Paul Krugman had an op-ed in the New York Times yesterday insisting that the President not accept the Republicans’ tax cut extension deal. I think he’s really off-the-ball on this one.
The Deal, in case you haven’t heard, is a simple solution to the holdup of the extension of both unemployment insurance and the Bush tax cuts, the latter set to expire on December 31st: Everyone gets everything. All of the Bush tax cuts will be extended for another 2 years, so all you millionaires out there (well…there are over a million of them) need not fret; unemployment insurance, which ended in November and which the Republicans had denied an extension until the tax cuts were extended, will now be renewed; finally, the President’s “Making Work Pay” tax credit will be replaced by a payroll tax cut for working families.
Krugman, who opposes this deal on the grounds that tax cuts for the rich are a gimmick that just compounds the deficit, is looking at this issue through a narrow lens. I applaud the deal even though I think he’s correct in his objections. For one thing, the tax cuts for the rich are actually a fraction of the overall increase in the deficit from extending the tax cuts. (Granted, he’s right that the middle- and working-class tax cuts are going to people who could really use the money, but they aren’t as efficient at either helping those in need or stimulating the economy as are, say, unemployment benefits, the President’s tax credit for working families or food stamps.) I agree that tax cuts for the rich are a gimmick, but the Republicans have their ideological interests same as the Democrats, and extending these tax cuts was a big-ticket item for them in the past election.
The coming raising of the debt ceiling will likely be objectionable to Tea Partiers for reasons that get back to their general cause: Raising the debt ceiling suggests that the Republicans aren’t committed to reducing spending significantly. The Republicans have been pretty specific about the amount by which they claim they will cut domestic discretionary spending. They have said nothing about what they will cut (which could mean they’ve gotten themselves into trouble already) and they certainly do not have a plan to balance the budget.
President Obama does have a plan to balance the budget. A big reason I reject Krugman’s call for Democratic intransigence is because he’s pretending the Deficit Commission didn’t exist. I think they came up with a really good plan. Granted, there’s no guarantee the 112th Congress will get to work on the plan next year, but the plan is there as soon as they’re ready to get serious. If the President and the Republicans hadn’t made this deal, you could be sure they wouldn’t have any negotiating room for that plan.
Whatever they do with taxes now wouldn’t matter much if they implemented the Deficit Commission’s plan. The income tax rates would be lowered and most deductions eliminated. They may not get to work on it for the foreseeable legislative calendar, but they couldn’t even consider it if they couldn’t first agree to scratch each other’s backs over stuff as basic as extending the tax cuts and unemployment insurance. So I think they did the right thing, even if it did mean paying for the old Republican gimmick.
Besides, if the Senate Republicans allow the rest of the lame-duck session to go on without filibusters, that is a huge benefit of this deal that Krugman overlooks completely. The President didn’t want to raise taxes on everyone else, so he agreed to keep the Bush rates for the rich. Of course, he wanted to extend unemployment insurance–and the Republicans would have ended that at their peril–but the President would also have lost his “Making Work Pay” tax credit for the working class.
Besides that, the Republicans had already committed to filibuster the lame-duck session in the Senate if the tax cuts weren’t extended first. I don’t know why Krugman overlooks that. The Senate still has a lot on its plate. It has to ratify New START, vote on the DREAM Act (which would grant naturalization for undocumented immigrants in college or the military), debate and vote on the repeal of Don’t Ask, Don’t Tell, and try to pass an energy bill of sorts (sans cap-and-trade emissions regulations), among smaller things. I’ll be surprised if all 4 if the aforementioned measures passed, but the Republicans have to consider their next move carefully, because if they try to block everything the President wants to come to a vote on in the Senate, he might resolve to refuse compromises designed to let the Republicans pass some of their legislative or reform proposals with minimal Democratic pain. If the Republicans can’t pitch their reform ideas to the President, John Boehner’s “Pledge to America” will likely disappear into the ether.
Congressional Republicans can’t pass a bill on their own motion. In addition to still being in the minority in the Senate, they will remain unable to override President Obama’s veto, and unable to respond to the President’s bully pulpit, signing statements, Executive orders, and the Federal bureaucracy which is led by his appointees. If Congress deadlocks, the most-likely result is the budgetary and regulatory status quo for the next 2 years–with occasional action on the President’s own motion. Then the tax cuts expire in 2012. The Republicans wouldn’t have any accomplishments to point to, with their largest House majority since the 1940s. Remember, their base feels like they’re starting from behind–which they are.