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Posted at 6:14 PM ET, 12/ 6/2010

An imperfect, but not-that-bad, deal on the tax cuts

By Ezra Klein

obamaboehnertax.JPG

The White House and the Republicans are pretty close to a final deal on the Bush tax cuts. Here are the specifics, though it's worth saying that as near as this is to completion, it's still not done, and so it could change:

1) The Bush tax cuts get extended for two years -- with one ugly surprise: For the next two years, estates up to $5,000,000 will be protected from the estate tax, and the tax rate for the few estates that are taxed will be 35 percent. That's worse than the 2009 estate tax ($3.5 million exemption, 45 percent rate), though better than this year's "no estate tax at all." The difference in expected revenue between the 2009 levels and the compromise levels is $10 billion or so.

2) The refundable tax credits are extended: The Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax Credit were all pumped up in the stimulus, but set to expire this year. All of them will be extended. Price tag? $40 billion or so.

3) Unemployment insurance gets extended for 13 months: Most observers -- myself included -- thought the federal boost to unemployment insurance (which allowed jobless workers in states with high levels of unemployment to collect insurance for up to 99 weeks) would lapse. At best, there'd be another two- or three-month extension. In perhaps the most important part of the deal, there's going to be a 13-month extension at a cost of $56 billion.

4) A 2 percent cut in the payroll taxes paid by employees: This is perhaps the most unexpected part of the compromise. Rather than extending the administration's Making Work Pay tax credit for two years, which would've been worth about $60 billion a year, they've agreed to a one-year cut in the payroll taxes paid by employees, which'll raise $120 billion in 2011. That's a much stronger boost over the next year, and of course these tax cuts have a tendency to get extended ...

5) Business expensing: Remember back in September, when the White House announced a proposal to give businesses two years in which they could deduct 100 percent of the cost of new investments? That's in the deal, too. The cost of this is a bit complicated -- it's $30 billion over 10 years, but it works by offering huge tax cuts in the next two years and then paying that back over the next eight. So we're basically trying to shift business investment forward to 2011 and 2012. Over those two years, the tax breaks should be around $200 billion, though because it's a shift rather than a cut, it will have less than $200 billion in impact.

So is this a good deal? It's a lot better than I would've told you the White House was going to get if you'd asked me a week ago. There's some new stimulus in the form of the payroll-tax cut and the expensing proposals. The older stimulus programs that are getting extended -- notably the unemployment insurance and the tax credits -- probably would've expired outside of this deal. The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious.

It's bad news for the deficit, though the White House and Congress are right to make the deficit less of a priority than economic recovery. And speaking of that economic recovery? This isn't enough, and it's not well targeted. The deal amounts to the White House throwing some bad money after good. But the end result is between $200 and $300 billion more in tax breaks, tax credits and unemployment insurance than there would've been if not for this deal (I say $200-$300 billion because of the uncertainty over what would've been extended in the absence of this package). That's better than nothing -- or to be more specific, better than backsliding.

Most of the money just keeps programs that are currently in effect from expiring, so in some ways, it would be more accurate to say that this money is anti-contractionary rather than stimulative. It's important that the White House doesn't repeat the mistake it made in the original stimulus and overpromise how much this will do for the economy. What you can say about this policy is that, for the moment, it doesn't make things much worse, and it probably makes them a bit better. This is not the government making a major new commitment to the recovery. It's the government not getting in the way, and maybe doing a bit to help, the horribly slow recovery that's happening anyway.

It also, importantly, holds the extensions to two years. The tax cuts for income over $250,000 and the new estate tax rates will expire in 2012. The White House thinks that this'll be a good election issue for them, as it combines a popular, populist stance on taxes with a deficit-reduction message. Whether they're right -- and whether they'll fight in 2012 in the way people hoped they'd fight in 2010 -- remains to be seen. But on a policy level, two-year extensions of bad tax cuts are much preferable to 10-year extensions of bad tax cuts.

And finally, it's something of a hopeful sign: The White House sat in a room with Republicans and Democrats and managed to negotiate an actual compromise. The final deal includes some things that Democrats will like and some things they won't like, and it includes some things Republicans will like and some things they won't like. But it's a deal, and a better one than many -- myself included -- thought they'd reach. These tax cuts were a bit of a special legislative case, as their scheduled expiration forced action, but if you want to be optimistic, this process suggests that the next two years might be a bit more productive than some of us have been predicting.

Photo credit: By Dennis Brack-Pool/Getty Images

By Ezra Klein  | December 6, 2010; 6:14 PM ET
Categories:  Taxes  
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Next: Wonkbook: Everything you need to know about the Bush tax cut deal

Comments

This is great news. One question: Any word on an increase in the debt ceiling being included in the deal?

Posted by: zosima | December 6, 2010 6:20 PM | Report abuse

I wish the WH pushed for more fiscal aid to the states which are under enormous financial strain right now.

Posted by: jasonr3 | December 6, 2010 6:22 PM | Report abuse

More tax cuts now = more poorly funded social welfare programs in the future.

Yay Obama.

Posted by: goinupnup | December 6, 2010 6:27 PM | Report abuse

Dod you say "talmudic?" Really? Wonky much? LOL

Posted by: hmcdougald | December 6, 2010 6:31 PM | Report abuse

Did you use the word "talmudic?" Really? Wonky much? LOL

Thanks for the summary, Ezra.

Posted by: hmcdougald | December 6, 2010 6:32 PM | Report abuse

Another Upper Class Class War victory.

Never saw that one coming.

According to Republican propaganda, the job creating should start any minute now. Right?

Does the Unemployment Extension include help for the 99ers? Or are we still lazy bums who don't deserve survival peanuts after 25+ years of hard labor?

Posted by: frank1569 | December 6, 2010 6:34 PM | Report abuse

"...this process suggests that the next two years might be a bit more productive than some of us have been predicting."

You are running ahead of yourself.

Barack Obama = Looser

Feel better now that I have said this.

It was given that WH would dangle lot of goodies after letting go the whole 'house'. So in that sense this litany of items is not a surprise. In reality it is all to 'cover' the core political battle lost by Obama and Dems.

