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Posted at 6:34 AM ET, 12/ 7/2010

Wonkbook: Everything you need to know about the Bush tax cut deal

By Ezra Klein

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I'll admit it: I didn't think they had it in them. A temporary extension of the Bush tax cuts? Sure, they could manage that. Fear is a powerful motivator in Washington, and nothing scares politicians like the threat of a tax hike on their constituents. But an actual, negotiated deal, in which the two parties sit in a room and give things up, and compromise on positions they'd taken in public, and walk out with a deal that accomplishes more than was strictly necessary? I didn't see that one coming.

The deal has something to annoy everyone -- but also something for everyone. You're a Democrat? The tax cuts for the rich are extended, and the estate tax deal exempts inheritances up to $5 million while cutting the rate heirs pay to 35 percent. But that's why the Republicans like it. You're a Republican? The tax cuts are only extended for two years, and they're paired with 13 months of unemployment insurance, an extension of a variety of tax credits passed in the stimulus, and a new payroll tax cut -- all of them deficit-financed. But that's why the Democrats like it. You're a deficit hawk? The deal adds more than $700 billion to the deficit. And, let's be honest, you got nothing in return.

It's important, however, to keep the actual policy in perspective. If you're a Republican who argues that long-term uncertainty about tax rates and the deficit are the main problem for the economy, this deal only eases tax uncertainty for two years and it makes the deficit worse. If you're a Democrat looking for more stimulus, this isn't nearly enough, and most of what's there is just an extension of programs that are currently in place. In reality, the politics of the compromise might mean more to the market than the specifics of the policy: The two parties actually have the ability to sit in a room and come to a compromise. That has implications far beyond yesterday's tax cut deal. It suggests that we may see more get done in the next two years than many of us thought, and there'll be more capacity to respond to crises than some feared.

Top Stories

Obama and Congressional Republicans have reached a deal on extending the Bush tax cuts, reports Shailagh Murray: "President Obama and congressional Republicans agreed Monday to a tentative deal that would extend for two years all the Bush-era income tax breaks set to expire on Dec. 31, continue unemployment benefits for an additional 13 months and cut payroll taxes for workers to encourage employers to start hiring."

"Obama was able to extract an agreement from GOP leaders to support an additional 13 months of jobless benefits, a 2 percent employee payroll tax cut and extensions of several tax credits aimed at working families that were included in the stimulus bill. The deal also would revive the estate tax, but it would exempt inheritances of up to $5 million for individuals and $10 million for couples. Democrats on Capitol Hill are strongly opposed to setting the cap at that high a level and to the 35 percent rate discussed by Obama and Republicans that would apply to the taxable portion of estates."

The president's take: "Sympathetic as I am to those who prefer a fight over compromise, as much as the political wisdom may dictate fighting over solving problems, it would be the wrong thing to do. The American people didn’t send us here to wage symbolic battles or win symbolic victories. They would much rather have the comfort of knowing that when they open their first paycheck on January of 2011, it won’t be smaller than it was before, all because Washington decided they preferred to have a fight and failed to act."

Mitch McConnell's take: “I appreciate the determined efforts of the President and Vice President in working with Republicans on a bipartisan plan to prevent a tax hike on any American and in creating incentives for economic growth. Their efforts reflect a growing bipartisan belief that a new direction is needed if we are to revive the economy and help put millions of Americans back to work. Members of the Senate and House will review this bipartisan agreement, but I am optimistic that Democrats in Congress will show the same openness to preventing tax hikes the administration has already shown."

The White House political team's take: "Although his liberal supporters are furious about the decision, President Obama's willingness to extend all of the George W. Bush-era tax cuts is part of what White House officials say is a deliberate strategy: to demonstrate his ability to compromise with Republicans and portray the president as the last reasonable man in a sharply partisan Washington...he strategy emerged from hours of post-election meetings among senior administration officials who, after poring over returns, exit polls and midterm history, have determined that the loss of independent voters who supported Democrats in 2008 cost the party dozens of races this year. "

The liberals' take: "The plan has thus far received an icy reception from Capitol Hill Democrats. In a one-sentence statement to reporters, Jim Manley, spokesman for Senate Majority Leader Harry Reid said, 'Now that the President has outlined his proposal, Senator Reid plans on discussing it with his caucus tomorrow.' Sen. Bernie Sanders (I-VT) claims he will join a filibuster of the plan if and when it hits the Senate floor...Progressive economists have worried that a payroll tax break along the lines of the one announced tonight could come back to bite Democrats if it undermined the solvency of Social Security. But officials tonight insisted that its cost to the Social Security trust fund will be reimbursed with a credit from general revenue."

The National Review's take: "A qualified victory." "[Democrats] ran two presidential campaigns on a platform of extending the 'good' tax cuts while letting the 'bad' ones expire. President Obama has now moved into the second phase of capitulation. He has agreed to delay any tax increases, on anyone, for at least two years. The top marginal income-tax rate will stay at 35 percent; the dividend and capital-gains tax rates will stay at 15 percent. Over the next two years, the estate tax will be lower than it has been for almost any part of the last decade. The president has also agreed to an additional reduction in tax rates: Payroll taxes will also be temporarily reduced. And his own administration’s best policy proposal, allowing businesses to deduct the full cost of all investment expenses over the next two years, is also included in the deal."

My take: An imperfect, but better-then-I-expected, compromise. "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...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."

Live in studio interlude: Keepaway play "Sideways Smile".

Got tips, additions, or comments? E-mail me.

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Still to come: The Center for American Progress unveils a new deficit plan; a deal has been reached on the Medicare "doc fix"; the auto workers' union is under attack for supporting the South Korea trade deal; the Supreme Court will rule on a global warming case; and a kitten hugging a teddy bear.

