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Posted at 12:30 PM ET, 12/10/2010

A mess of the Democrats' own making

By Jennifer Rubin

In his column today, Eugene Robinson writes:

For a two-year cost of nearly $1 trillion, we get a bit more than $300 billion worth of measures that are truly stimulative: a cut in the payroll tax, a provision allowing businesses to write off capital investment and an extension of unemployment benefits. We'll spend the rest -- I should say borrow the rest, then spend it -- to continue existing tax breaks that obviously are not roaring engines of job growth.

I, and other conservatives (not to mention Larry Summers), would argue that unemployment benefits are hardly "stimulative," although there may be other reasons not to cut off funds to the chronically unemployed. Moreover, as the president and a wide array of commentators have argued, keeping marginal tax rates from rising is stimulative, or at least protection against a further hit to job creators and investors. And, of course, it's all borrowed money -- the unemployment benefits included.

But while I don't agree with Gene on economics, I do think he's spot on when it comes to the politics of the deal and the options for Democrats. He delivers the blunt news to the liberal base:

The opportunity to shape a better deal - one without those unnecessary, unfair and supremely galling tax cuts for households making more than $250,000 a year - is long gone.

As a practical matter, I don't see how Democrats could possibly think they have leverage to exact concessions before the end of the year. Republicans can simply wait them out, knowing that Democrats will be in a much weaker position when the new Congress convenes in January. . .

But as much as I sympathize with the progressives who are ready to man the barricades, let's be real. Killing the deal now would mean a middle-class tax increase, no extended unemployment benefits and no payroll tax holiday. Voters would surely feel they had been robbed - and Democrats, perhaps unfairly, would get the blame.

Actually, they would deserve the blame if they undermined the president, only to see a worse outcome in a matter of weeks. It may have been bad deal-making and poor atmospherics for the president to lash out at the "sanctimonious" left, but as Gene points out, it's not a bad description of the behavior of Pelosi Democrats who failed to make a deal earlier this year and now are literally cursing the president for doing damage control.

And, finally, a key point to keep in mind is that this is a dilemma for liberals largely of their own making. I agree that "[s]ix months ago, Democrats could have refused to compromise - and forced the GOP to play its hand on the 'millionaires' tax cut' before the election. Obama and congressional leaders could have gotten a better deal and maybe - who knows? - even saved a few seats." But Pelosi didn't look down the road, and in the weeks leading up to the elections, she couldn't manage to bring any tax proposal to the floor. In other words, they have an abundance of sanctimony and a shortage of competence.

By Jennifer Rubin  | December 10, 2010; 12:30 PM ET
Categories:  House Democrats  
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Comments

I stopped reading when she said unemployment isn't stimulative. Leave economics to the economists. I am trying to give this lady a chance but she is just brutal. Bring David Weigel back, please!!

Posted by: patrickbyers | December 10, 2010 12:38 PM | Report abuse

I just so love the lefty rhetoric about "spending" money by not taking it in taxes. I've decided to apply it to myself. Why just last month I "spent" more than $100 million on charities when I didn't break into their accounts and take their money. What a philanthropist I am! Wheeee... Mr. Robinson, I didn't take any of your money either. I'm not sure how much I "spent" on you this way, but I hope you appreciate my generosity.

Posted by: Larry3435 | December 10, 2010 12:42 PM | Report abuse

Employment benefits are stimulative in the sense that they tend to get spent right away, and have a high "mulitiplier."

However, on the down side, a portion of that money leaks to buy foreign goods - which stimulates factories in China.

That portion is in the Obama Debt Spiral - we borrow the money to give to people, we borrow again to finance the trade deficit, then we borrow a third time to pay the interest on that debt once the next budget swings around.


We need pro-growth job creation tax incentives.

Obama doesn't get it. He really doesn't. We need supply-side tax incentives which will spur hiring and spur purchase of equipment made in the US. It does little good to give a tax incentive to buy equipment made in China.


All these issues have to be examined carefully, and policies have to be tailored to spur job creation in the US.

Posted by: RainForestRising | December 10, 2010 12:58 PM | Report abuse

Perhaps Boehner is smart enough to know that - should the situation arise - he should honor this deal after the first of the year.

Boehner would like to give the country a good first-impression, and pulling out of the deal in January might not be the best way to do that.

So, if January comes, Boehner could pass another bill in the House right away, that day. It can always be retro-active to the first of the year.


Then that would push the Compromise to the Senate again - this time with the Republicans holding 47 seats.