The only thing which can be said positive is Pete Rouse is learning the significance of positive atmospherics and Obama is learning some ropes in devising his style of 'trangulation' after having capitulated.

Would this make at least few in Base happy? I am not sure about that but at least lot of folks are going to be much, much less interested, hooked in Obama Presidency. It is as clear as sunlight, there does not need to be any passion required for this guy.

Economy does not improve - dump him. Economy improves but GOP runs a smart campaign - dump him. So you can see how it is stacked against this looser...

(Estate Tax - not problem for this Centrist. Lincoln I guess had suggested it. So no issues with that. Issue is with the core cut off line....)

Posted by: umesh409 | December 6, 2010 6:39 PM | Report abuse

Incidentally - Bill Clinton was the President who was responsible to remove Glass-Steigal (with Dick Armey, Larry Summers and Rubin) and the genesis of destruction in subsequent decade was placed in.

Same way - Obama let go bonuses of Wall Street Bankers, did not bother to setup sensible shareholder controlled limits on compensation, supported not so tight Frank-Dodd and now this full house to rich guys.

Are these seeds of continued gilded capitalism of USA headed towards one more crisis in the name of another of Democratic President?

May be we should think about 'one - term Obama Presidency' only.

Actually you will start hearing more of 'one consequential term' kind of 'above the fray, saintly talk' from Obama as 'red meat' to the base; but then we will know that this 'loser' is trying to deceive us.

Defeating him in Primary may not be a bad goal for Left Base.

Posted by: umesh409 | December 6, 2010 6:52 PM | Report abuse

I agree that this is a better than expected deal in terms of providing and maintaining stimulus.

A separate question is how it will be spun and that is a function of the broadcast media and it's default conservative slant. So get ready for a 24/7 mediagasm of OBAMA'S MASSIVE DEFICIT!!! OMG we're all gonna die. Cut SS NOW!

I have no doubt that Republican House chairmen are now scheduling weekly hearings about the looming deficit apocolypse and cablenews will broadcast it all.

Obama wrote the narrative in '08. Fox wrote the narrative in '10. Who is going to write the narrative for '12?

Posted by: BobFred | December 6, 2010 6:57 PM | Report abuse

What is a 2% cut in employee 'payroll taxes'? Reduction in medicare/FICA or just a reduction in withholding?

Posted by: kirk2 | December 6, 2010 6:59 PM | Report abuse

Frank - you're on an internet comment board... you are a lazy bum

Posted by: cdosquared5 | December 6, 2010 7:05 PM | Report abuse

Spin this for all you are worth Journolister Klein, you are one of the few. This is a huge win for conservatives and a kick in the face for liberals.

I could not be more happy.

Posted by: Charley_XF | December 6, 2010 7:09 PM | Report abuse

"A separate question is how it will be spun and that is a function of the broadcast media and it's default conservative slant. So get ready for a 24/7 mediagasm of OBAMA'S MASSIVE DEFICIT!!! OMG we're all gonna die. Cut SS NOW!"

What happened with Reagan, Tip Oneill, and deficit spending?

Posted by: krazen1211 | December 6, 2010 7:10 PM | Report abuse

He's BAAAAAAAAAAAAAAAAAAAAAAACCCCCCCCCCCCCCKKKKKKKKKKKKKKK!

George W. Bush’s job approval rating as president has spiked to 47 percent, according to a Gallup poll released Monday.

That’s 1 point higher than President Barack Obama’s job approval rating in a poll taken the same week.

Posted by: krazen1211 | December 6, 2010 7:29 PM | Report abuse

He's BAAAAAAAAAAAAAAAAAAAAAAACCCCCCCCCCCCCCKKKKKKKKKKKKKKK!

George W. Bush’s job approval rating as president has spiked to 47 percent, according to a Gallup poll released Monday.

That’s 1 point higher than President Barack Obama’s job approval rating in a poll taken the same week.

Posted by: krazen1211 | December 6, 2010 7:29 PM | Report abuse

BTW Will this change how the Deficit Commission Repoert is received by Congress?

Posted by: BobFred | December 6, 2010 7:36 PM | Report abuse

Hey Ezra this sounds like the same load of sh** you party shills pitched when they caved on the public option. "The health care bill isn't perfect but hey it's better than we thought." Primary Obama.

Posted by: JimHines362 | December 6, 2010 7:45 PM | Report abuse

The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious.

--------------------------

True.

It seems that Washington has it's checkbook out. The account is empty, but nobody cares.

This seems like a way to sell our grandkids to the wealthy.

Posted by: postfan1 | December 6, 2010 7:45 PM | Report abuse

You need to check your estimates Ezra. There was a report out the other day that over the last 3 years jobless benefits have cost 319 billion dollars. So the Federal share may only be 56 billion but the states pay an equal amount. The last time I checked they get their money from the same place. The TAXPAYERS. Are we going to just pay people unemployment forever.

Whats going to happen a year from now. Unemployment is not expected to be any lower next year.

Posted by: bjeagle784 | December 6, 2010 7:56 PM | Report abuse

ARE YOU CRAZY????

That 2% cut in payroll taxes is Obama's official opening shot directly at Social Security.

Obama is helping the rich get richer by screwing over the middle and working classes.

Like HELL he cares about anybody but the rich - and you call th is "not-that-bad"?

You ARE crazy!

Posted by: solsticebelle | December 6, 2010 7:56 PM | Report abuse

All you Republicans and conservatives who are feeling your oats over the Bush tax cut extension success, SOBER UP NOW.

There's 10 more days of this lame duck congress, in which a lot of damage can be done by Obama and the majority Democrats. One of the most perverse items on Harry Reid's wish list is the Dream Act. He is going to introduce it on Wednesday for a procedural vote. Email your senators now, Democrat or Republican, and tell them how you feel about the Dream Act.

Google your senator's name with an email trailer, and you'll quickly get their email address. There's no time to gloat or bad mouth Obama. There's too much work ahead in the next ten days.