Economy

The Center for American Progress has proposed its own deficit reduction plan, write Michael Ettlinger, Michael Linden, and Reece Rushing: "The most far-reaching of the revenue plans, the 100 percent tax revenue option, relies on seven distinct tax increases. This plan would generate $255 billion in new revenue by: Implementing a graduated surtax on adjusted gross income for households making more than half a million dollars per year. Imposing a $10 per barrel fee on imported oil. Returning the estate tax to pre-Bush tax cut levels--a $1 million exemption and a 55-percent rate. Removing the cap on the employer side of the Social Security payroll tax. Indexing the entire tax code to a better measure of inflation. Increasing the top rate on capital gains and dividends. Increasing the ordinary income tax rates on tax brackets. between $140,000 and $380,000."

Federal taxes are at a historic low: http://reut.rs/fv8QZj

We can cut the deficit without "austerity measures", writes Joseph Stiglitz: "In the US (and some other advanced industrial countries), any deficit-reduction agenda has to be set in the context of what happened over the last decade: a massive increase in defense expenditures, fueled by two fruitless wars, but going well beyond that; growth in inequality, with the top 1% garnering more than 20% of the country’s income, accompanied by a weakening of the middle class - median US household income has fallen by more than 5% over the past decade, and was in decline even before the recession; underinvestment in the public sector, including in infrastructure, evidenced so dramatically by the collapse of New Orleans’ levies; and growth in corporate welfare."

Bowles-Simpson worked, writes Keith Hennessey: http://bit.ly/hYzXx3

The world economy is in need of rebalancing, writes Jeffrey Sachs: "The first rebalancing should be between the rich and poor. The traditional gaps between the 'developed' and 'developing' worlds are closing, thanks to the remarkable growth of the emerging economies. The small club of the G-8 countries has already given way to the larger G-20, which includes China, India, Brazil and other emerging economies. It’s urgent to widen the circle still further, so that today’s poorest countries may gain a foothold on prosperity and participate fully in global leadership. Within our own divided societies, we must of course do the same. America and other highly unequal societies need to rebalance a culture of super-wealth alongside degrading poverty."

Adorable animal with a teddy interlude: A kitten hugging a teddy bear.

Health Care

A deal has been reached on the Medicare "doc fix", reports Jennifer Haberkorn: "Senate leaders have reached a tentative, one-year deal on the Medicare 'doc-fix,' sources close to the negotiations say. The deal pays for the must-pass extension of Medicare doctors’ payments with changes in the tax subsidy program that some consumers will use after 2014 to buy health insurance on the new exchanges...The rest of the Senate was to review the deal Monday night with hopes of passing it with a unanimous consent agreement later this week, possibly on Wednesday...Democrats are under pressure to pass a full-year patch of the doc-fix during the lame duck session, because Republicans are already eyeing it as a vehicle to tie to repeal efforts in the next congress."

Arizona's organ rationing system is morally and technically wrong, writes Sally Satel: "The Arizona decision is doubly wrong, technically and morally. To regard transplantation as "optional" is a grievous medical error. When suitable patients receive organs, they can live meaningful and longer lives as parents, spouses, neighbors, and workers. Morally, it is troubling enough to deny life-saving treatment by never guaranteeing it in the first place; it is even worse to pull the plug on people's hope--and, with it, their lives. At the very least, the state should have grandfathered in those already assured of coverage. Then, going forward, in refusing to transplant those who could not afford it, Arizona would be making more explicit the economic rationing that already exists."

Domestic Policy

The United Auto Workers are under fire for backing the South Korea trade deal, reports John Maggs: "Organized labor is in an uproar over the new free trade agreement with South Korea, with some union leaders accusing United Auto Workers president Bob King of embracing a deal to curry favor with a White House that saved the UAW with its $80 billion bailout of the auto industry. King denied the charge in an interview Monday and said he would work to convince his fellow union presidents to support the agreement, predicting that 'they will see that this a good deal for our members, and they will respect that.'...Neutrality would be a watershed moment for the labor movement, which has made a harsh attack on trade and globalization a central principle for decades, according to Andy Stern, former president of the Service Employees International Union."

DC-area Congressmen are fighting the federal pay freeze: http://wapo.st/eUnbza

Ex-DC schools chancellor Michelle Rhee is launching a campaign organization, report Bill Turque and Nick Anderson: "Michelle A. Rhee, who often expressed impatience with politics in more than three years as D.C. schools chancellor, launched a new political organization Monday that plans to spend $1 billion bringing her aggressive brand of education reform to the national stage . Rhee said the new group, StudentsFirst, will pressure elected officials and bankroll candidates at all levels of government who support her approach. The agenda includes recruiting high-quality teachers who are held accountable for student growth, swiftly removing those who do not perform, offering merit pay to reward top educators, expanding school choice and fostering parent and family involvement."

Republicans should support the DREAM Act, writes Michael Gerson: "Critics counter that the law would be a reward for illegal behavior and an incentive for future lawbreaking. But these immigrants, categorized as illegal, have done nothing illegal. They are condemned to a shadow existence entirely by the actions of their parents. And the Dream Act is not an open invitation for future illegal immigrants to bring their minors to America. Only applicants who have lived in America continuously for five years before enactment of the law would qualify... The actual choice is between allowing these young men and women to develop their talents and serve in the military, or not."

Young wizards being judge-y interlude: Every moment of Hermione snark in the Harry Potter movies.

Energy

The Supreme Court is hearing a case on global warming, reports Robin Bravender: "The court will hear an appeal next year from electric utilities in the high-profile American Electric Power v. Connecticut case. Power companies are challenging a lower court ruling that allowed states and environmental groups to move ahead with a public nuisance lawsuit seeking to force the utilities to slash their greenhouse gas emissions. Monday’s decision marks a victory for the utilities -- American Electric Power Co., Duke Energy, Southern Co., Xcel Energy Inc. and the Tennessee Valley Authority -- that want the court to toss out the decision that could force them to reduce their greenhouse gas emissions."

