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House Democrats Won’t Let Obama Compromise with Senate Republicans

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President Barack Obama makes a statement to reporters after his meeting with Democratic congressional leaders on a year-end bipartisan agreement to extend expiring tax cuts, at the Eisenhower Executive Office Building, part of the White House complex, in Washington.

CREDIT: AP / J. Scott Applewhite

Just when President Obama wins a compromise with the Republican Party, House Democrats curry favor with its progressive base by tabling the current tax deal. House Speaker Nancy Pelosi made the decision after receiving a letter from mostly progressive House Democrats stating they do not support the president’s plan to extend tax cuts for wealthy Americans even though he won precious concessions from the GOP that aid a majority of families.

Before Pelosi’s move, it seemed as if Republicans had been hoodwinked, even though they thought Obama capitulated. While the GOP won a two-year extension of Bush tax cuts for the richest two percent and a halt to a rise in the estate tax, they also agreed to a 13-month extension of unemployment insurance (UI) and a wide swath of tax credits for the middle class.

It’s unfortunate Democrats feel that the president caved to Republican demands too quickly. At question was never whether any tax cuts would be extended, or whether all but the top two-percent of income earners would receive a tax cut; in truth, the matter was over how much the wealthy would receive on top of the broad-based cuts team Obama was vouchsafing the rest of America. The difference between the two tweaks to the IRS tax code earned the rancor of progressive legislators, and here’s why.

Under the Obama plan, tax cuts would increase along an almost linear slope for households earning $10,000 to $100,000, beginning at somewhere under $100 and ending at just shy of $2000. For those earning above $250,000, tax cuts would hover between $6000 and $7000. What the GOP proposed, and got Obama to sign off on, is a massive increase of cuts on top of what the broad-based plan offered. Millionaires can expect to see tax cuts of $100,000, or about 14 times more than what the Obama administration wanted.

And, as you’ve heard, the tax cuts Republicans favor are an onerous burden on the deficit and public debt, and do not make efficient use of money spent to generate jobs. The Center For American Progress lay it out here. Drop the tax cuts for the wealthy and instead use the money to cut taxes on payroll, and you suddenly have a projected increase of half a million jobs for $13 billion more.

But this is where Congressional progressives who are opponents to the newfangled tax cuts have it wrong.

A 13-month extension of UI exceeds the wildest aspirations of House Democrats. Democrats imagined a three-month extension was the best they could do. And what else did Obama get out of Minority Leader Sen. Mitch McConnell’s camp? A two-year subsidy on research and development expenses for private businesses, a two-percent cut in the social security tax for all employees (and not employers, meaning the cuts are felt by the workers, not the bosses), and a whole slew of tax credit extensions that first appeared in the 2009 stimulus package. Those extenders include subsidies for college tuition, the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit.

What does that spell? A short-term stimulus plan that would not have been possible without the GOP digging its heels in. This is one heck of deal, and its perquisites outweigh the economic toll of the tax cuts for the rich. If the House Democrats went with the agreements, Obama’s only task would be to sell this win to the public.

So far in his administration, Obama has presided over impressive policy, but has lacked the communicative savvy to convince people he deserves a lot of credit. Figuring out how to get over that hitch might be all that it takes in 2012, when he’s up for re-election, and the current benefits and tax cuts package is up for renewal.

But now Obama can’t worry about message alone; he has a Democratic caucus unwilling to throw him a bone. Sticking to your guns is fine, but if no bill is voted on before the end of December, over two million people are without unemployment benefits, and taxes for many earning under $100,000 increase by as much as $3000.

Happy Holidays!

Mikhail Zinshteyn is a staff writer for Campus Progress. You can e-mail him at mzinshteyn@googlemail.com.

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