Posted by: bbwk80a | December 6, 2010 8:06 PM | Report abuse

Republicans gave Obama the best excuse to let all Clinton era rates return, and Obama still makes a lousy choice.

Republicans won't support jobless people, but the President still thinks that HE will be politically vulnerable without cutting taxes.

It makes me wonder what ever made anyone think this guy was politically smart.

Posted by: bcbulger | December 6, 2010 8:08 PM | Report abuse

NEWS ALERT:

An apoplectic Speaker of the House Nancy Pelosi is the first Democrat to announce her intention to seek the appointment of a Special Prosecutor to examine the validity of President Obama's birth certificate.

And that's the way it si; have good night and a better tomorrow!

Posted by: f4bav8r | December 6, 2010 8:10 PM | Report abuse

Copromise has never been at the core of truly Presidential leadership-and that was what was needed from Obama in this time of critical mass in America.
Thirteen months of unemployment benefits is a pittance compared to the infrastructure jobs programs we could have created with 1.4 Trillion dollars over two years. Some deal! Even buying a used car from Nixon was better.

Posted by: lionelroger | December 6, 2010 8:24 PM | Report abuse

I wonder if this deal would make it through the new Boehner Congress scheduled to take power early January 2012? I thought the Tea Party was most focused on the deficit? Are they a moving target? Or will they try to reverse this when they take over. 1/3 of the House will be freshman republicans I think.

Posted by: mickster1 | December 6, 2010 8:31 PM | Report abuse

Well, that's one heckuva spin there, Ezra. Go read Digby -- she takes your butt to the woodshed.

This is a tee-up for going after Social Security.

Posted by: scarlota | December 6, 2010 8:36 PM | Report abuse

Not bad. You are nuts. Where is the principled stand on Democratic platform issues, such as saving Social Security. This plan, for the first time, opens the door to Congress spending the Social Security excess, ensuring that Social Security will run out of money before 2037. So much for the Roosevelt trust fund. Social Security now becomes part of general revenues, just like Europe.
And how about forcing billionaires to take cuts they don't want. Yes, they don't want the as Warren Buffett and George Soros have both said. They have enough money, but Obama bowed to GOP opposition, and simply caved.
What an unmitigated disaster.. Where is the Tea Party of the Democratic party to rise up and defend this party's principles?

Posted by: edwardallen54 | December 6, 2010 8:41 PM | Report abuse

But you leave out three crucial numbers.

Extending the Bush rates to those making OVER $250,000 will cost 70 billion a year.

Extending it to those making UNDER $250,000 a year will cost 200 billion a year.

Since our deficit in 2009 was 1.4 trillion dollars, the "tax cuts for the rich" are 5% of the deficit. The tax cuts for the rest of us are 14% of the deficit.

It is good to know some facts and numbers.

We all enjoy a bit of hysteria now and then. But hysteria with facts is better than hysteria in a state of ignorance.

Posted by: rjpal | December 6, 2010 8:51 PM | Report abuse

Hoping against hope that Congress doesn't put this through, the Bush cuts expire, and it stays there. All Obama has done is bankrupted the country even more, re-distributed wealth up to the rich and given them an excuse to say that Social Security is not and never will be self supporting. Seriously, woe to the republic that this neophyte was given the nomination instead of Clinton.

Posted by: dyinglikeflies | December 6, 2010 9:23 PM | Report abuse

I agree with Ezra -- Obama got about the best deal that he could. The real problem is Congress, both houses of which are now controlled by "conservative" and "centrist" corporate lackeys, so that they were able to take the middle class and the unemployed and hold them hostage. Nothing improves in this country unless and until enough voters smarten up to send both the Republican and Democratic "conservatives" and "centrists" home.

Posted by: AdrianMole | December 6, 2010 9:24 PM | Report abuse

This isn't a compromise. Unconditional surrender is more like it. This package of spend, spend, spend will just hasten the day of bankruptcy that much sooner. How do you think we can implement the plan by the deficit commission when we have given away all the goodies today? The reality is all that comes out of Congress these days is more and more spending. By giving the Reps. the prize, what negotiating leverage does Obama have to get anything he wants in the future? Since the rich already have what they want, they can now sit on the sideline, watch the economy tank, blame Obama and recapture the White House in 2012. They the tax cuts will be make permanent and we will be on the road to financial ruin with no way to stop it.

Posted by: akibono3 | December 6, 2010 9:26 PM | Report abuse

I am a proud progressive who is all for taking the fight to the Republicans a heck of a lot more than we have been. But what, exactly, do folks who think the President capitulated here want him to do?

The reality of this situation is that the Democrats did not have the votes to extend only the middle class tax cuts or to pass unemployment benefits extensions without Republican support. And the only way to get the Republican support was to extend the tax cuts for the wealthy elite for two years. By accepting this deal, Democrats will be keeping 7 million Americans our of truly dire straits, along with getting the stimulative affect of unemployment benefits and a payroll tax holiday. This is far from perfect, but about the best we could get in this situation.

I am mad that this deal had to be made and that we are giving even more money to millionaires at a time of economic turmoil and budget deficits. But I am focusing my anger on the true culprits here - the immoral Republicans who have held the unemployed hostage in order to provide even more money to their wealthy sugar daddies, not on a President who did what he needed to do to help 7 million Americans in need.

http://www.winningprogressive.org

Posted by: WinningProgressive | December 6, 2010 9:29 PM | Report abuse

Thanks for the write up...we certainly know who thinks they got the better side of this "deal" though :

http://www.doubledutchpolitics.com/2010/12/the-way-you-know-you-lost-a-compromise-got-pushed-around/

Posted by: RyanC1384 | December 6, 2010 9:29 PM | Report abuse

How did we elect Michael Dukakis?

Posted by: akibono3 | December 6, 2010 9:33 PM | Report abuse

Ezra, you are spending too much time listening to David Broder...

Posted by: Yoni1 | December 6, 2010 9:34 PM | Report abuse

Bad deal.

If it is good for the right-wing regressive anarchists it is very bad for the United States.