White House energy czar Carol Browner may become deputy chief of staff, reports Darren Samuelsohn: "Would anyone notice if the White House didn't have a special energy and climate office? That's the million-dollar question as President Barack Obama considers giving Carol Browner a promotion to deputy chief of staff...White House officials say Browner’s tenure has been a success, citing the creation of the first greenhouse gas standards for automobiles and a record $90 billion stuffed into the economic stimulus package for renewable energy. She also got high marks for her coordination of the response to this year’s Gulf of Mexico oil spill."

Al Gore's climate group is cutting staff: http://politi.co/h5N5aq

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.

By Ezra Klein  | December 7, 2010; 6:34 AM ET
Categories:  Wonkbook  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: An imperfect, but not-that-bad, deal on the tax cuts
Next: The White House takes on Pelosi and Schumer -- but why?

Comments

oh my goodness, you're one of my favorite analysts but I think your take on the "framework" is way off. It's not a good deal b/c both sides agreed to it. The fundamentals of the deal are bad b/c the GOP is arguing from a failed economic ideology and the President is too weak - or too much a believer in that ideology - to do have done the right thing from the beginning. You've fallen victim to the "if everyone hates it, it must be good" fallacy. It's not good. It won't help enough and costs too much. It will further deepen income inequality and worsen the instability of our economic system, while entrenching a political system that is hurting us more than helping us.

Posted by: eRobin1 | December 7, 2010 7:39 AM | Report abuse

As a progressive, I am happy that the $5 million estate exemption was added. I'd actually like it even higher. The reason I like this is that, without it, many estates must be sold off to richer Americans or transnational corporations simply because those inheriting the estate can't afford the tax bill. Lots of these estates have high values but are cash poor; no sense handing over family estates to richer entities. That doesn't seem progressive to me.

Posted by: lauren2010 | December 7, 2010 7:45 AM | Report abuse

Ezra, if I say to you, "You're money or your life," and you give me your money, we didn't both come out ahead.

Posted by: RyanD1 | December 7, 2010 7:52 AM | Report abuse

What prevents the democrats from waiting until enough Republicans state their support the compromise is guaranteed passage, and then amending it to make the 250000 and less tax breaks permanent? Or similarly reintroducing the House Bill after passing the compromise? Would the Republicans be able to prevent the decoupling?

Posted by: DavidCEisen | December 7, 2010 8:07 AM | Report abuse

I suspect all this happy talk will dissipate by, say, March, as the tax cuts and benefits fail as adequate stimulus, the unemployment rate remains mire above 9%, and the deficit climbs higher, opening the door to the old Beltway classic, " We Must Gut Social Security and Medicaid -- NOW."

Posted by: scarlota | December 7, 2010 8:24 AM | Report abuse

As Jonathan Chait said, "Why were Republicans so flexible? They are willing to deal away a lot if they're getting tax cuts for the rich." It's a very important point.

In the comments, I expanded on this:

It suggests a strategy for Democrats.

In this case the gift to the uber-rich cost only $10 billion over two years, but it was tightly focused on the uber rich. Thus, it was super valuable to the Republicans even though it didn't cost that much nationwide.

Perhaps for future big things, like universal free bachelors degree, we can get Republicans to acquiesce at relatively low cost with a tax cut just for billionaires. There's only a few hundred of them so even if we gift them with $100 million each, it still only costs a few tens of billions, but the Republican party and the trust fund babies they work for will go ape over it and agree to big concessions.

It's funny, but the general idea could be powerful.

at: http://www.tnr.com/blog/jonathan-chait/79693/how-obama-got-the-tax-cut-deal#comments

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

According to Krugman's analysis, this was a mistake for Obama and the Democrats, $700 billion added to the deficit and it doesn't even improve their chances in 2012; it hurts them:

So let’s say that this raises GDP by 0.7 percent relative to otherwise; rule of thumb is that one point on GDP is half a point on unemployment, so add 0.35 points to the CBO numbers.

That’s a two-year average; what about timing? Both the payroll tax break and the unemployment extension are for the first year only. So, a bigger boost next year, fading out in 2012. Since all the evidence says that elections depend on the rate of change of unemployment, not its level, this is actually bad news for Obama: he’s setting himself up for an economic stall in the months leading into the 2012 election.

at: http://krugman.blogs.nytimes.com/2010/12/07/the-deal/

Did Obama even have numbers like these run? Or was he once again overly worried about looking too liberal and not post-partisan-fairy-land enough.

Posted by: RichardHSerlin | December 7, 2010 8:55 AM | Report abuse

I am surprised that Ezra thinks this deal was somewhat unlikely.

Listen up Ezra, I will now tell you something you haven't learned yet....

The GOP will agree to almost ANY package that either lowers taxes for the wealthy or increases corporate welfare by a sufficient amount.

There. Done. Do you understand now why this deal was almost a sure thing from a GOP perspective?

They don't really oppose such things as unemployment benefits. That's because they don't mind increasing deficits and debt (as history AND THIS DEAL has shown). They simply use these other issues as bargaining chips to get what they really want.

Despite the increasing debt and deficits, the GOP will never agree to tax increases. They will instead hold out for austerity measures and spending cuts, and would gladly see the entire system crumble just so long as their taxes don't go up. It's all part of the Starve The Beast plan.

Another thing. Don't be fooled into thinking this agreement signals a possibility of fiscal bipartisanship on the GOP's part. UNTIL THE GOP AGREES TO RAISE TAXES, IT IS ILLOGICAL TO SUGGEST THEY ARE BIPARTISAN. This is because they don't care about any other fiscal issue except lowering taxes. This includes the issue of deficits. They don't care about deficits. Period. So, what we have here today is the GOP getting everything they cared about (keeping taxes low) and everything else is meaningless to them. That is NOT bipartisanship. That is the GOP winning everything they held out for.

