WASHINGTON -- It should be painfully clear by now that President Obama's $1 trillion economic recovery agenda has failed to create a strong climate for growth and job creation.
If a mediocre economic growth rate in the 2 percent range and 10 percent unemployment -- with little improvement expected on either front -- doesn't prove that, then Obama's decision to try across-the-board tax-rate cuts clinches the case. It is a clear admission that his economic agenda isn't working and that he'd better change course to turn the economy around if he is to have any chance of getting re-elected in 2012.
Obama came roaring into office two years ago blaming George W. Bush's "tax cuts for the wealthy" for just about everything that was wrong with the economy. In fact, Bush's tax cuts for low-income people and the middle class weren't the problem, but tax cuts for so-called rich Americans in the top 2 percent of income earners were what held back the recovery, or so he claimed.
He was going to push their income tax rates to 40 percent, raise the capital gains and dividend tax rates on investors, and impose higher taxes on American corporations that made and sold products abroad in the global economy (just as Toyota and Honda do here).
For Obama, pulling the economy out of its recession was merely a question of providing enough stimulus in the form of increased federal spending that started at about $800 billion, but eventually reached the $1 trillion-plus level. The money went to hundreds of dubious federal agencies and programs to spend on make-work projects, to state and local governments to save or create public sector jobs, and to shovel-ready public works projects. Much of the money went into safety net programs, and to subsidies for "green jobs" that still have yet to be created.
So the money was spent, and is still being spent, but the result has been a feeble number of public jobs, fewer private sector jobs, while the unemployment rate climbs and the government debt soars to unprecedented levels.
Businesses and venture capital investors, fearing Obama would succeed in raising taxes on all of them and spark another recession, held on to their reserves and economic expansion slowed. The government reported that the private sector created virtually no new jobs in November. Uncertainty about the economy's future, and what the tax picture would look like next year and the year after that, was rampant throughout the business world.
Then the American people, whose patience had come to an end, went to the polls and slammed the White House and Democrats in Congress with the political equivalent of a sledgehammer.
Obama lost his muscular majority in the House and most of it in the Senate. Two days later, the dismal jobless report hit him like a ton of bricks and shook his economic advisers. He had given his big-spending agenda two years to show progress, and it wasn't working. Democrats were privately urging him to change policies. It was time to deal with the Republicans on their terms.
The tax-cut extension package that is moving swiftly through the Democrats' lame-duck Congress is astonishing in many respects, but mostly because it contains all the tax cuts Obama had fought to repeal or, more importantly, raise.
A month or so ago, the president was still demonizing the Bush tax cuts. Now he is calling for their continuation over the next two years to boost economic growth and create jobs.
He began his presidency by arguing that we could spend our way out of the recession and pointedly spurned tax rate cuts that he said represented "the failed policies of the past." Now he is pushing a plan that gives income tax rate cuts to everyone, including the wealthiest of Americans. Even, to use Obama's favorite class-warfare phrase, "millionaires and billionaires."
Also included in the package are lower capital gains and dividend tax rates for investors, a one-year, two percentage point reduction in the Social Security payroll tax rate for all workers, a lower 35 percent death tax for two years, instead of the 55 percent estate tax if no agreement is reached, and a 100 percent tax write-off of new business equipment.
On Capitol Hill, the liberals, ultra-leftists and at least one socialist from Vermont, Sen. Bernie Sanders, are up in arms over what they say is Obama's betrayal of their party's agenda to redistribute the nation's wealth.
But according to a Washington Post-ABC News poll, 70 percent of Americans say they like the deal Republicans and Obama have stitched together. Notably, they approve of extending all of the Bush tax cuts by 54 percent to 42 percent.
It took Obama two long and tortuous years to acknowledge, at least tacitly, that his retro-New Deal, make-work policies have failed. Isn't it amazing how an anemic, jobless recovery and a very angry electorate can clear the mind?