The GOP has not presented one single successful fiscal policy in its 140-year history. Unless you call the historically monumental movement of wealth from the middle class to the wealthiest 1% of population a success. Maybe so, but for whom? Surely not our people or our society as a whole.

The GOP - continued failure at all costs with 99% of the people paying and the other one percent reaping the profits.

Posted by: BigTrees | December 6, 2010 9:35 PM | Report abuse

So yesterday we were all deficit commissions all the time, and now we all agree deficits don't matter anymore.

And you wonder why I said you wasted 25 different posts on the commission reports?

Posted by: 54465446 | December 6, 2010 9:43 PM | Report abuse

Man, if this is such a good deal for everyone, just think how great our economy would be if we DOUBLED spending and HALVED taxes again? Wouldn't it just be great? Both parties are filled with fools, and the American people send them there cheering every election.

Posted by: baldinho | December 6, 2010 9:44 PM | Report abuse

umessh wrote:

"Bill Clinton was the President who was responsible to remove Glass-Steigal (with Dick Armey, Larry Summers and Rubin) and the genesis of destruction in subsequent decade was placed in."

You don't want to mention Phil Grammm who wrote the damn thing?

Posted by: 54465446 | December 6, 2010 9:46 PM | Report abuse

I agree w/Ezra Klein. Benefits for the unemployed will be extended for 13 months providing a stimulus of sorts. The economy which is growing but is still fragile does not experience a major change in taxation. Peter Orzag, among others, urged exactly what Obama did--extend the tax cuts for two years and then, hopefully, eliminate them completely. In two years the economy should be on a sounder footing. To have continued wrangling while the unemployed waited would have been immoral. He did the right thing.

Posted by: ElinorMiller | December 6, 2010 10:17 PM | Report abuse

The President managed to achieve an actual compromise because he caved on everything! At the very least, he should have called out the Republicans for holding unemployment benefits hostage to obtain tax cuts for the rich by making them publicly reject the Dems' proposal to let them expire for all but folks earning over $1m before he gave up entirely. Tomorrow the Republicans will be blaming the deficit on him -- he will gain nothing from them for this.

Posted by: fmjk | December 6, 2010 10:28 PM | Report abuse

Nice rundown!

I am a bit disappointed that they didn't retroactively institute an estate tax for 2010. But whatever, I guess now the GOP can all think George Steinbrenner is the luckiest man not alive.

Posted by: chrisgaun | December 6, 2010 10:30 PM | Report abuse

The Dems should grow a spine and pass things in budget. Index capital gains over a million at 21% add a point a million till 30% over 10 million to pay for an under million in income small business investment tax credit of 20% so Joe the plumber can buy the additional truck and hire 2 more employees. There would be plenty of coin left over seeing how the top 2% quadrupled their income in 09 after the bubble crash. Will the capital gains rate stay at 15% is not discussed in any article leaving me to believe it will go to 20%.

Posted by: jameschirico | December 6, 2010 10:30 PM | Report abuse

I guess nobody can call Obama a "socialist."

Posted by: ElinorMiller | December 6, 2010 10:32 PM | Report abuse

Obama's not going to get any credit for handing out China's money. The Democratic brand is tarnished by this irresponsible deal.

Posted by: bmull | December 6, 2010 10:36 PM | Report abuse

Clinton indeed made huge mistake compromising with the GOP to sign such GOP proposed things as NAFTA and glass steagal.

Time will tell if Obama has learned anything from history. My take is that, if things improve, the GOP will get the credit and if things get worse Obama will get the blame. This is because Obama is now seen as a weak president suffering from the Stockholm syndrome from his GOP captors. Since his election, Obama has shown no sign of a willingness to fight for liberal ideas.

Posted by: lauren2010 | December 6, 2010 10:41 PM | Report abuse

We are all deficit doves now.

And I mean republicans, tea partiers, and democrats.

All of us.

Posted by: lauren2010 | December 6, 2010 10:43 PM | Report abuse

I resent being referred to as the "wealthy elite" if my wife and I pursue educational opportunities, get graduate degrees, and then work our tails off and earn $250K/year. If one lives in a major metropolitan area an annual family income of $250K does not make one "wealthy" -- at best you're in the upper middle class at that level. Two federally employed professionals will make $250K and still struggle to make ends meet between the mortgage, clild care, tuition, local property taxes, etc. If you want to penalize the "rich," set the threshold somewhere closer to real wealth - at least $500K.

Posted by: mnm9897 | December 6, 2010 10:47 PM | Report abuse

Ezra, I really love what you right--but I have to say that on this you are full of, well, chicken crap.

WJC knew when to compromise and when to take a stand and took a completely GOP-controlled Congress and embarrassed them and by doing so pretty much halted the 'Contract on America'. It's the long view and always negotiate from strength.

Posted by: gingles | December 6, 2010 10:58 PM | Report abuse

Sorry, what you write--two degrees and I can't write/right.

Posted by: gingles | December 6, 2010 11:00 PM | Report abuse

GOP: GRAND OBAMA PARTY!

Let's see if we get this straight:
Last week, the President announces a WAGE FREEZE on ALL FEDERAL salaries. And, most of the federal employess, while not liking it, think, "OK, it's for the good of our nation, so we'll agree to that," when THIS WEEK, this SAME President then CAVES IN to the Wall Street Republicans and bails out the TOP 2%, Billionaires and Multi-millionaires at the EXPENSE of both, federal employees AND the other 98% of the American Taxpayers!

So, what IS wrong with this picture?

Obama has become a REPUBLICAN!

Democrats in the House and Senate, YOU have an ENEMY at the White House and YOU need to act accordingly. No more NICE, NICE to Mr. Obama as he has already SUNK the House and nearly the Senate.

And, you Democrats are sitting idly by letting this happen to ALL of you?

Better PRIMARY the guy and get him OUT there before YOU Democrats become the endangered Party rather than what the GOP had been just 24 months ago.

And, NONE of you saw this coming? And, MOST of you continue to DEFEND this guy?

Your PARTY's President has just SOLD out every American and the GOP is loving it.

