Some would rather have Obama fight this out until the end. “The end” is a few weeks from now. Not the next election. The current congress is done at the congress’ break on Dec 17th(?). The politics and polls point to the Obama tax plan being a winner but legislation isn’t made in a vacuum. What Obama knows is that he has less than a month left of a majority Democratic congress, unemployment is too high (9.8%) and 2 million Americans are about to lose benefits and become what the economists call permanently unemployed.
In short, a $60 billion tax cut for the richest will be unsavory to some people, but it’s become a vehicle for historic tax relief for average Americans. Of the six stimulus ideas analyzed by the CBO in the summer, this deal has four, including the two most stimulative: jobless benefits and a payroll tax cut, both of which target the middle- and low-income Americans.
From a long-term perspective, however, this deal is a potential budget buster. There is no official cost estimate, but it will certainly add hundreds of billions of dollars to the 2011 deficit. This makes the case for deficit reduction all the more necessary in the next few years.
Today, Americans at every income level got a major stimulus. But tomorrow’s deficit debate just got louder and more urgent.
Really what we have here is a tax cut/unemployment insurance stimulus. Less effective than Obama’s revenue rich original tax plan, but it’s the best we can get. The trade off was tax cuts for all of the income of the rich. Hopefully, the Democratic congress understands the issue here is time. They need to get this compromise passed and to the president’s desk so that START, DADT and DREAM (doubtful on the last one) can be brought to the house and senate floors.