That might work. The only thing is that pesky addition of another TRILLION dollars to the debt. Something should be done about that.

Posted by: RainForestRising | December 10, 2010 1:04 PM | Report abuse

The suggestion that it is "stimulative" to pay people not to work, just because they will spend the money, is sophistry of the most mindless sort. If the goal is just to get the money spent, spend it, or, much better, just don't seize it in the first place, and some economically active person will spend it for you. Confiscating money from productive people to subsidize unproductive activity is as counterproductive now as it always has been.

Posted by: meta-materialist | December 10, 2010 1:14 PM | Report abuse

Sorry to diagree with everyone but there is little or no stimulus in this bill. Here's why before you kill me.

Very little changes from Dec 31st to Jan 1st. A few more dollars for indivduals in less payroll taxes, a business tax credit moved up calendar wise for businesses. VIRTUALLY EVERYTHING ELSE IS ALREADY IN PLACE! (estate taxes are a separate category entirely)

To call this stimulative, you have to judge it against some black hole where we would have supposedly fallen. Rick Santelli had an apt analogy for the package. He said it's like stepping off a curb and not getting hit by the passing bus. It's great that you didn't die, but nothing else has changed in your life.

Nothing else has changed in the economy. We have already been in a jobless recovery for going on a year now, with rising GDP. These EXACT same policies did NOT stimulate employment to any degree over the last year plus. Can anyone give me a reason why that will change on Jan 1st?

I already know that someone will say policy "certainty". That's a faith-based argument that has no real world counter factual.

I compare this to a 21st birthday party of a friend many years ago. He had gotten sloppy drunk while waiting to watch the first free tv replay of the classic Homes-Norton title fight, won by Holmes. Now, as we were carrying him, a Norton fan, home supported under each arm; he was exhorting us to go faster so he wouldn't miss the fight.

We took the logical stand that what did it matter because he already knew his fighter had lost. He replied with a clarity that only drunks can muster "Yeah, but you'd (perform an embarassing bodily function on yourself) if Norton won on the reply!"

I sometimes think of that quote when somebody tells me that something which was done to a definitive outcome one time, is expected to have the total opposite outcome on it's replay!

Posted by: 54465446 | December 10, 2010 1:21 PM | Report abuse

I would guess that unemployment benes are mildly stimulative. But I think if you're going to do that, you really should let people at 250k+ hold onto more of their own money. People with the money are the ones who are going to spend it on consumer goods and drive the economy. I was making big bucks 2 years ago before the apocalypse and I was majorly stimulating the economy let me tell you.

Also, as always, many of those over 250k are small businesses and we should definitely let them keep more of their own money right now.

I know it's going to be agony for leftists, but this tax cut deal WILL provide a lift to the economy in 2011.

Posted by: jmpickett | December 10, 2010 1:24 PM | Report abuse

He delivers the blunt news to the liberal base

As Krauthammer delivered a blunt message to the Conservative base,Obama outsmarted the Conservatives.

Posted by: rcaruth | December 10, 2010 1:28 PM | Report abuse

"I just so love the lefty rhetoric about "spending" money by not taking it in taxes. I've decided to apply it to myself."

You probably never get out of your mother's basement either, so what you do is best left unimagined.

I know that FOX "News" regulars tell you that "we do not have a revenue problem, we have a spending problem", and you believe it, because, well, because FOX "News" told you to.

We simply added 900 billion to the national debt because we have a spending problem

Tea baggers: Concerned and ANGRY about the national debt.

But only from Jan 21, 2009 to Nov 2, 2010

Posted by: HumanSimpleton | December 10, 2010 1:37 PM | Report abuse

If unemployment benefits stimulate the economy; and the American economy only benefits if the money is spent here, on American made products; and if the only the way of adding money to the Treasury to lessen the deficit is to have more money directly taken from American citizens; then, can't we kill 3 birds with one stone by having the American government make all the products we need, and then giving money to the American people to buy all those products. Why not just cut out the regulatory, taxing, and protectionist middlemen?

Has anyone ever tried that before?

Posted by: adam62 | December 10, 2010 1:42 PM | Report abuse

jmpickett wrote:

"People with the money are the ones who are going to spend it on consumer goods and drive the economy. I was making big bucks 2 years ago before the apocalypse and I was majorly stimulating the economy let me tell you."

You're not going to have any MORE money in your pocket in January than you have today. Have you been stimulating the economy this year? If not, why will you do more of it next year, consumer sentiment?