Posted by: gglenc | December 6, 2010 11:09 PM | Report abuse

It's relatively easy to get politicians to agree on tax cuts and other things that amount to giving candy to voters- you give your voters this candy, we'll give our voters that candy. What we need is for them to come into a room like that and agree to cuts in Medicare, Medicaid, Social Security, and Defense spending. Spending cuts are so much harder.

Posted by: staticvars | December 6, 2010 11:55 PM | Report abuse

This is Obama's crowning achievement, the first bipartisan effort of his presidency. He "surrendered" to common sense, "capitulated" to not taking the economy apart, and "caved in" to a chance at strengthening the flaccid recovery.

Congratulations and thank you, Mr. President. My sympathies to the Progressives on the passing of their Movement for another generation.

Posted by: mark31 | December 7, 2010 12:03 AM | Report abuse

So much for all the deficit reduction rhetoric from the Republicans during the prior election campaign.

And how does any of this lead to major increases in employing the 15 million unemployed?

It's just more spend, spend, spend....

Posted by: JackJo | December 7, 2010 12:05 AM | Report abuse

To my fellow liberals, why cant we just declare victory. In exchange for $56B in unemployment benefits and a $120B payroll tax holiday that benefits middle and working class taxpayers and the business investment credit proposal that the Dems could not previously pass, Obama has agreed to a 2-year extension of the Bush tax cuts on the top 2% that the Dems in Congress had been unable to successfully separate from the tax cuts for the other 98%, thereby keeping those tax cuts in place as well. The primary need currently is for more stimulus. Obama basically used the GOP obsession with the tax cuts for the top 2% to get stimulus that the Dem congress showed no ability to achieve in the past year. When the economy has improved after his now even more likely 2012 reelection, Obama can credibly threaten a veto of any further extension of the top 2% cuts without fearing any negative consequences to the economy.
There is no harm to the social security program in this holiday. Are there better forms of stimulus economically-absolutely. Any evidence that such stimulus would pass Congress-none. I'll take imperfect stimulus achieved over perfect stimulus that exists only in a fantasy world anyday.

Posted by: gregspolitics | December 7, 2010 12:30 AM | Report abuse

@gregspolitics.

What he said.

Posted by: Jasper999 | December 7, 2010 1:29 AM | Report abuse

Nice summary.

One big question: Does the two-year-only Bush tax cut extension apply to all tax payers or only the rich (> $250K)? In other words, are the extension of tax cuts for the middle class made permanent?

It seems to me the rich need to be treated differently in this, because two years down the road the Democrats will be in a worse negotiating position. It's better to lock in the cuts for us little people now, so as to put us all in a better negotiating position two years from now.

I'd sign on to this with that one change. Otherwise, no deal.

Posted by: mroberts45 | December 7, 2010 2:51 AM | Report abuse

Hate the tax credits. And they're refundable too. Ugh. Stop the spending already.

Businesses are not going to invest when they know they're going to eventually be forced to pay for Obama's tax credits handouts.

Posted by: cprferry | December 7, 2010 5:05 AM | Report abuse

Why do people seem not to realize that taxes apply not just to individuals but to businesses? "Those making over 250,000" can be a business, not a person. 250,000 in profit means a small business. This needs to be clarified because of the bad faith of the administration in constantly saying, and having their surrogates say, "millionaires".

Posted by: truck1 | December 7, 2010 5:13 AM | Report abuse

OBAMA You Sold Out The 99ERS?
Without Tier 5 Aggregated Robbery!
99ERs 2011 The Year Of The HOBO!
Should You Learn The Language?

Today graffiti is prevalent on walls, residences, businesses and the infrastructure in America. A result of gangs slinging communication at each other while leaving the general public puzzled and bewildered.

But this isn't the first time that indigenous groups have used code to converse with each other. In the 1930's millions of Hobos developed their own unique system of symbols which could be found on street curbs buildings and crossroads nationwide.


The meanings of the symbols reached the vagabonds riding the rails that arrows and geometric shapes were a communication highway. Will this truly American underground dialect be called back for today's unemployed survival? When millions of unemployed patriots are kicked to the streets to be belittled, starve and disenfranchised, then a peaceful outcome is unpredictable. Add to this how many new HOBOs recently working class believe their situation is their own fault when they know an unregulated Wall Street took them down?

Do we really want our National Guard posted and on stand bys to prevent civil unrest? Is it worth it to the GOP Tea Party millionaires at the tax cut trough, to increase costs in homeland security for all because of their contempt for the unemployed? Will it be worth to us all to leave unemployed 99ERs extensions in the abyss?

Artist Country Carl dot com of the 99ERS New Depression Blues Video,

Hopefully you won't have to HOBO UP!
Google Up Country Carl or
http://www.youtube.com/watch?v=tM6CuCjUTDK

Posted by: countrycarl | December 7, 2010 5:18 AM | Report abuse

The taste of Obama's pudding will be in the eating!

It's inconceivable that GOP leaders are NOT afraid of a backlash in 2012.

Posted by: hariknaidu | December 7, 2010 5:21 AM | Report abuse

It takes two to reach a compromise in any negotiation. Most people agree the Republicans won this round. Here is what they won.

What the Republican’s won:

• 900 billion increase in the deficit over the next two years
• Tax cuts targeted to the highest income earners (so called “millionaires tax cut”)
• More spending and tax cuts using borrowed money

Sounds like the same old story from the past 10 years, doesn’t it?

Posted by: NewThoughts | December 7, 2010 6:59 AM | Report abuse

At least we got an extension of the estate tax. Then, when the nation carries out the class warfare against the people who are moving jobs overseas, not hiring domestically, hoarding money and buying elections, we'll have a lot more revenue because their estates will be taxed!

Hooray for good politics!

Obama had already lost the right; now he's working on losing the left. Hey genius: the right isn't coming back because you did that. Are you a Republican president now?

Posted by: aaronweiner | December 7, 2010 7:30 AM | Report abuse

It's always great fun to see a loser call Obama a 'looser'.

Posted by: missfying | December 7, 2010 7:54 AM | Report abuse

The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious.

