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Posted at 6:00 PM ET, 12/ 7/2010

Reconciliation

By Ezra Klein

Recap: Everything you need to know about the tax cut compromise; the other possible tax cut deals; and how the White House cut a pretty good deal but lost its base.

No links today, but an observation: I think there's a good case to be made that the White House struck a pretty good, and certainly better-than-expected, bargain with the Republicans. But the president certainly didn't look like a man who'd cut a good deal during his news conference. He was, by turns, touchy about the questions and scolding toward his base. He also still seems to be smarting over the public option debate. It was an oddly insecure public performance by a guy who had, I think, a fairly decent product to sell to the country. As I argued earlier, the president has really been more successful at the inside game of negotiations and compromises to get bills passed than at the outside game of communication and base mobilization. I find that surprising.

I'll be talking about the tax cut deal on both "Countdown With Keith Olbermann" and "Last Word With Lawrence O'Donnell" tonight.

By Ezra Klein  | December 7, 2010; 6:00 PM ET
 
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Comments

Based on the title of this post, I was hoping you'd touch on how the fact that Democrats in the Senate only needed 50 votes to pass a middle class only extension. Since the original tax cuts were passed using reconciliation, it seems only fair that the Democrats could use similar procedural tactics. I find it hard to believe that you really couldn't get 50 votes on this if you tried.

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

So the President looks out for his own 2012 prospects and the 2011 economy in one move and you call him insecure? Why? Because he used the public option debate as an analogy while discussing competing priorities in politics?

"The public option, as it exists in any bill moving through Congress, is not the core of reform, nor anything near it....The public option is not now, and has not ever, been the core of the argument for heath-care reform." - Ezra Klein, 7/28/09

President Obama basically restates your view and you call him insecure?

Your political analysis is totally at odds with your policy analysis. The President doesn't look insecure but you sure do look like you're talking out of both sides of your mouth.

Posted by: jamusco | December 7, 2010 6:38 PM | Report abuse

What are you, the Obama administrations court jester? Are you still trying to push the theory that Obama is playing chess while everyone else is playing checkers? The President is just an ordinary college town community organizer who is in way over his head. You and the rest of the Jurno-List media built him up to be some sort of genius and now that he has failed to enact your version of of wealth redistribution you are scrambling to rationalize this failure.

How are you now going to deal with the fact that every time you mention the debt you will have to chant the liberal mantra of "because of the Obama tax cuts"?

Posted by: cummije5 | December 7, 2010 6:45 PM | Report abuse

The President's scolding towards the left clearly shows his disconnect with reality. He thinks the reason people were upset over the public option is that it wasn't in the final bill. I'm sure some would prefer it, and frankly so would I.

However, the reason people were so upset over it was that Obama and the Dems didn't even put it on the table. That's the pure definition of not fighting for your core principles.

Even if the GOP wouldn't have accepted it, you still start negotiating at your ideal position and THEN compromise. Not move to the middle and then start negotiating.

That is why the left was so upset about the public option.

Posted by: rpixley220 | December 7, 2010 6:52 PM | Report abuse

He's testy because democrats know he is trying to gut social security with this payroll gimmick, and continue with his laughable attempt to call tax cuts "stimulus." He's testy because democrats know his big show of "fighting" against tax cuts for the rich was all hat and no cattle for several painful months. He's testy because he thinks democrats should be satisfied with him being "unhappy" with the "compromise," instead of angry. He's testy because democrats are questioning why he was unable to defeat republicans even though the voters were clearly on the democrats' side.

He's testy any time a democrat calls him out for giving his supporters nothing but articulate platitudes while delivering substantive victories to his political opponents.

Obama is like the friend in elementary school that didn't back you up when the bully picked on you. When the bullying was over though, your friend always came back to you saying "man that was some mean bullying," and then expected you to continue to be happy and satisfied with your relationship. When you questioned why your friend didn't have the guts to back you up against the bully, your friend became upset and insulted while you stood there with a black eye.

That's the kind of friend Obama has been to the democratic party, and we will pay dearly for it in 2012, just as we did in 2010.


But at least Obama can still count on your friendship, Ezra.

Posted by: hopeadoped | December 7, 2010 6:55 PM | Report abuse

Reconciliation is not available at this point.

Obama got what's likely the best deal possible at this time. The alternative is a stand-off in the senate - do you really think the republicans will cave?

The deal is likely the best stimulus available. If the economy doesn't improve, we'll have to deal with the Voldemort administration in two years.

Posted by: fuse | December 7, 2010 7:03 PM | Report abuse

Yeah, big win for the Democrats-- tax cut, tax cut, tax cut, tax cut, unemployment benefits. And the payroll tax cut is designed to weaken Social Security. And the extension of the holy and inviolable Bush tax cuts sets them up for being made permanent in two years.
Champagne for everybody!