Posted by: 54465446 | December 10, 2010 1:46 PM | Report abuse

HumanSimpleton I know that FOX "News" regulars tell you that "we do not have a revenue problem, we have a spending problem", and you believe it, because, well, because FOX "News" told you to.

We have a huge Revenue problem that is exacerbating the deficit problem. I recently asked Commentary's economist Guru,John Steele Gordon,a simple question,John,how could our GDP still be at a $16Trillion Dollar level when our tax revenue is down 30% at all levels. His answer,"That's a good question. I don't know the answer."
I do,we no longer have a 16 Trillion$ economy,it more like 10 Trillion and shrinking. Which means,that virtually everything we are told about our Economy,from the Government,from the Press,is wrong,and is dangerously optimistic.

Posted by: rcaruth | December 10, 2010 1:59 PM | Report abuse

I'm not in the top tax bracket these days, but if I were, I would spend less money in 2011 because the government would have been taking more from me. I realize we're just extending the status quo here, not really cutting taxes at all. But the alternative would have been ugly, as Larry Summers stated this week.

In my opinion. I think it just makes sense to leave more money to the people who earn it, class warfare aside. I'm not really talking about millionaires, I'm talking about families and businesses that make 300-400, maybe 500k per year. If you jacked up their taxes in 2011, they would have spent less. I think that isn't what we need right now.

Posted by: jmpickett | December 10, 2010 1:59 PM | Report abuse

The Progressive's just don't seem to know what is more important...remember the emergency Obamacare vs jobs debacle...more of the same.

Posted by: d1carter | December 10, 2010 2:15 PM | Report abuse

54465446 | December 10, 2010 1:21 PM |


I think the word out there is that Obama people have said that they want this tax bill to be a stimulus - to try to help Obama's re-election


We realize you are trying to manage expectations here.

Extending unemployment benefits has a stimulus effect - as does the SS tax holiday.


________________


However, clearly the "stimulus" from those two items is limited - and a case can be made that those help China more than the US economy.


The US has to borrow to put this money out there, then borrow again to finance the trade deficit and then borrow a third time to finance the interest payments.


What are we thinking ?


Obama has put the nation in an OBAMA DEBT SPIRAL that we have to get out of somehow.

Bernie Sanders - I love that guy

Posted by: RainForestRising | December 10, 2010 2:34 PM | Report abuse

It's very depressing to read this thread. Only Meta-Materialist is making any sense. The notion that unemployment benefits are stimulative is flatly insane.

That policy is tantamount to arguing that we will put people back to work by paying them NOT to work.

Who in the world could seriously advocate such self-evident gibberish? (Oh yeah, Nancy Pelosi, third in line to the presidency) Have any of you folk ever heard of microeconomics? Have you EVER thought about the impact of incentives on behavior? There isn't a micro-economist on the planet who would concur with this foolishness.

Posted by: TYoke | December 10, 2010 3:24 PM | Report abuse

RFR:

Note your use of the word extending, as in keep on doing things that have not have a stimulative effect so far.

Posted by: 54465446 | December 10, 2010 3:32 PM | Report abuse

Still no comment on Krauthammer's excoriation of the Republican's Trillion Dollar Stimulous Bill at NRO. I thought Krauthammer was the official "Voice" of the Neo-Cons".

Posted by: rcaruth | December 10, 2010 3:39 PM | Report abuse

Unemployment spending is “stimulative” in the same sense that taking water from the deep end of the swimming pool and pouring it into the shallow end is "filling the swimming pool." It’s ridiculous. Spending per se is never “stimulative.” Foreign borrowing is somewhat stimulative, assuming you haven’t already done so much of it that the stimulative effect is maxed out and becomes swamped by the anti-stimulative effect of inducing fear in the economy. Moving money from one sector of the economy to another is useful if it moves the money to a sector that can maximize growth by investing in improved productivity – something the private sector does decently and the government does horribly. The much vaunted “multiplier” is just another way of saying you are moving money from savings and investment into short-term consumption, which is the exact opposite of what the U.S. economy needs right now. And I truly wish that some people (are you listening simpleton?) knew the first thing about economics.

