back in apparent frustration at critics in his own party, saying at a press conference that while he is as opposed to the high-end tax cuts now as he has been for years and promising to fight to end them in when they expire again in two years. But, he added,

the middle-class tax cuts were being held hostage to the high-end tax cuts.  I think it’s tempting not to negotiate with hostage-takers, unless the hostage gets harmed.  Then people will question the wisdom of that strategy.  In this case, the hostage was the American people and I was not willing to see them get harmed.   

Former president Bill Clinton rose to Obama’s defense, telling reporters,

Look, if we had 5 percent growth and unemployment was dropping like a rock, maybe you could have the so-called Mexican standoff and you could say: “It'll be you, not me, the voters will hold responsible for raising taxes on middle-class people, if they all go down, you know, next year.” That is not the circumstance we face.

While Republicans expressed shock and outrage that Obama would compare their obstructionism to hostage-taking, the truth was Obama had a point: in fact his choice was probably between extending all the Bush tax cuts or none of them.

The fact is that the Democrats bargaining position was never as good as it might have seemed. Republicans knew that Democrats were split on whether they would prefer to extend the tax cuts on incomes over $250,000 or let all the tax cuts expire. Letting the tax cuts for most Americans expire while the economy is so bad would have been politically difficult for the Democrats. And the Democrats' numbers in Congress are only going to go down in January. So in exchange for their cooperation, Republicans were able extract the only thing Republicans seem to care about these days: the extension of the tax cuts on high incomes.

But as part of the deal the Democrats were also able to get the extension of unemployment benefits, a cut in the payroll tax, and an expansion of of the earned income tax credit—all of which amounts, as David Leonhardt says, to a second stimulus package. In spite of the practically unprecedented tax breaks for the rich, as Steve Benen points out, the bill mostly benefits progressive causes. Charles Krauthammer agrees, saying Republicans got swindled. And a second stimulus, as I have argued, is precisely what Obama needs to ease the pain of the faltering economy, not to mention precisely what he needs to have much chance of winning a second term.

Develop mindfulness to boost your creative intelligence

Sharon Salzberg, world-renowned mindfulness leader, teaches meditation at Big Think Edge.

Image: Big Think
Big Think Edge
  • Try meditation for the first time with this guided lesson or, if you already practice, enjoy being guided by a world-renowned meditation expert.
  • Sharon Salzberg teaches mindfulness meditation for Big Think Edge.
  • Subscribe to Big Think Edge before we launch on March 30 to get 20% off monthly and annual memberships.
Keep reading Show less

For a long time, the West shaped the world. That time is over.

The 21st century is experiencing an Asianization of politics, business, and culture.

Videos
  • Our theories about the world, even about history or the geopolitics of the present, tend to be shaped by Anglo perspectives of the Western industrial democracies, particularly those in the United States and the United Kingdom.
  • The West, however, is not united. Canada, for instance, acts in many ways that are not in line with American or British policies, particularly in regard to populism. Even if it were united, though, it would not represent most of the world's population.
  • European ideas, such as parliamentary democracy and civil service, spread across the world in the 19th century. In the 20th century, American values such as entrepreneurialism went global. In the 21st century, however, what we're seeing now is an Asianization — an Asian confidence that they can determine their own political systems, their own models, and adapt to their own circumstances.
Keep reading Show less

Why modern men are losing their testosterone

Research has shown that men today have less testosterone than they used to. What's happening?

Flickr user Tom Simpson
Sex & Relationships
  • Several studies have confirmed that testosterone counts in men are lower than what they used to be just a few decades ago.
  • While most men still have perfectly healthy testosterone levels, its reduction puts men at risk for many negative health outcomes.
  • The cause of this drop in testosterone isn't entirely clear, but evidence suggests that it is a multifaceted result of modern, industrialized life.
Keep reading Show less

Why the ocean you know and love won’t exist in 50 years

Can sensitive coral reefs survive another human generation?

Videos
  • Coral reefs may not be able to survive another human decade because of the environmental stress we have placed on them, says author David Wallace-Wells. He posits that without meaningful changes to policies, the trend of them dying out, even in light of recent advances, will continue.
  • The World Wildlife Fund says that 60 percent of all vertebrate mammals have died since just 1970. On top of this, recent studies suggest that insect populations may have fallen by as much as 75 percent over the last few decades.
  • If it were not for our oceans, the planet would probably be already several degrees warmer than it is today due to the emissions we've expelled into the atmosphere.
Keep reading Show less