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Democrats should embrace Obama's tax compromise

Posted: Sunday, December 12, 2010

The following editorial first appeared in the Chicago Tribune:

In the wake of President Barack Obama's tax deal with congressional Republicans, the left of the Democratic Party was aflame with anger and disappointment. "I think a ransom was paid, and it was a very high price," fumed Sen. Frank Lautenberg, D-N.J. Former Labor Secretary Robert Reich called the agreement "an abomination."

The liberal Daily Kos Web site railed, "Enough is enough." House Speaker Nancy Pelosi's attitude was chillier than a San Francisco fog.

It seems to have escaped these Democrats that the nation just held an election and they lost. It also seems to have escaped them that under the circumstances, the president did a better-than-expected job of advancing Democratic priorities in a climate that is anything but hospitable. If their own economic theories are correct, he also improved his party's chances of rebounding in 2012.

As things stood before, jobless Americans who had exhausted 99 weeks of unemployment benefits would be on their own. Just last month, the House rejected a measure to extend this assistance by three months. And what did Obama get Republicans to accept? An extension of 13 months.

The agreement also calls for a one-year cut in the payroll tax, from 6.2 percent to 4.2 percent, a reduction that goes primarily to the middle class. Not to mention that the package keeps tax rates from rising on everyone - which is what would have happened if the two sides had deadlocked.

True, the president had to give up his plan to let George W. Bush's tax cuts expire for couples earning $250,000 a year or more. He was forced to go along with cutting the estate tax to 35 percent from the 55 percent that would have taken effect next year, while raising the exempted amount from $1 million to $5 million. These are bitter pills for those yearning to punish the rich.

But the GOP made it clear the White House would have to give on those matters if it wanted anything in return. That's how most policy gets made in Washington: with compromises between two sides who settle for less than they want rather than opt for nothing. No wonder the president groused about liberals who prefer to be "sanctimonious about how pure our intentions are and how tough we are" rather than meet the opposition halfway.

It's hardly fair to say the president got the worst of the deal. Obama could not expect the next Congress, with a Republican-controlled House, to approve a second economic stimulus package. But that's what this amounts to, using both tax cuts and additional unemployment payments in an attempt to boost demand for goods and services.

With the exception of the tax cuts in the upper bracket, it's straight out of the Democratic playbook.

Of the $900 billion price, by the way, only $120 billion goes to the wealthiest taxpayers, who are least likely to increase their consumption. Most goes to Americans who are more apt to spend the extra cash.

If that strategy pays off, it will mean a boost in GDP growth and hiring, which happen to be absolutely vital not only for prosperity but also for Obama's chances of being re-elected. Liberals who are having trouble getting excited about that might want to consider the alternatives.



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