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

@brookynpsu Ezra addressed that idea in a separate post, I think yesterday (though read the comments since Ezra was not 100% correct); reconciliation was not available for a variety of reasons, one of them being that Democrats passed a rule that it couldn't be used to increase the deficit. (Republicans will presumably drop the rule right away, just like they did before.)


Posted by: Hopeful9 | December 7, 2010 7:13 PM | Report abuse

Ezra you're right and wrong. The immediate deal in the immediate circumstance may be about all that can be gotten, but it is two years of both Obama and Dems playing poor poker that has brought them to such a weak position that they have to make such a deal. THAT is the disappointment. This is just the event that makes us painfully aware of it.

Posted by: TomCantlon | December 7, 2010 7:58 PM | Report abuse

Maybe I am missing something. On Olberman , Ezra kept saying the payroll tax reduction was progressive. Isn't it an across the board 2% reduction and isn't it mitigated for those making under $75,000 by the expiration of the make work pay credit?

Posted by: rivercard | December 7, 2010 8:42 PM | Report abuse

Maybe I am missing something. On Olberman , Ezra kept saying the payroll tax reduction was progressive. Isn't it an across the board 2% reduction and isn't it mitigated for those making under $75,000 by the expiration of the make work pay credit?

Posted by: rivercard | December 7, 2010 8:44 PM | Report abuse

@TomCantlon: Amen. And it's all very well for Obama to complain about liberal complaints. But his approach has not only failed to realize our hopes, it has failed politically, viz., the recent elections. It's not just that's it's not perfect -- it's not working.

Posted by: jtmiller42 | December 7, 2010 8:58 PM | Report abuse

I can't buy the 'pretty good deal' argument until somebody explains why the Social Security poison pill that will inevitably be used to destroy the program is part of a 'pretty good deal.'

Posted by: technoir | December 7, 2010 9:12 PM | Report abuse

“If you look at the numbers alone, the tax cut deal looks to have robbed Republicans blind.”

But not really. Democrats felt they had to support the tax cuts that weren’t for the rich, but what they really preferred was using that money for stimulus government spending, especially on high return social investments and aid to state governments, or to lower deficits. It feels like totally giving in to the Republican’s game and narrative without a fight from Obama that almost all of the $900 billion is for tax cuts and zero is for government investment.

Posted by: RichardHSerlin | December 7, 2010 9:25 PM | Report abuse

Any Democrat who considers this tax deal a good one can't see the forest for the trees.

The federal tax revenue take will be lower as a result of this deal. What does that mean? Any federal deficit reduction will have to come on the expenditure side.

You can just imagine the future initiatives to balance the federal budget on the backs of the poor and lower middle class coming down the pike. This is gov't by the rich for the rich. Sounds crass but that's what is happening. Who can say with a straight face that the 2% payroll tax cut will have a progressive impact on federal tax burdens? Maybe a Republican.

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

Any Democrat who considers this tax deal a good one can't see the forest for the trees.

The federal tax revenue take will be lower as a result of this deal. What does that mean? Any federal deficit reduction will have to come on the expenditure side.

You can just imagine the future initiatives to balance the federal budget on the backs of the poor and lower middle class coming down the pike. This is gov't by the rich for the rich. Sounds crass but that's what is happening. Who can say with a straight face that the 2% payroll tax cut will have a progressive impact on federal tax burdens? Only a Republican.

Posted by: tuber | December 7, 2010 10:03 PM | Report abuse

Obama and the dems screwed up by not fixing the tax problem months ago and by waiting until the last moment to try to fix it.

But now that were here, I think Obama got the best possible deal from the infinitely corrupt GOP. Thus, I am in alignment with Ezra on this now.

But Obama can not continue to appear weak and reactive, as I think he has done far too often. Though he is good intentioned, he needs to shape up or ship out. Get a backbone Obama, and start listening to your base.

Posted by: lauren2010 | December 7, 2010 11:01 PM | Report abuse

Just watched you on msnbc, Thank you so much for slapping me in the face. They are having a White House Christmas Party, My wife and I are trying to decide if we are going to let the lights get shut off or let them repo the car. Nothing here for people for me who have been out of work for 100 plus weeks,except for a bill to be paid if I ever do find a job. Will you be coming by with you smarta$$ mouth to tell my kids why there is no Christmas, or why dad can not go look for a job anymore because the bus and gas cost money? Or why dad did go look for a job and never came back because he is going to roll over and quit like his President just did? no I thought not. Have a nice Christmas.

Posted by: lvlichaels | December 7, 2010 11:19 PM | Report abuse

because he is going to roll over and quit like his President just did?


president obama is working in washington, and not in the north pole. sadly, he is the president, and not santa claus.
he did the best that he could.
that is the harsh reality of the world we live in, and not the one we all hope for.
this was the best that could happen, in a world that is built on difficult choices and harsh compromises.

the real world is no fairy tale.
many democrats wish to believe otherwise.