Posted by: lauren2010 | December 7, 2010 8:55 AM | Report abuse

social security is in trouble and the clown obozo wants to take funds away from it...
hey obama...
doing this won't get you independent votes...
because down the line a decision about social security will have to be made and when they point this out...
you will lose everyone's support...

Posted by: DwightCollins | December 7, 2010 9:00 AM | Report abuse

The moves last night are too marginal to stimulate the US economy. A much less costly way to create millions of jobs would be to eliminate the US corporate income tax. And a more important impact would be the great assist it would give to the funding levels of the State/Muni/Corporate pension plan systems.
The US needs significant growth initiatives right now. www.eliminatecorporateincometax.com

Posted by: dennis47 | December 7, 2010 9:03 AM | Report abuse

The $10 billion gift I meant was on the estate tax. the total gift to the rich was much larger with the income tax cuts.

Posted by: RichardHSerlin | December 7, 2010 9:11 AM | Report abuse

For those progressives that are whining about 'undermining social security', where was the whining when a half-trillion was taken from SS for ObamaCare?

I didn't hear much from them then. Why now?

Posted by: WrongfulDeath | December 7, 2010 9:15 AM | Report abuse

"...so add 0.35 points to the CBO numbers. [unemployment .35% lower over two years]" -- Krugman

And you have to wonder too if we'll even get that. With no deal, projected deficits are $4 trillion lower over the next ten years. This could make the Fed willing to add substantially more stimulus than otherwise, giving us that same 0.35 or more. So this may have actually increased unemployment, as well as adding hundreds of billions or trillions to the deficit, and increased the odds of a President Palin.

Posted by: RichardHSerlin | December 7, 2010 9:19 AM | Report abuse

wrongful

You are living up to your name by saying Obama took a half trillion from SS for Obamacare. That is WRONG

The money was taken from Medicare Advantage. Not SS. In essence, the money was taken from an ill-conceived part of medicare designed more to provide corporate welfare than to provide cost effective medicare care for medicare participants.

Still, Obama has now shown he does not want to really be a good one-term president. Rather, he is trying to win re-election by not making everyone angry with smaller paychecks.

Posted by: lauren2010 | December 7, 2010 9:26 AM | Report abuse

You have to wonder, does Obama have someone on his inner team who runs numbers like Krugman's and presents them to him, and explains the trend, that the stimulus is less in 2012 than 2011, and direction of unemployment matters more than level for re-election. Or is it just that Obama is once again overly scared of looking too liberal and not post-partisan-fairy-land enough.

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

Richard

It is simple.

Obama is afraid of angering people because of diminished paychecks starting in January.

That's it. See, easy.

This means Obama really does want to be re-elected and no longer cares about being a good, one-term president (as he earlier claimed).

Obama is unwilling to risk that anger, and so wants a deal now while the dealing is achievable.

Posted by: lauren2010 | December 7, 2010 9:35 AM | Report abuse

This is perhaps the worst piece of legislation ever. All they have to do to end the jobless problem is not do anything, and now the American taxpayer is going to pay 700 billion dollars to continue this disaster for two more years?

Posted by: eggnogfool | December 7, 2010 9:37 AM | Report abuse

Blah blah blah. I am so sick of this discussion. To me the important thing is the new rules for the new congress. I understand January 5 is the date the Senate will consider new fillibuster rules. Please God. Isn't it unconstitutional somehow that they (GOP) can pervert the majority rule? If majority ruled we wouldn't be having this discussion. In the neantime, I am glad the President is looking out for the unemployed and all the people who are living paycheck to paycheck. I wish there was another tier for the 99ers and I wish there was an aid-to-the-states package. And my anger is directed at the Republicans and the handful of Democrats who voted with them.

Posted by: espell | December 7, 2010 9:42 AM | Report abuse

Folks, as long as you can separate your beliefs from your investing, this should be a great day for you.

If as I told you weeks/months ago you went short Treasuries, long the dollar, long financials and long commodities, your Christmas is already paid for and you are insulated from the effects of this or any other deal. (no, I'm not operating under the assumption that people take investment advice from me, I'm illustrating a point).

Democrats need to make money so they can support theri candidates too!

Now, if you haven't done the above, for God's sake today is not the day to buy! You have to wait for the inevitable pullback, except if the dollar goes down significantly today (not as of this writing). Hang on to your commodities no matter what. Real inflation will be very hot, possibly by summer, no matter what core inflation does.

There is an OPEC meeting this weekend, and if they raise production, prices might fall in the short term. That would be a great time to get in. The cheating usually begins after an increas of 5-10% in barrel prices.

It's a BEAUTIFUL morning, even for a Democrat!

Now, back to your regularly scheduled interviews with college professors and bloggers.

Posted by: 54465446 | December 7, 2010 9:50 AM | Report abuse

"Still, Obama has now shown he does not want to really be a good one-term president"

i am tired of reading this.
President Obama has been an excellent president, and he will not be a one-term president. he will be re-elected for a second term, and the legacy of his record will show many great accomplishments.

those of us in the real world here, aware of the daily obstacles, bitter conflicts and ensuing madness that president obama has to deal with, value his accomplishments and accept the relative goodness of things in a world that requires bitter and constant human compromise on every level.

what people expect of president obama, on a world-scale, most cannot accomplish on a micro-scale, even within their own families, workplace or communities.
take the plank out of your own eyes, before casting scathing critiicism on the work he is trying to do.

Posted by: jkaren | December 7, 2010 9:55 AM | Report abuse

@lauren2010 "It is simple.

Obama is afraid of angering people because of diminished paychecks starting in January.

That's it. See, easy."

I believe you are underestimating the policy calculation of Obama's economic team that "bad stimulus is better than no stimulus" when it comes to the economy and unemployment. I think Ezra's calculations were that it was another $200 - $300 billion stimulus and if you are Keynesian this is better than nothing at all.

Posted by: jnc4p | December 7, 2010 9:55 AM | Report abuse

@54465446,

You are correct. Long Sliver since two weeks ago. Money is rolling in.