Posted by: Larry3435 | December 10, 2010 4:03 PM | Report abuse

Jonah Goldberg of NRO comments on Krauthammer,obviously CT is causing a problem that Jenniferwants to avoid,
http://www.nationalreview.com/corner/255008/dr-ks-swindle-jonah-goldberg

Posted by: rcaruth | December 10, 2010 4:12 PM | Report abuse

Jonah Goldberg of NRO comments on Krauthammer,obviously CK is causing a problem that Jenniferwants to avoid,
http://www.nationalreview.com/corner/255008/dr-ks-swindle-jonah-goldberg

Posted by: rcaruth | December 10, 2010 4:13 PM | Report abuse

Oh, and by the way, tax revenues went from $2.6 trillion at the height of the housing bubble to $2.1 trillion last year. The largest drop was in corporate income taxes. And the reason was that corporate incomes taxes are based on profitability while GDP is based on production, which is apples and oranges.

Posted by: Larry3435 | December 10, 2010 4:15 PM | Report abuse

Larry3435 /Oh, and by the way, (1)tax revenues went from $2.6 trillion at the height of the housing bubble to $2.1 trillion last year. The largest drop was in corporate income taxes. And the reason was that corporate incomes taxes are based on profitability while GDP is based on production, which is apples and oranges.

(1)Does this include tax revenues from States Counties,and Cities,and other governmental entities as well as individual tax revenues for Federal,State,City,and County?,Of course it doesn't.
(2)Are you saying that lower tax revenues are a sign of expanding GDP? It sounds like it.

Posted by: rcaruth | December 10, 2010 4:55 PM | Report abuse

“A mess of the Democrats' own making” far more fundamentally than anyone has discussed so far.

Isn’t it interesting to realize that this ENTIRE SITUATION was set up by the DEMOCRATS themselves when they “held hostage” a permanent resolution of the tax structure when they were negotiating Bush’s tax cuts back in 2001 and 2003. (BTW, was Kennedy’s Tax Cut drafted and passed as a temporary tax cut? That was before my time, but I doubt it.) As I recall, Bush and the Republican really disliked the Democrats refusing to countenance a permanent arrangement, but went along to get the cuts we needed.

Now the Democrats seem to be having trouble with their Karma.

Posted by: nvjma | December 10, 2010 6:40 PM | Report abuse


This article should be re-titled.. "Economic disaster: the mess of Americans' own making.." All I keep hearing from the unemployed is that 1. I've worked since I was a teen.. 2. This is my FIRST time I have ever been unemployed.. 3. I have a college degree (this is by far my favorite as they must have graduated with a basic course in finance.. DON'T SPEND WHAT YOU DO NOT HAVE. Millions took spent every penny they earned & could get their hands on via credit. Then MILLIONS walked away from their debt, carefree initially. Always singing.. 'Through No Fault of My Own' .. now even the Politians are caroling in. Many of the unemployed had ample salaries allowing for saving.. THEY CHOSE to purchase new homes, new cars, dine out, shop shop shop shop.. taxpayers's have already picked-up the tab for your self-centered, all-consuming & greedy living debts.. now we have to pay for them NOT TO WORK - SICKENING!

Posted by: WakeUpAmericans | December 10, 2010 7:50 PM | Report abuse

99ERS AND FUTURE 99ERS -- WE ARE RUNNING OUT OF TIME -- WHY ARE WE NOT UNITING?
IF WE DON'T COME TOGETHER DURING THIS LAME DUCK SESSION -- WE ARE DOOMED!!!

We are in an emergency situation. You should be calling all of your representatives to complain about extending tax cuts for the wealthy and eliminating the 99ers from the extension of unemployment. Please go to the website -- From the Trenches World Report and go to the Organized Resistance page and under Nationwide Rally to Extend Unemployment Insurance, leave your first name, state and the address of your unemployment office so we can organize active civil disobedience. This is our only hope. We have got to have enough people to form protest groups. I don't understand why we are not getting stronger. We are not going to win by being silent and we are not being heard by our government. Please help me make this happen. We can do this.

Posted by: Barbara99er-GA | December 11, 2010 12:57 AM | Report abuse

My household would pay about 6K more in taxes next year if the rates go back to their pre 2001 levels. I can promise you there would be nothing stimulative about that. If I have to pay 6K more there will be no spending in my household except for the bare essentials. I am also running out of sympathy for the so called 99ers. I think you will see the majority of those people employed as soon as the checks stop coming.

The people who think unemployment benefits are stimulitive dont live in the real world. Taking money from one hand and putting it in your other hand is not stimulative. If unemployment is so stimulative why is everyone screaming for jobs we should all just be unemployed and collect a weekly check from the Government and that will solve all our economic problems.

Posted by: bjeagle784 | December 11, 2010 1:21 AM | Report abuse

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