Posted by: jkaren | December 7, 2010 11:39 PM | Report abuse

here's my take he has the republicans in the palm of his hand, they have to vote for the dept celling, they can talk about the dept, or the stimulus, they cant talk about cutting medicare or social security, cause everytime they do I said you added another 700 billion bonues for the rich now you want the poor to pay for it, forget it then add all the amount of the deal to the deficit, and remind the people they agreed. I also remind them and everyone else that, they are share holders in the deal. Now, think about 2 years from now, how will they fight about raising taxes, it's off the table, its raised already, with an agreement that they are temp. how will they fight not raising for 250,000 and below (which is still everyone)just say the employment rate goes down with private sector jobs, wont that be 250,000 and below, humm. So I say thank you President it's about time the Republicans get involved, with governing the GOVERNMENT, that they say is too big, well you have now helped making it bigger, did I mention bigger than the stimulus. then i add you spent all the money i earned, from the payback, to payback your donors. Again, thank you MR. President, for looking out for the little guy. Not the people on tv with JOBS! (NOT YOU EZRA)or the Democrate that are Milloniars, and wont vote with you.

Posted by: sweetp_b307 | December 7, 2010 11:49 PM | Report abuse

Thank you, Ezra, for injecting some reality into the debate.

Once again, President Obama has pulled a fairly good, mostly progressive outcome out of a Congress where Senate Republicans can stop anything. You don't notice anybody who was about to lose Unemployment Insurance or the Earned Income Tax Credit complaining, do you?

Some of those who are complaining seem to want a dictator who will do what our side wants rather than a leader who knows how to make more incremental progress than any Democratic president since FDR.

Posted by: greg631 | December 8, 2010 2:24 AM | Report abuse

Ezra,
I can do advanced math, strategize and negotiate and I see losses across the board for the Dems and Obama.

- Obama has shown - yet again- the Dems can be rolled without a public fight. All McConnell has to do is appear intransigent and say "I won't budge." I had a 4 year old sister who did this, too.

- the WH and Dems NEVER got their messaging consistent. The middle class cut applies to 100% of households, not 98%. There is a cap at $250K, but even the rich get some. Rather than repeat that over and over, they split their messages.

- Obama's campaign platform of middle class cuts only fell apart without a fight.

- Obama has shown "temporary is permanent." The Bush cuts aren't going away in 2012. Obama just gave away $700 billion in freebies to top incomes and added it to the federal debt over the decade - $60-70 billion a year.

- WTF is the estate tax giveaway about? Whose pet project is that? I'm looking forward to reading Matt Taibbi on that one.

- Bernie Saunders concurs with me. The payroll tax holiday is designed to eviscerate Social Security. It's not a slippery slope, it's a cliff. If you don't understand that spend more time with Grover Norquist.

Now let me turn to finance.

- There is INVERSE correlation between the Bush tax cuts and job creation. The more tax cuts = fewer jobs.

- Lower taxes for high incomes = FEWER jobs. Can you find evidence that I'm wrong? No, but you can find 3 decades of evidence that I'm correct.

- High income investors are literally sitting on their money in low yield bond funds. They're in a low tax, low inflation, low risk environment why should they invest in job creation?

- I'm seeking capital now for a new company. I was on the phone today with a small fund manger and an investor. Later this week I'm meeting with 3 venture capital firms and one angel group. We're ALL complaining about a lack of risk capital for investment in technology firms that take years to get new devices from lab to market. Social networking is easy - but it doesn't create new industries with huge job creation.

- In short, no big increase in private job creation in 2011. Only job creation will be public jobs - and I don't know where that money comes from.

- Unemployment insurance extension? The Republicans would have caved on that if the Dems held out. Even the Rep's agreed.

- FINALLY - I've never seen Mitch McConnell smile. It's an unnatural act for him. But he let slip a smile on camera announcing the deal and it was scary. Go watch the video.

Obama was pawned. The nation is screwed.

Posted by: boscobobb | December 8, 2010 3:05 AM | Report abuse

Oh, forgot one more item.

If Obama let the top 2% pay more taxes...

"I heard the message of the Deficit Commission loud and clear. I'm using the elimination of special tax cut on high earners to reduce the deficit. They did very well the last decade. I froze paychecks of federal employees for the same reason. There's more to be done, but this is a start."

Any talk about "raising taxes" would evaporate.

Posted by: boscobobb | December 8, 2010 3:13 AM | Report abuse

It feels like totally giving in to the Republican’s game and narrative without a fight from Obama that almost all of the $900 billion is for tax cuts and zero is for government investment.