***********
Not that I'm anything close to rich, but I do like fairness. Which begs the question: if the estate tax is so good (that is, taxing inheritance or assets passed from one generation to the next based on the principle that it is earned income), why not extend the tax to everyone? Politics, not principle, is the answer.

Posted by: dnara | December 7, 2010 8:15 AM | Report abuse

"The older stimulus programs that are getting extended -- notably the unemployment insurance and the tax credits -- probably would've expired outside of this deal. The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious."

This sounds like my 9-year-old when he's playing 'opposite day'.

Unemployemnt insurance is not stimulative, it is supportive. These are meager amounts of money people will use to try and stay fed and keep warm. It is not gonna fund job creation.

Now, tax cuts for people rich enough to invest that money just mught be job creating, if they choose to invest that money the right way. But that is "a bad way to spend $100 Billion."

I'll be generous and take a pass on the whole weirdness by which allowing someone to collect their income unmolested, magically becomes a gift _spent_ on that very same person!

And the idea that it is "noxious" not to double-tax money that has already been taxed after the death of a parent - to ensure that they can pass on as little as possible to their kids when they're gone. I find that attitude beyond selfish.

Posted by: pdqlmnop | December 7, 2010 8:36 AM | Report abuse

For all those "citizens" out there who were aghast at a "black man" being in the White House, take a look at the picture in this article and pick out who is the "blackest" man therein. What will you do when your own private "black" man runs for president? Will you picket the White House and holler "NO" to everything he attempts to do?

Posted by: Grannieannie | December 7, 2010 8:37 AM | Report abuse

Hillary Clinton for President in 2012, and no promises again. Obama will have plenty time to play basketball!

Posted by: gwazdos1 | December 7, 2010 8:39 AM | Report abuse

Why are you all blaming the president? The Senate could not get the bill passed. Should he let all the tax cuts expire for everyone and cause a mess next year with all the payrolls. Who do you think everyone would blame when their taxes went up and when unemployment insurance ended for so many people? Not the republicans!!! It would be President Obama.

Posted by: clramsay1 | December 7, 2010 8:45 AM | Report abuse

This logic is like telling a person with terminal cancer to cheer up because he will be able to control his weight. This deal stinks politically and economically. Forget Obama this is bad for working people and the country in general. Disgusting.

Posted by: dfdougherty | December 7, 2010 8:57 AM | Report abuse

I agree that it was a more bipartisan agreement, one of the first on Obama's watch.

Also, it exposes GOP hypocrisy. Two of their presidents (Reagan and GW Bush) added more to the deficit than all the presidents before them combined. And Clinton did the most to reduce the deficit. Yet the GOP yells about the deficit as if it were something the Democrats caused.

Now the GOP has held START and unemployment benefits hostage to extend large tax cuts for the very wealthy.

It will be interesting to see if the billionaires keep sitting on their money while they leave the middle class unemployed. If they do, that will be apparaent about the time of the 2012 elections.

Maybe Obama is smarter than people give him credit for.

Posted by: tinyjab40 | December 7, 2010 9:16 AM | Report abuse

Good to see one clear-headed assessment of the deal. Too may sky-is-falling rants. My assessment was, "meh." A "C" compromise--not great, but certainly not horrible.

Posted by: wd1214 | December 7, 2010 9:16 AM | Report abuse

must be nice to br rich in America and have govenment in your pocket. Criminals - all of them.

Posted by: sux123 | December 7, 2010 9:28 AM | Report abuse

This was a smart move by a smart man. I certainly was willing to see the President challenged in a primary if he “caved” on this issue, and was pretty hot when this news was first reported. Then I heard the list of what we got. This prevents a tax increase of roughly $3500.00 a year per family for the dying middle class.(Bush and Obama tax cuts that could have gone away) Add that the unemployment extension, which is the most effective way to stimulate the economy, also gets to happen and it’s a lot better than I hoped for. Of course some might say that the Republicans would have never actually gone through with that increase on middle class taxes and not giving the unemployment extension but you must not have been paying attention. The non-human space aliens that seem to have taken over the Republican Party have no shame and no Christian compassion. They are willing to sell their own mothers (end Medicare and Social Security) if they thought they could make a buck. The outrage that we are increasing the deficit in a way that is least effective at stimulating the economy by making the government sanctioned rich richer needs to be directed where it belongs: At those Democrats and Republicans that made it clear weeks ago that the votes in congress were going to extend all tax cuts no matter what. There is a debate that is not being had which is, are we trying to stimulate the economy or reduce the deficit. The two can not happen at the same time. Maybe two years from now we can end all the Bush tax cuts and start paying the bill for all the programs that neither side is willing to give up.

Posted by: SETinVA | December 7, 2010 9:47 AM | Report abuse

awww This is such a relief. Thank you for all the information. At first I was just happy that my taxes wouldn't be going up but now I see there is more to be thankful for. Also thanking President Obama for not giving up on the middle class even though pundits will bash him but they bash him no matter what so....*shrugs*.

Posted by: mirrorimage | December 7, 2010 10:07 AM | Report abuse

"There is no harm to the social security program in this holiday"...gregspolitics
_____________________________
I take the other perspective - that this is the beginning of the end of Social Security as the Republicans have been planning for 30 years. The Repubs will 'not allow a tax increase' which means that in one year they won't allow the SS tax to go back up to 6.2%. They can then argue that, since it's underfunded, retirement age must go up and benefits must be decreased.

Posted by: kirk2 | December 7, 2010 10:13 AM | Report abuse

What Obama got:
1. Extended unemployment benefits for Workers (which allowed jobless workers in states with high levels of unemployment to collect insurance for up to 99 weeks), at a cost of $56B.
2. Earned Income Tax Credits for Workers (Earned Income, Child, and the American Opportunity), at a cost of $40B.
3. A 2 percent cut in the payroll taxes paid by employees, at a cost of $120B.
4. Business Tax Cut in which businesses can deduct 100 percent of the cost of new investments, at a cost of $200B.