However, those Dems who post here think it's evil to make money and anyone who does is also evil, except for George Soros or ALGORE.

You can lead a horse to drink, but you can't make him water.

Save your breath

Posted by: WrongfulDeath | December 7, 2010 10:02 AM | Report abuse

"Still, Obama has now shown he does not want to really be a good one-term president"

dont you know that even an inch of progress can take a lifetime to accomplish?
dont you know how difficult radical change is,
even in the life of one person, no less, an entire and completely disarrayed country?

there is no such thing as small change.
transformation may appear sudden, but it is actually a gradual thing.
dont you see that?
dont you see that one small act, builds on another small act, and that is how real change occurs.
in our impatient and unyielding culture, nothing happens fast enough or tailor-made enough, for most people, nowadays.
that is one of the very big problems in this country.
reflect on the actual possibilities of things.
just how much can happen all at once.
patience in all situations, is one of the hardest lessons to learn.
there is a spiritual way to look at the demand for immediacy and "perfect" satisfaction in all things.

Posted by: jkaren | December 7, 2010 10:04 AM | Report abuse

Wrongful death:

Don't give up so easily. This may be a teaching moment!

Silver has been great, but make sure you have Ag exposure. With any kind of a world economic recovery at all, grain shortages are invevitable due to biofuel production rising.

Posted by: 54465446 | December 7, 2010 10:06 AM | Report abuse

Watch that inflation burn like a wet cigarette at a bus stop.

http://krugman.blogs.nytimes.com/2010/12/06/core-logic-still/

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

jkaren - Not in blogo-land. Change must happen before lunch today otherwise everyone here will know for certain that Obama is a fraud.

Do yourself a nice little experiment. Give yourself a total blogosphere blackout for a week and then come back. I guarantee they will still be talking about the same things in the same urgent, all-or-nothing tones. Yet they need to post 10-12 times per day for people to read. There is a fundamental disconnect in the rhetoric of blogs and the pace of "real" life. I think that's behind a lot of the faux outrage by the Professional Left.

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

jkaren and klautsack:

I appreciate the effort both of you put into your posts. Remember long lasting effective change only comes from the top, not the bottom. That's why our Revolution, led by some of the richest men in the colonies, succeeded and the French one, led by the Parisian mob, failed.

Obama would never have been president if he had gone to Joe Jones State University. Make as much money as you can and put your children into the most powerful positions you can get for them. Don't worry too much about protest marches, they're for college students, the unemployed and the old.

Consider yourself like a computer virus, activating when you reach the necessary level of power.

Posted by: 54465446 | December 7, 2010 10:24 AM | Report abuse

klautsack

thank you for what you wrote.

i continue to be grateful for the leadership of president obama.
it takes great inner- courage and wisdom to know there is no alternative to making compromises in life, in politics....as much as we wish the world would yield completely to our terms and ideals.
in a political arena that is filled with brass gongs, his vision and composure continue to elevate us.
even though so many fail to understand, or acknowledge that.

in the longer view, all of this will be revealed, and his legacy of accomplishments will be very great.
he promised "change that we could believe in," not every darned thing we could hope for.
i wish many people would finally have the wisdom to know the difference.

Posted by: jkaren | December 7, 2010 10:26 AM | Report abuse

I'd like to suggest that anyone referring to themselves as a wonk, go and wonk the wonk off.

It's a pathetic, overused term like hipster and engenders the same reliability in predicting economic theory as being a hipster does in evaluating music.

It seems that Ezra and his minions are wonks only in the sense that they can use Google to "wonk" and find evidence for theories they already believe are true.

Oh look, I found a chart without any references to any data sources (I mean downloadable csv data - not just ambiguous "From the CBO" crapola) that shows how right I am. I'm such a wonk!

Posted by: NelsonMuntz | December 7, 2010 10:30 AM | Report abuse

"Obama would never have been president if he had gone to Joe Jones State University. Make as much money as you can and put your children into the most powerful positions you can get for them. Don't worry too much about protest marches, they're for college students, the unemployed and the old."

this is not true.
look at the power of sarah palin and glenn beck.

and to my way of thinking, barack obama and michelle obama came from very difficult and marginalized circumstances, and they both represent the highest values that i aspire to.
there are many situations where change has come from the bottom, and not from the top....your two illustrations, notwithstanding.

Posted by: jkaren | December 7, 2010 10:36 AM | Report abuse

The deal President Obama made is a s!!t sandwich Ezra. I'm going to ask my Congress critters to vote against it.

