I know this has already been discussed but I wanted to excerpt a few of these takes on the deal to extend the Bush tax cuts – even those for the wealthiest Americans – for another two years. Ezra Klein says it’s not such a bad deal after all:
It’s a lot better than I would’ve told you the White House was going to get if you’d asked me a week ago. There’s some new stimulus in the form of the payroll-tax cut and the expensing proposals. The older stimulus programs that are getting extended — notably the unemployment insurance and the tax credits — probably would’ve expired outside of this deal. The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious.
It’s bad news for the deficit, though the White House and Congress are right to make the deficit less of a priority than economic recovery. And speaking of that economic recovery? This isn’t enough, and it’s not well targeted.
Daniel Larison thinks progressives will take this as betrayal regardless of the unemployment benefits and stimulative effects of the tax cuts:
Obama’s cave-in on taxes will alienate more than vocal progressives. It could be far more politically damaging than that. This is not simply a matter of provoking the base with yet another compromise. This is a matter of abandoning a position that is widely and strongly held throughout his party. In some cases, Obama has angered progressives by doing exactly what he promised during the campaign, but in this case he would be openly repudiating one of the most prominent positions he took during the campaign.
This is probably true, but I think David Leonhardt is right that the alternative – expiration of all the Bush tax cuts for every income level – would have been both politically and economically a disaster:
Letting all of the tax cuts expire surely would have an economic effect, and not a positive one. At a time when the economy is weak, when job growth has proven disappointing yet again and when Europe is again struggling with debt crises, the national discussion would be dominated by an across-the-board tax increase. Households would have less money, and everyone would be talking about how households had less money. That situation seems very likely to push back the date when real improvement would begin and push back the date — still a long way off — when the economy would feel healthy again.
One politician, above all, would be hurt by those events: the president.
In a follow-up post, Leohnardt calls the deal a second stimulus:
What actually seems to be happening: Democrats and Republicans agree to extend all the tax cuts and also agree to an extension of unemployment benefits, a cut in the payroll tax and, according to my colleagues, “continuation of a college-tuition tax credit for some families, an expansion of the earned income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases.” The amount of money pumped into the ailing economy: about $900 billion over [two] years.
This was smart politics from Obama even if it does mean he’ll have to fend off attacks from within his own party. Extending the tax cuts for the wealthiest Americans may be a bitter pill to swallow for many progressives, but it’s not that high of a price to pay for a serious shot of stimulus. I would actually like to see more stimulus in the form of direct payments to middle and low income Americans, followed by some long-term structural and tax reforms to shore up the long term deficit. But deficits, while important for our future, are a ways down the list during a recession. First comes economic recovery, then comes whatever necessary cuts and tax reforms necessary to get our fiscal ship in order.