What the Republicans got:
1. Tax Cut for the RICH, those making over $250,000, the Top 2%, at a cost of $100B to Debt.
2. Tax Cut for the RICH, those with estates valued at over $5,000,000, the Top 0.1%, at a cost of $10B.

Obama got Tax Cuts for Workers and Tax Cuts for Businesses that invest in America. These create jobs, but add to the Debt.
Republicans got Tax Cuts for the RICH that do nothing to create jobs, and add to the Debt.

Who Won:
On one side Obama, Jobs, Workers, and the American people won.
On the other side Republicans and the RICH won.
Let's assume everyone wins on the job creating business tax cut. Then, of the $270 billion cost of this deal, 41% goes to the RICHEST 2%, and 59% goes to 98% of the American people and the workers. What's wrong with that picture?

FootNote: Every dollar less in Taxes paid by the RICH is a dollar more paid by the Workers. That would be you and me.

Posted by: chucky-el | December 7, 2010 10:13 AM | Report abuse

We democrats do not want to say even, our leader sucks, Plain and simple, I will let Mr. Obama know I will not vote for him in next election. He is a leader with out common sense, his read of republican is flawed. If he keep signing what republican wants then why not I vote for a republican.

Posted by: mfarooq56 | December 7, 2010 10:31 AM | Report abuse

"Barack Obama = Looser"

Posted by: umesh409


Lose error.

Posted by: veritasinmedium | December 7, 2010 10:33 AM | Report abuse

There is no compromise if no one has to sacrifice anything they care about. Neither party opposes more benefits or lower taxes per se - they both just want to reallocate resources towards what they prioritize and away from policies they care about less. That is, conventional partisan positions on unemployment and taxes are based in a world of limited resources (like the one we actually live in). On the other hand, in a world of unlimited resources, Republicans don't give anything up by allowing an unemployment extension and Democrats don't lose if the rich pay lower taxes. This fantasy world is where negotiations on this deal - predicated entirely on deficit spending - took place . The result is that neither party had to swallow anything it doesn't like.
Necessarily, compromise involves agreeing to split a pie in a way that is agreeable to the negotiating parties - but for a compromise to deserve a positive connotation of shared sacrifice, it also necessarily depends on the pie being a defined and finite size. If negotiators can increase the size of the pie without paying anything for it, then it is hardly an accomplishment to eventually create a pie large enough that negotiators will agree their portion is sufficient. Imagine if the Israelis and the Palestinians could expand the borders of the territory each claims as its own by expropriating land from Syria, Lebanon or Egypt without penalty - George Mitchell would be collecting Mitch McConnell endorsed unemployment benefits.

The real rot at the core of this deal in my opinion then is the false veneer of political accomplishment that it is projecting onto the parties involved. No one showed any political courage or traded off short-term sacrifice for long-term best interests - each side merely agreed to take resources from an unrepresented third party to make a reciprocated bribe in the service of political expediency. This certainly doesn't indicate newfound political maturity, nor is it laudable policymaking. in fact, its the opposite and should be portrayed that way.

Posted by: ContraVentionalWisdom | December 7, 2010 10:41 AM | Report abuse

What former WH OMB Director Peter Orszag said when he endorsed this idea three months ago:

http://www.nytimes.com/2010/09/07/opinion/07orszag.html

Posted by: faithfulservant3 | December 7, 2010 10:44 AM | Report abuse

I am probably too optimistic, but I think that at some point people are going to realize that social security does not HAVE to be solvent for the elderly to receive care and benefits. So the fact that social security tax is reduced doesn't bother me. But this business incentive plan I don't get. It appears that businesses get a tax write-off but have to pay taxes on the investment in later years? If they don't see a profit opportunity they don't invest, period. Maybe the tax write-off makes a handful of marginal ventures look more appealing, but it doesn't suddenly mean that businesses see money everywhere. It certainly doesn't provide the type of incentive that makes businesses want to invest in something long-term like labor.

Posted by: evanbwright | December 7, 2010 11:42 AM | Report abuse

tinyjab40 - Clinton increased the federal deficit (the national debt) by $1.6 trillion over his 8 years...

Not as bad as the Bushes but not in the black...

Posted by: sarms58 | December 7, 2010 12:32 PM | Report abuse

What happens to the long-term unemployed, those who won't have a renewal of their 99-weeks benefits--but who have less chances of finding work? They are but a "casualty" of this capitulation.

President Obama is an incredibly poor negotiator. But, at the root, the fault belongs to us all who allow this "democracy" to have been taken over by a retrogade, uncaring and cynical Republican Party, ever since the Gore v Bush Supreme Court coup d'etat.

Posted by: ptesta | December 7, 2010 5:26 PM | Report abuse

Ezra Klein sees this compromise as "something of a hopeful sign: The White House sat in a room with Republicans and Democrats and managed to negotiate an actual compromise. The final deal includes some things that Democrats will like and some things they won't like, and it includes some things Republicans will like and some things they won't like. But it's a deal, and a better one than many -- myself included -- thought they'd reach."

The President is apparently a realist, unlike many in his own party, and willing to compromise, unlike many in the old Party of NO. This is unother achievement, it seems to me, that his supporters can [and should] be proud of. The unemployed now hope to see extension of benefits for the next 13 months. Both employers and employees will benefit, encouraging more employment. The package is better than either side alone would, could have provided without compromise.

And all you passionate partisans out there in the cyberfora whose particular agenda lost out, give the snideness,vitriol, verbal attacks a rest. Let's try to be the United States, nor the Divided States, of America for a refreshing change.

Who won? We all did. Well done, President Obama. "Discretion IS the better part of valor."

Posted by: castleb | December 7, 2010 5:28 PM | Report abuse

What happens to the long-term unemployed? Those who have been without a job, without insurance--and without hope, for over 99 weeks. Are they simply the innocent victims of bi-partisan negotiations? They, who have the least options, have been left without a blanket in the coldest of winters. Shame on you, Mr. President.

Posted by: ptesta | December 7, 2010 5:30 PM | Report abuse

Rah, rah, bipartisanship!

We better hope that BOTH economic philosophies - one quasi-Keynesian but with endless government spending and the other trickle-down tax cuts - are correct in their promises to stimulate the economy.