Posted by: kindness1 | December 7, 2010 10:37 AM | Report abuse

Though I speak with the tongues of men and of angels, but have not love, I have become sounding brass or a clanging cymbal.
~~~~~~
Corinthians 13:1

Posted by: jkaren | December 7, 2010 10:46 AM | Report abuse

jkaren:

"this is not true.
look at the power of sarah palin and glenn beck"

Neither of them will ever be president, bet on it.

I wasn't criticizing the President, I was saying that he, or someone close to him, saw that the path to power in this country does not go through the streets, or from small universities, but through the normal halls of power.

Of the Presidents since Harding, the only one first elected in his own right who was not from an elite school was Reagan.

(Truman, because of FDR, Johnson because of Kennedy, Nixon because of Eisnehower, Ford, accident of history)

Posted by: 54465446 | December 7, 2010 10:59 AM | Report abuse

kindness1 - for some reason "slit sandwich" sounds infinitely more vulgar than its more common counterpart.

Posted by: klautsack | December 7, 2010 11:07 AM | Report abuse

Yes, Ezra is absolutely correct. The ability of Democrats and Repbulicans to come together and pass legislation is much greater than we thought, especially if the Decmorats give the Republicans everything they want and more, and receive almost nothing in return. Were the Republicans really prepared to end unemployment benefits with unemployment hovering around 10%? Try to run in 2012 with that in your platform. The Democrats in Washington are weak, spineless, short-sighted and stupid. They deserved the thumping they received in November and they will deserve even bigger losses in 2012, including the White House. Obama just signed up as a one-termer. Jimmy Carter anyone?

Posted by: chadborman | December 7, 2010 11:13 AM | Report abuse


"I wasn't criticizing the President, I was saying that he, or someone close to him, saw that the path to power in this country does not go through the streets, or from small universities, but through the normal halls of power.

Of the Presidents since Harding, the only one first elected in his own right who was not from an elite school was Reagan."

the path to power often does go through the streets.
richard nixon, ronald reagan,bill clinton, jimmy carter, barack obama....most have not come from lineages of wealth...but most of them valued an outstanding education, and had the work ethic and persistence to chart a special course for themselves.
there is no surprise in that.
i think that sarah palin had a more conventional beginning than barack obama, who came from extremely complicated personal circumstances.
but the difference between them, is that he worked hard to learn, to express his thoughts, to value education......
unlike sarah palin, who represents a lazy intellect and a lack of humility....does not honor the traditions of education, or of the gospels she supposedly holds sacred in her system of judaeo-christian beliefs.
many of our leaders came from the bottom...and from hardscrabble origins...but it was their spirits that led them to places where they could learn and make a difference.

Posted by: jkaren | December 7, 2010 11:20 AM | Report abuse

Heirs pay the tax?? I don't think so -- more like the estate pays and if it can't then it is called insolvent. The only situation heirs would be interested in paying the DEATH tax is if the heirs would like to keep the assets for themselves.

Posted by: hwstov4 | December 7, 2010 11:20 AM | Report abuse

Well from where I stand this is a deal for the crooks in Gongress an Big Business! I am sick to death of them sticking it too me at the gas pumps! These prices are killing the American Economy an the Business America Employs now will be gone! Meanwhile Gongress gave themselfs a loophole to protect them only an continue to screw the working class. I hope America Eupts in the New Year to show them all a lesson they won't soon to forget!

Posted by: JWTX | December 7, 2010 11:21 AM | Report abuse

"The Center for American Progress has proposed its own deficit reduction plan, write Michael Ettlinger, Michael Linden, and Reece Rushing:"

That is so yesterday!


"Bowles-Simpson worked, writes Keith Hennessey"

Of course!


"Ex-DC schools chancellor Michelle Rhee is launching a campaign organization, report Bill Turque and Nick Anderson"

That money will probably wind up going to keep finacee Kevin Johnson out of jail as he has an unfortunate tendency to "flirt" with tennagers!

Posted by: 54465446 | December 7, 2010 11:26 AM | Report abuse

As it stands now it is mathematically impossible to reduce the deficit or debt at any time, without severe cuts elsewhere in the budget. The big question: How long will the financial markets pretend they don't see the train wreck coming?

How long will it be before Moody's cuts the US debt to JUNK status?

Posted by: Maddogg | December 7, 2010 11:28 AM | Report abuse

jkaren:

You are arguing with yourself. I am not discussing where they came from, but how you achieve power in this country.

Posted by: 54465446 | December 7, 2010 11:29 AM | Report abuse

You're right Ezra, there's something in the deal to annoy and encourage everyone. For me and most Americans, it's the extension of the tax bonuses for all those making over 250K. In Obama's defense, he was in a bad position to bargain. Short of having 60 progressives Democrats in the Senate to break Republcian filibusters, he had a weak hand. Had he let taxes go up for the middle class and ended stimulus for the sagging economy, it might have been disastrous for Democrats in 2012. With this deal, not only will tax cuts for the middle class continue, but the stimulative unemployment insurance will be extended for over a year, plus there will be a countecyclical cut in payroll taxes. In addition, if there had been no deal, there would have been no hope for the repeal of DADT, the ratification of the vital START treaty, and possibly some movement on other legislation wanted by Obama and Democrats. The whole situation that led to the deal is unfortunate (most of all, the fact that obstructionist and mean-spirited Republicans held all good legislation hostage to tax cuts for the rich), but the histrionics of the hard left is dismaying, childish, and lacks all historical perspective.

Posted by: DWSouthern | December 7, 2010 11:30 AM | Report abuse

These tax cuts don't come free. In fact, they are more costly that both wars combined every year. The axe is going to come down hard on the middle class as Republicans "pay" for their $100,000 annual giveaway to millionaires by slashing Medicare payments, cutting SS, reducing government services and making the poor much poorer, the middle class pay a lot more in taxes and lost benefits, and the rich a lot fatter.

Posted by: AxelDC | December 7, 2010 11:38 AM | Report abuse

"Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt." – Orszag

Has he or anyone in the administration actually run specific numbers and talked about them with Obama?

