Tax Cuts Compromise: 'The Path of Least Resistance'

Peter Coy and Michael Scherer Break It Down

Tuesday, December 07, 2010


Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from political conversations on WNYC. On today's Brian Lehrer Show, Michael Scherer, White House Correspondent for TIME, and Peter Coy, economics editor at Bloomberg BusinessWeek, discuss the Bush Tax Cuts extension compromise struck between Obama and Senate Republicans.

President Obama and Congressional Republicans have struck a deal to extend the Bush tax cuts for two years in exchange for the extension of unemployment benefits for 13 months. In his remarks about the deal last night, the President said this was tough medicine. He "doesn't like" the extension of the Bush tax cuts, but says it's an "essential step on the road to recovery." This comes as a blow to Congressional Democrats who were hoping for, at the very least, to block the extension for the highest earners. 

Peter Coy, Bloomberg BusinessWeek's economics editor, says this deal between the President and Congressional Republicans is all about "taking the path of least resistance."

On the one hand, Obama needed to answer to the Republicans, and on the other hand, he needed to answer to his liberal base. And what he did is he came up with a compromise that gives something to both sides at the cost of adding massively to the debt, so in the short run the easy course is to make everybody happy... in the long run of course that's unsustainable.

Coy says, this new compromise between Obama and the Republicans has quickly shadowed the work done by the President's deficit reduction commission. This, Coy says, shows the mounting debt has taken a "backseat" to short-term political priorities.

Michael Scherer agrees, but says this is also a warning sign for another problem.

It shows that no one has yet to prove that anybody in Congress is willing to do the responsible thing unless they're getting paid and so as a precident it's really bad for Simpson-Bowles [deficit commission]. I don't know if this is exactly a reputation. I think they wouldn't say that pumping money into the economy in the next year or two is the worst possible thing that can happen for the long term deficit, but the fact that the only way you can get anybody to vote on your side is to give them hundreds of billions of dollars is the worst possible thing for the long term.

Coming out of the election season, Scherer says Obama took advantage of a contradiction in the Tea Party position.

The way Republicans pay their voters is through tax cuts. The way Democrats pay their voters is generally through spending, and both sides in election seasons refuse to acknowldege that their paying of their voters is irresponsible. Now, the Tea Party movement is slightly different because it's incredibly focused on the deficit... and yet even during the 2010 cycle, there wasn't really an acknowledgmenet among the Tea Party crowd...that continuing the Bush tax cuts was going to have a huge deficit impact. And so what the President has done is basically exploited that contradiction here.

One caller to the Brian Lehrer Show said the compromise illustrates President Obama's inability to "deal and sell." Scherer says, this is a "dominant criticism" the President is receiving from progressives, but it's worth noting the difficult situation the President is in.

If he wanted to really go hard on this and really fight for raising taxes on the richest two percent, he would have somehow had to come up with six votes including two Republicans and the calculation from the White House was he could beat his head against a wall... and he wouldn't get himself anywhere. He would actually just get himself lost and would be facing a weaker position because, the White House viewed, he'd be responsible for allowing taxes on everybody to go up.

Despite Democratic disappointment, Scherer says it still doesn't look like this compromise will increase the likelihood that President Obama would face a primary challenge from his party. But, it's always possible, he says, since we're in a political environment where "all it takes to run for President is a website."

The President will hold a news conference this afternoon to answer questions about the new tax agreement.


Do you support the tax cut compromise? Get the details, take a poll, and join the conversation here.


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Comments [1]

Gleb Sidorkin from Boston

I don't know why progressives are so disappointed with this compromise. Even Obama's most Keynsian economic advisers would clearly not recommend a massive hike on taxes for the rich in this moment of recession. Right now, deficit spending is required to pump liquidity into the economy. So what if we concede to the Republicans a 2-year extension of tax cuts for the wealthy-- it's actually decent fiscal policy, and it's worth it to get unemployment insurance extended.

Dec. 08 2010 12:37 AM

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