Because it's unlikely that the scenario of one succeeding and the other failing will be enough to both address the needs of the economy AND the other strategy's harmful consequences.

And if they both fail, oh sh*t. Wait, how do you say oh sh*t in Mandarin?

Posted by: cprferry | December 7, 2010 9:20 PM | Report abuse

"FootNote: Every dollar less in Taxes paid by the RICH is a dollar more paid by the Workers. That would be you and me.

Posted by: chucky-el"

Or to their bank accounts. That are then invested in other businesses or loaned out. The assumption that the money doesn't end up in the economy is false. Yes, it's true the poor and middle class are likely to spend it on McDonald's or Sears the next day, but the economy grows by directing it to the best investments. More money chasing after wasteful investments does not grow the economy it causes inflationary bubbles.

Posted by: cprferry | December 7, 2010 9:27 PM | Report abuse

Gee, here I was thinking this was a terrible disaster for the country, with an extra trillion on the deficit just so rich people can get an extra foreign car this christmas.

Thanks, Ezra, for pointing out that it's really not a bad deal at all. What would we do without you giving us the "moderate" view, which every one knows has to be correct, because it's, well, so MODERATE.

Posted by: poperatzo | December 7, 2010 10:00 PM | Report abuse

I POSTED PRIOR TO THIS BUT DID NOT SEE IT SHOW UP SO IF IT DID THIS IS A REPEAT SORRY. I watched the president live today. Prior to watching it I was livid!! After watching it I had some understand where he is comming from and I think he believes he is doing the right thing but I think his advisers are giving him poor advice. I also think he should have gone to the Democratic house and senate prior to the annoucement not after the annoucement. After the speach and after some thought I still do not agree with him. Giving into the tax cuts for the rich will devastate our economy in the long term and it will put us in more debt with foreign countries as it is likely we will have to borrow money. We cannot afford to be paying billions more in interest to other countries and in doing so weaking our country and our negotiations with other countries. Important programs will be cut which probably will affect the middle class and the poor as whom else would they affect. This bill will have nothing but a negative affect. It is time to stand tough even if it means no tax cuts period. These tax cuts were implemented during a suplus that is no longer in effect and we need the money to lower the deficit.Something and someone has to give and it is time that it is the rich. It is the rich that get all of the tax loop holes. How did Exon get such a big refund or Bank of America pay no taxes? What is going on? I can even understand the inheritance tax as that has already been taxed but if the Republicans will not give in on tax cuts for the Rich I do not want the Democrates to vote for the bill period. I would rather let it go back to everyone paying taxes as the people will get use to it as then maybe america will wake up and figure the Republicans out. Just maybe they will figure out their agenda. We cannot afford this bill. I voted for President Obama as he ran on change. This is one of his campaign promises that was very important to me as was the public option. It took me a long time to get over that one as without the Public Option I can see our premiums going sky high. Also as far as the unemployement benifits I feel for those people but if the democrates cave in to this bill then what next as I guaratee there will be a next and then what Mr. President. If this bill passes I will not be able to forget this one. This bill is too important and it will be the beginning of a downward spiral and President Obama will be right in the middle of the spin. I am loosing faith in the people I vote for as he tried to justify it in his speach and I understand there are times you must compromise but Mr. President you picked the wrong one.

Posted by: tweetbird | December 8, 2010 2:12 AM | Report abuse

Added note anyone that thinks this is a good idea better start asking yourself where will they get the money that they won't have by passing this bill. Then those who are rich that think this is so wonderful go and find out which countries we owe money to the Saudi's are trying to buy up some of our debt contracts now as just the interest along they make billions on and it gives them power over us. We are having difficulty with trade agreements with China because how do you negotiate with a country when you owe them lots of money. Check out how much money and how many countries we owe money to. It will make you loose sleep as it does me. So which country do we borrow from this time? We are headed for a economic disaster that will make what we are going through now look like a cake walk and for what so the rich can put more money in their pockets? Is it going to be worth it for what it will do to our country? I think not.

Posted by: tweetbird | December 8, 2010 2:39 AM | Report abuse

It's unconscionable that Obama would agree not to increase the tax on millionaires. He had the perfect opportunity to do the right thing by saying he would not sign a bill that did not include this and force the Republicans to make a vote on record before December 31st. If Obama doesn't have the spine to make it crystal clear to the public that he stands up for the middle class, then what in the world does he have going for him?

Posted by: Plee2 | December 8, 2010 1:13 PM | Report abuse

Obama has never cared about anyone but himself in his politica carrer. Did nothing but water down Comm. Ed reform bills in Il and they funded his primaries. He lied in primaires and stole Hillay's voters from N. Jersey, Tx and Co.
Now he chews out his base but never fought for a great health care bill or real wall street reform. Now for some few crumbs he gives the budget a more than the stimuls costs a huge hole to set uo the demolition of S.S and Medicare. News media aiding him are just as weak and feel sorry for him as he's tanned. He is worse than Carter and needs to be primaried and this bill should be scrapped and get the congress to balk and fight for real middle and working class. Biden's a solider but he's wrong and he knows it. Obama please step down!

Posted by: crrobin | December 8, 2010 4:23 PM | Report abuse

Everybody is now saying that Barack Obama is a good man but does not have courage of his convictions. I say that as the first African-American president he is the perfect front man for corporations. I think that the reason why Democrats cannot pass tax cuts for the poor and middle class only is because they want campaign contributions from the rich. That is probably also why health care was skewed toward big pharma and the insurance companies and why the financial reform bill was a joke. All these are Republican-like bills and the only reason why Republicans opposed them was for the chance to sink Obama's presidency. But really, Clinton, Bush, and Obama, all have the same cabal of banksters led by Goldman Sachs manipulating the country from behind the curtain.

Democrats are still not saying anything about billionaire hedge fund managers paying taxes at the 15 percent rate. That was the present that Democrat Sen. Schumer gave them a few years back

Posted by: BabeintheWoods | December 11, 2010 5:04 PM | Report abuse

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