Here's Krugman from a post today, "...so add 0.35 points to the CBO numbers. [unemployment .35% lower over two years]". And you have to wonder too if we'll even get that. With no deal, projected deficits are $4 trillion lower over the next ten years. This could make the Fed willing to add substantially more stimulus than otherwise, giving us that same 0.35 or more. So this may have actually increased unemployment, as well as adding hundreds of billions or trillions to the deficit, and increased the odds of a President Palin, especially since they front loaded it. There's more stimulus in 2011 than 2012, so around election time they effect on the unemployment trend will be upward, when trned is more important in elections than the absolute level.

Do they run these numbers and discuss them? Or is Obama again being overly scared of looking too liberal and too un-post-partisan-fairy-land?

Posted by: RichardHSerlin | December 7, 2010 11:38 AM | Report abuse

" I am not discussing where they came from, but how you achieve power in this country."


i am sorry if i am somehow missing your point.

how you achieve power and excel in almost any field, is through knowledge and an excellent education and extremely hard work...not just in politics.
my point is where you start from. and many of our recent presidents didnt come from extraordinarily privileged beginnings.
you can still get to a place of great power with very humble origins and many strikes against you.
how is a career in medicine, in engineering, in mathematics, in law...any different?
dont the very smartest and most competitively hardworking individuals usually end up at the best schools?

why would it be different in who achieves the presidency.
(with some notable rare, recent exception. fate plays a wierd hand in everything.)

Posted by: jkaren | December 7, 2010 11:43 AM | Report abuse

Keep your eye on the ball. The real move here is to destroy Social Security.

Posted by: rusty3 | December 7, 2010 12:00 PM | Report abuse

3 strikes and he is out and this is the 3rd strike. I will not ever vote for him next term. He should not run. Nor will I vote republican.

Health care idea sucked--all PhARMA did was increase 30% cost of drugs and higher premiums and what was the joke on credit cards--oh for 2 years they sucked their customers dry with fees and higher interest rates and some ignored the entire situation.

Now we come to taxes and we get Bush another few years--just what we wanted..the rich to get richer and us to help them and to be a republican whether I want to be one or not.

I would rather fight the good fight and lose than to be a gutless wonder so I can spend 4 more years in the WhiteHouse--not on my vote!

Posted by: mac7 | December 7, 2010 12:24 PM | Report abuse

The extra 2% of my income I get from not having to pay that amount in Social Security tax is not going to "stimulate" me to spend it. It is going into my savings account because I will need it when the United States economy collapses from the debt overburden. Although then money will be worthless and we will return to the barter system.

Posted by: foofoofoo | December 7, 2010 12:41 PM | Report abuse

For all of you arguing that Obama was in too weak of a position to bargain, read Krugman's article from yesterday. He lays it out in plain English. The Bottom line is that Obama's political advisers should be dumped!

http://www.nytimes.com/2010/12/06/opinion/06krugman.html?_r=1

Posted by: chadborman | December 7, 2010 12:52 PM | Report abuse

I'm livid over this, especially because McConnell used Obama like p*ssy.

But could this mean that the landscape is expected to be very different in 2 years, such as if the Deficit Commission recommendations begin to become a reality?

Posted by: Anglo_Rider | December 7, 2010 1:06 PM | Report abuse

RichardHSerlin... don't rely on Krugman .. as with most economist of the left persuasion, he is rarely correct.

Whether the current rates are extended for 2 or 3 years will not have an impact on the next election... the issue will remain, raising taxes during a recession is detrimental to economic recovery.

Obama has NO choice - he cannot alienate the entire Middle Class (which of course doesn't exist in our classless society) by allowing tax rates to increase.

This compromise protects his status among the black community - his most loyal constituenccy, as well as the "working people". If the economy turns and gets stronger, this presidunce will defeat a weak Republican slate.

Memo to Republicans - be careful who you nominate ... you must make sure your candidate is not susceptible to being marginalized by the media as they did with Palin.

Posted by: Hazmat77 | December 7, 2010 1:07 PM | Report abuse

"It suggests that we may see more get done in the next two years than many of us thought, and there'll be more capacity to respond to crises than some feared."

Divided government works. It may not please the Republican or Demcoratic base, but reasonable measured results are accomplished when neither party has complete dominance.

Posted by: moebius22 | December 7, 2010 1:10 PM | Report abuse

555' : "Folks, as long as you can separate your beliefs from your investing, this should be a great day for you."

Utterly ridiculous.

Only a day trader or wallstreet "player" would say that.

You rejoice in the short-term ups and downs of the market with little regard to the long-term health of the country.

99% of Americans have no idea how to play the market like you. They instead let their 401Ks or IRAs ride the wave, and unfortunately deals like the one you celebrate cause the wave to decline and decline and decline over the long-term.

Yes, there will always be short-term increases in the wave and players like you will be able to capitalize.

But this constant borrow and spending of the two parties and funnelling of our wealth to the richest 1% is only increasing our debt and deficits, increasing unemployment, and killing the middle-class.

I have no doubt Obama was partly influenced to accept this deal because he feared what would happen in the market should a tax deal not be achieved. I consider this blackmail by the wealthiest and by wallstreet.

I have no problem with freezing the current tax rates for the middle-class, but the high end rates should have elapsed. That in my opinion (and in many economists opinions) would have been the smartest thing to do for our country. And that deal should have been the one the market could have responded favorably to.

So go ahead and celebrate your your short-term gains, even as you help the country to further decline.

I recommend everyone read Stiglitz' article, mentioned in the wonkbook.

Posted by: lauren2010 | December 7, 2010 1:12 PM | Report abuse

This statement is out there;-
"OBAMA'S TAX DEAL IS ALL ABOUT WINNING BACK INDEPENDENTS."
---------
Of course it is, walk with me;

THE OBAMA ADMINISTRATION AND THE OPORTUNISTIC FACTOR

Now that Obama seems to 'let pass' (via 'compromise') the continuation of tax cut for the merican public,few reaction are going to be seen...so wait for them.

1. THE MARKET might feel half way confortable with the 'Obama accomplishment',...and so
investors my give a trying, based on the posibility that republicans could continue
...let's say...'gaining grounds for economy recovery'

2. THE PRIVATE SECTOR SMALL BUSSINESS could follow the same pattern and start to hire/
and expand production for products and services.

3. THE AMERICAN POPULATION may feel that THE OBAMA ADMININSTRATION is really concern
and honestly looking for to favour the national economy for he just...
(NOW AND FINALLY)...listening to the people and doing what is common sense to do.

In others words he is,... let's say...uhh!....'moving to the center', just as Pres