Posted by: RichardHSerlin | December 7, 2010 9:25 PM | Report abuse

hello. load of crap alert. As Ezra correctly said on Countdown (and Keith wouldn't let him get a word in at all as he was trying to run as always with the rich vs poor theme) was that only 15% of the tax cuts were for the "rich" and 85% were for everyone.

Posted by: visionbrkr | December 8, 2010 6:42 AM | Report abuse

An interesting take by Robert Reich:

The President’s Last Stand Is No Stand At All: Why the Tax Deal is an Abomination
TUESDAY, DECEMBER 7, 2010
The deal the President struck with Republican leaders is an abomination.

It will cost $900 billion over the next two years — larger than the bailout of Wall Street, GM, and Chrysler put together, larger than the stimulus package, larger than anything that’s come out of Washington in years.

It makes a mockery of deficit reduction. Worse, the lion’s share of that $900 billion will go to the very rich. Families with incomes of over $1 million will reap an average of about $70,000, while middle-class families earning $50,000 a year will get an average of around $1,500. In addition, the deal just about eviscerates the estate tax — yanking the exemption up to $5 million per person and a maximum rate of 35 percent.

And for what?

Wealthy families won’t spend nearly as large a share of what they get out of this deal as will middle-class and working-class families, so it doesn’t do much to stimulate the economy.

The deal further concentrates income and wealth in America — when it’s already more concentrated than at any time in the last 80 years.

The bits and pieces the President got in return — extended unemployment benefits, a continuation of certain small tax benefits for the middle class — are peanuts. After last week’s awful jobs report, Senate Republicans would have been forced to extend unemployment insurance anyway.

It’s politically nuts. Polls showed most Americans are against extending the Bush tax cuts for the wealthy.

It would have been a defining issue for the President to use to show whose side he’s on (the middle and working class) and whose side the Republicans are on (not the middle and working class). And given that the House turns over to Republicans in January, the President probably won’t have another chance like this one.

It loses him even more of his “base” — by which I mean people who think of themselves as Democrats and are committed to the ideal of equal opportunity and don’t want the nation to become even more of a plutocracy.

It makes him look weak — Republicans got everything they wanted. And when a President looks weak, he is weak.

House and Senate Democrats should reject this abomination.

The President should get himself new advisors.

Posted by: lauren2010 | December 8, 2010 7:25 AM | Report abuse

http://www.nytimes.com/2010/12/08/us/politics/08impact.html?src=ISMR_HP_LO_MST_FB

The deal to extend the Bush-era tax cuts for two years includes a bevy of additional credits and deductions that will reduce the burden on nearly all households.

But the tax benefits will flow most heavily to the highest earners, just as the original cuts did when they were passed in 2001 and 2003. At least a quarter of the tax savings will go to the wealthiest 1 percent of the population.

The tentative deal includes a two-year patch for the alternative minimum tax, a reduction in the payroll tax and a plan to reinstate the estate tax with lower rates and higher exemptions than in 2009 — all of which will offer far more savings for high earners than those in the low- or middle-income bracket.

The wealthiest Americans will also reap tax savings from the proposal’s plan to keep the cap on dividend and capital gains taxes at 15 percent, well below the highest rates on ordinary income.

And negotiators have agreed that the estimated $900 billion cost of the cuts will simply be added to the deficit — not covered by reductions in spending or increases in other taxes. That is good news for hedge fund managers and private equity investors, who appear to have withstood an effort to get them to pay more by eliminating a quirk in the tax code that allows most of their income to be taxed at just 15 percent.

In fact, the only groups likely to face a tax increase are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.

Posted by: lauren2010 | December 8, 2010 7:34 AM | Report abuse

lauren,

that's not an interesting take from Reich. Its (as usual from Reich) a completely one-sided, don't look at the whole picture take from Reich. Ezra's take is the interesting one. That being said if this "abomination" as you call it is stopped and nothing happens then the poor get saddled with tax rates they can't afford in horrible economy. Do we go into a double dip then? Maybe, maybe not.

Nice cherry picking btw. As Ezra's mentioned now ad nauseum this is 85% cuts/programs for everyone and 15% cuts/programs for the rich. I'm honestly kind of stunned that the Republicans aren't balking about it more.

Guess we have a new party of NO.

Posted by: visionbrkr | December 8, 2010 9:42 AM | Report abuse

AND the fact that any liberal can come onto a site like this and complain about this shows just a little bit of forgetfulness that the poor and middle class starting in 2014 are going to be getting $450+ BILLION PER YEAR in subsidies for their healthcare. If that's not total wealth redistribution I don't know what is. Not a one shot deal or a two year deal as this is but a PERMANENT WEALTH REDISTRIBUTION.

Posted by: visionbrkr | December 8, 2010 9:53 AM | Report abuse

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