As you all undoubtedly know, the Bush Tax cuts for both the upper income bracket as well as the other brackets have been extended. In addition to the extension of these cuts, unemployment benefits have been extended, payroll taxes have been cut, and the estate tax has increased the level which can be writ off. A lot has been written on the subject from the liberal perspective that has been to a certain extent bemoaning the lack of political spine of Obama. An individual blogger than I read quite frequently has a pretty good take on why this deal was eventually reached and it basically comes down to the fact that the two groups both wanted something: Democrats wanted the extension of middle class tax cuts and unemployment benefits, and Republicans wanted the extension of Upper Class tax breaks. What happened? They did what we all say we want from our elected officials, they compromised and created a bill that would meet the demands of both groups. It's bipartisan!
This particular agreement goes a long way towards demonstrating my belief that no one cares about deficits, but I'm not going to go on about that. Anyone who still believes that these individuals care about deficits is deluding themselves. This plan will in fact increase the deficit/debt/ whatever we want to call it because it combines spending with massive cuts in potential revenue. I will say that I don't actually think this matters because the deficit is something that is not an issue now, all of this posturing about the deficit is really just an excuse to cut government services.
What this deal really says about the state of American politics is that individuals in power are incapable of raising taxes on anyone, for any reason, at any time. We have a party that is nominally dedicated to the Middle Class and refuses to make them pay more taxes (Democrats), and we have a group that refuses to raise taxes on corporations or the Upper Class (Republicans). Given that these two groups will always be exchanging power while holding large majorities when they are not in control, that is a recipe for no raised taxes. We as a society have elected officials that will not raise taxes, will not cut spending, and generally tell us how someone else will pay for what we want without any kind of impact on our everyday lives or pocketbook. We're a society of having our cake, and eating it to. One need only look at the Bowles-Simpson plan that was produced. Within it, a number of spending cuts were introduced but no tax hikes. Taxes would actually be reduced for upper income earners in favor of greater price controls for health care. When we are more willing to talk about cutting Medicare or Social Security instead of increasing taxes on the wealthy or closing corporate tax loopholes, we have discovered a new third rail.
I would like to finish with the idea that, though this plan should represent the end of talks about fiscal restraint or reducing the deficit, it won't. Also I want to say that overall this isn't the worst thing in the world that could have happened to Obama or the Democrats. They actually got two key policy goals, extension of unemployment benefits and the middle class tax cut, out of this agreement that would have hurt them if they hadn't done anything. Can you imagine what would happened had Democrats not made a deal and let all of the tax cuts lapse? We'd be burning them in effigy in all likelihood. One area of complaint that I actually have is that more could have been gotten out of this by Obama and Democrats. Republicans have to cut taxes, they are ideologically compelled to, especially for upper income earners. Reid and Obama should have packed a few more things into this, DADT Repeal would definitely have passed if linked with tax cut extension because Republicans care more about carrying water for corporate interests than Gays.
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