Clinton did in the past and so he will project an american image of serious about
the current economical platform.

So,...all will looke like everything is going to be,... 'fine and dandy',...'swell' , if you will.

Well, listen-up and wise-up,..THE OBMAMA ADMINSTRATION is counting for all that to be as an starting platform and as result possibility of re-election in favour of Mr Obama comes into effect.

In realilty a number of things are out of place here - in regards of the so called 'compromise' - and mong those just look at the EXPANSION OF UNEMPLYMENT BENEFFITS...it is just another trick for WASTE! ...MORE GIVING AWAY MONEY THAT WE DO NOT HAVE .....and in the process PROMOTE THE NANNY STATE LAZINESS.

Obama,...'moving to the center'?....'geting it,... finally'?...looking that after 'THE MID-TERM ELECTION LESSON' he finally is looking after resolving economy problems with 'bi-partisian aproach'?....FAT CHANCE!

No-no-no-no,...don't anyone out there fall for this LATEST DECEPTION.

Just remember that this man(Obama) , this man masters CORRUPTION, DECEPTION AND FRAUD ...the entire band of liberal-democrats and RINO's associates of him are promoters of the most nefarious and insidious SABOTAGE AGAINST OUR COUNTRY that we ever seen before.

So there, very very simple, take it or leave it.

Input anyone?

Opinions welcome.

Daniel Cabrera
Merrillville,Indiana

Posted by: morcab | December 7, 2010 1:14 PM | Report abuse

YOU GO BERNIE!

This is a budget-busting giveaway. Let ALL the Bush cuts expire and the unemployment benefit extensions as well. And certainly don't cut the payroll tax without making up for the lost revenue to the Social Security Trust Fund.

All of this money being handed out is borrowed from people who some day will look at us as they now look at Ireland, Iceland and Greece.

After 2 years, it is time to stop trying to "stimulate" our way back to the good times and let the economy adapt to new realities including the facts that:

- There are no jobs because they've all moved to east Asia and latin America;

- The US consumer was spending more than he was earning and has now been forced to cut back

- Houses weren't really worth what "creative" loans allowed people to pay for them and now those loans are gone so the prices have come down.

Posted by: BTinSF | December 7, 2010 1:30 PM | Report abuse

Ezra is completely wrong about their being anything redemptive about Obama's blunder. This is a result of a completely confused person running the country. He does not know who he is, so he can't stand for anything. The Republicans have wisely weakened Social Security with what would seem to a naive Dem. like a 'stimulus' (the payroll tax reduction). It is nothing of the sort. It is a regressive move to raise the ante against Social Security and Medicare. Paul Krugman is mulling that one right now. Then, there is the Estate Tax giveaway of Borrowed Chinese Money. This is pretty remarkable, but the Republicans are capable of it, as they are all planning houses in the Caribbean or some other place. No way are they staying in the US. Here's the scam: You borrow money from the Chinese and invest it in Shanghai. You do this for your children also, at your death. The kids make out ok, and you do too, all on US taxpayer borrowed Chinese Dollars. What a great thing!

The rest of the Obama madness will go away as soon as he does. There is a dump Obama movement starting, and it will be very powerful in a year. Watch.

Posted by: bert8 | December 7, 2010 1:41 PM | Report abuse

".the entire band of liberal-democrats and RINO's associates of him are promoters of the most nefarious and insidious SABOTAGE AGAINST OUR COUNTRY that we ever seen before."

Um, Daniel.

The economy collapsed BEFORE Obama got into office you dimwit.

Any casual look at the long-term data shows that the destruction of the middle-class began with trickle-down economics theory, which started in the 80s under Reagan, and which began to funnel our wealth to the top 1% of Americans even as they started shifting tax burdens down to everyone else.

I am amazed at how many idiots out there fall for the GOP and media propaganda.

Posted by: lauren2010 | December 7, 2010 1:41 PM | Report abuse

I like Ezra's post most of the times, but this is rather wishy washy. Ezra thinks that this is a model for republicans and democrats to work together. Oh really? You mean for similar kinds of deals? Don't you think a log jam is better than this?

Posted by: kevin1231 | December 7, 2010 1:45 PM | Report abuse

"As a progressive, I am happy that the $5 million estate exemption was added. I'd actually like it even higher. The reason I like this is that, without it, many estates must be sold off to richer Americans or transnational corporations simply because those inheriting the estate can't afford the tax bill...."

Sorry Lauren, I am not sure what kind progressive is this. May be sort of when rich people feel sorry for the poor people but they still don't their wealth to be touched. I have family members who feel the way. May be this sort of progressivism is borne of guilt. Guess how many people have estate valued at 5 million dollars? Avery very tiny segment of population. If you want to live in a society of meritocracy, then the taxes should be much more progressive.

Posted by: kevin1231 | December 7, 2010 1:52 PM | Report abuse

"As a progressive, I am happy that the $5 million estate exemption was added. I'd actually like it even higher. The reason I like this is that, without it, many estates must be sold off to richer Americans or transnational corporations simply because those inheriting the estate can't afford the tax bill...."

Sorry Lauren, I am not sure what kind progressive is this. May be sort of when rich people feel sorry for the poor people but they still don't their wealth to be touched. I have family members who feel the way. May be this sort of progressivism is borne of guilt. Guess how many people have estate valued at 5 million dollars? Avery very tiny segment of population. If you want to live in a society of meritocracy, then the taxes should be much more progressive. And where would the money come from to make up for the loss of revenues? Mostly cuts in the essential programs for the poor and higher fees for services.

Posted by: kevin1231 | December 7, 2010 1:54 PM | Report abuse

Well congress has done everything else to pillage Social Security and the reserves that it has gutted. Now I should believe that they are not undermining the solvency of Social Security by a 2% reduction in worker contribution for a year. I really believe that they will reimburse the SS trust fund from the general fund. Santa where are you?

Posted by: earlcody | December 7, 2010 1:58 PM | Report abuse

richardserlin wrote:

"You have to wonder, does Obama have someone on his inner team who runs numbers like Krugman's and presents them to him, and explains the trend, that the stimulus is less in 2012 than 2011, and direction of unemployment matters more than level for re-election."

He did have, the hapless Christina Romer, but after causing him numerous embarassments, she finally got the message and retired, saying all the while that her models were right, but everything else was wrong!

Of course.

Posted by: 54465446 | December 7, 2010 3:19 PM | Report abuse

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