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Opinion: The Dems' Epic Fail on Tax Cuts

Dec 6, 2010 – 9:22 PM
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Michael Cohen

Michael Cohen Contributor

(Dec. 6) -- It looks like Washington's version of "Let's Make a Deal" has finally come to an end.

The White House and congressional Republicans are on the verge of making a deal to extend the Bush tax cuts even for those making more than $250,000 a year. Surprisingly, President Barack Obama seems to have swung a deal far better than nearly anyone might have expected -- in return for granting Republicans what is seemingly their most important policy objective (keeping tax rates low for rich people) the White House has finagled a 13-month extension of unemployment benefits, a payroll tax holiday and a series of other tax cuts intended to spur business investment and consumer spending.

Nonetheless, the deal will blow another $900 billion hole in the deficit. It will hand the GOP a major political victory and almost certainly will further depress the president's liberal supporters. Already, Sen. Bernie Sanders, I-Vt., has pledged to lead a Senate filibuster of the deal, and House Democrats seem decidedly lukewarm about the agreement.

But it takes a certain brand of chutzpah for congressional Democrats to blame the White House for the tax cut deal. In reality the blame lies almost entirely with them. Consider:

Back in September President Obama challenged Republicans to "not hold middle-class tax cuts hostage any longer" and derided continued tax cuts for the wealthiest 2 percent of the country. "We are ready, this week," the president said, "to give tax cuts to every American making $250,000 or less."

A few days later, House Republican leader John Boehner tipped his party's hand by making clear that if they were forced to, House Republicans would likely vote in favor of a bill that preserved tax breaks for the middle class. Polls showed that most Americans supported the Democratic position. And, to top it off, Democrats had the maximum possible leverage two months before Election Day.

So what did Obama's Democratic "allies" in Congress do? Nothing. No vote was taken. Why? Because centrist Democrats were afraid to cast a vote that Republicans could label as a tax hike just weeks before the midterm election.

From a political perspective, it was an epic failure.

But from a negotiating standpoint, it was even worse. By kicking the can down the road, the Democrats gave up their political advantage. The move provided the Republicans with the opportunity to use a truncated lame-duck session to hold the Congress and the president's legislative proposals (like "don't ask, don't tell" repeal, the New START treaty and extending unemployment benefits) hostage. And they did just that by directly threatening to refuse to allow any congressional business to go forward until the tax-cut issue was resolved.

As a result the White House found itself in a no-win situation. If Obama had followed the urgings of many of his liberal supporters and called the Republicans' bluff -- allowing tax cuts to expire -- then most Americans would have seen their paychecks get smaller on Jan. 1. Aside from inciting voter anger, it would almost certainly have had a negative effect on the struggling economy. At the same time Obama's legislative priorities would have bitten the dust as well. Who do you think would have blamed for that political disaster? Well, it wouldn't have been congressional Democrats.

It's small wonder that faced with those options Obama chose to cut the baby in the middle and make the more politically expedient deal to extend some of the Bush tax cuts in return for GOP support of his legislative priorities.

But this cycle follows a familiar pattern.

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After all, it was congressional Democrats who blocked the public option during the health care debate; it was Senate Democrats like Ben Nelson who demanded a smaller stimulus package in February 2009. But it was the White House that got blamed by the left. Now on tax cuts, the reluctance of many of the same congressional Democrats to do their job and pass a tax-cut bill (something they could have done at any point over the past two years) has left Obama to clean up the mess and again shoulder the anger of ticked-off liberals.

But it didn't have to be this way. If congressional Democrats had held together and forced a political showdown with Republicans last fall, they may well have succeeded in extending only the middle-class tax cuts. At the very least they could have raised the public profile of the Democratic position and put real political pressure on the GOP. Instead they've helped ensure that the budget-busting Bush tax cuts will be extended.

It's a fitting coda to a Democratic Congress that had so many important legislative accomplishments, but more often than not let disunity get in the way of smart and effective politics.
Filed under: Opinion
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