If Obama had asked for a second stimulus directly, he would have been laughed out of town. Stimulus I was so reviled that the Democrats banished the word from their lexicon throughout the 2010 campaign. And yet, despite a very weak post-election hand, Obama got the Republicans to offer to increase spending and cut taxes by $990 billion over two years. Two-thirds of that is above and beyond extension of the Bush tax cuts but includes such urgent national necessities as windmill subsidies.
No mean achievement. After all, these are the same Republicans who spent 2010 running on limited government and reducing debt. And this budget busting occurs less than a week after the president's deficit commission had supposedly signaled a new national consensus of austerity and frugality.
Some Republicans are crowing that Stimulus II is the Republican way - mostly tax cuts - rather than the Democrats' spending orgy of Stimulus I. That's consolation? This just means that Republicans are two years too late. Stimulus II will still blow another near-$1 trillion hole in the budget.
How does maintaining the status quo (and raising the estate tax from its current level) pump new money into the economy? Also, I understand that for deficit accounting, many people buy into the idea that tax cuts are indistinguishable from spending increases. But that seems like a separate argument from whether or not this deal provides a second, even bigger, stimulus.
Democrats on Capitol Hill have had two years to avoid this day of tax reckoning, yet they kicked the tough vote into a lame duck session. They proceeded to lose a modern record of 63 House seats. Then when a Democratic President seeks to spare the country a huge tax increase by cutting a deal with the soon-to-be-majority Republicans, the losers try to bust up the economy and the Obama Presidency on their way out of town.
This is also a revealing exercise in sheer ideological willfulness. To the modern liberal mind, the Bush-era tax rates have taken on quasi-religious significance. A tax rate even as high as 35% on estates and upper income earners isn't nearly enough to honor this god. Even if all of the tax cuts are extended on lower earners, and even if jobless benefits are extended for 13 more months, House Democrats won't make the trade because their highest policy principle is to redistribute wealth and income. They want to punish the successful, no matter the economic damage.
As for Republicans, they have already given up an enormous amount to get what is essentially the status quo on tax policy. They get a two-year reprieve against tax increases on capital and income, and two years of death taxes at 35% instead of 55%. This spares the economy from immediate tax harm while it is still emerging from recession, but this deal is nothing close to a genuine pro-growth, supply-side tax policy....Republicans would be fools to give Democrats a single new concession, even a token one.
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