“Tax deal” is the buzz phrase of the week in Washington, as Barack Obama and congressional Republicans came to an agreement Monday on a two-year extension of current income tax rates for all Americans. Predictably, the Left went hysterical. House Democrats promptly held a voice vote to reject the compromise unless undisclosed changes are made to it, though the Senate began debate on a larded-up version of the proposal Thursday night with a test vote scheduled for Monday. As usual, the devil is in the details — and, in this case, the definitions.
Obama, his fellow Democrats and their acolytes in the media continue to frame the debate in terms of tax “cuts” versus the budget deficit — as if tax rates before 2001 were the natural order of things and to keep rates where they are is a “cut” that will increase the deficit. On the contrary, without the deal, everyone’s taxes will rise by hundreds or even thousands of dollars next year. With the deal, no one’s income taxes will be cut. In fact, some taxes will skyrocket. The estate (death) tax will be resurrected at 35 percent with a $5 million exemption — up from 0 percent this year, but down from the previous 55 percent. The only new cut would be a temporary payroll tax reduction of two percentage points.
The facts, however, don’t stop the Left from their dishonest characterization. “The far-reaching package … would add more than $900 billion to the deficit over the next two years,” The Washington Post lamented. Ditto for The New York Times, the Associated Press and others. This assumes that economic behavior won’t change if taxes go up, meaning federal revenue will increase by the exact amount of the tax increase. Ergo, if Congress prevents the tax hike, that lost revenue adds to the deficit. It’s a wrong assumption, demonstrable by the fact that federal revenue actually went up after the Bush tax cuts went into effect.
Meanwhile, Obama was so concerned about the “cost” that he insisted that unemployment benefits be extended for another year. Now that will actually cost nearly $60 billion, and it will cause the unemployment rate to remain higher than it otherwise should. On top of that, Sens. Maria Cantwell (D-WA), Barbara Boxer (D-CA) and Tom Harkin (D-IA) secured various energy subsidies in exchange for their votes, and more pork is almost sure to follow.
The fact that Obama conceded to any deal is notable. The Wall Street Journal concludes, “Obama has implicitly admitted that his economic strategy has flopped. He is acknowledging that tax rates matter to growth, that treating business like robber barons has hurt investment and hiring, and that tax cuts are superior to spending as stimulus. It took 9.8% unemployment and a loss of 63 House seats for this education to sink in, but the country will benefit.” The flop is so complete that even former economic adviser Larry Summers warned of a “double dip” recession if taxes go up. John Maynard Keynes, call your office.
Though Obama did accept the deal with the GOP, he proved to be a rather disagreeable compromiser, calling Republicans “hostage takers” and the American people the “hostages.” Obama thus not only reneged on an oft-repeated campaign promise to repeal the Bush-era tax cuts “for the rich,” he also proved utterly ungracious to those lawmakers with whom he had just struck a deal. “[B]ecause of this agreement, middle-class Americans won’t see their taxes go up on January 1st, which is what I promised,” he said. “[But] I’m as opposed to the high-end tax cuts today as I’ve been for years. In the long run, we simply can’t afford them. And when they expire in two years, I will fight to end them.”
Some conservatives are opposing the bill because of the aded deficit spending. Club for Growth President Chris Chocola said, “The plan would resurrect the Death Tax, grow government, blow a hole in the deficit with unpaid-for spending, and do so without providing the permanent relief and security our economy needs to finally start hiring and growing again.”
Yet given that Democrats still control the White House and, until January, both houses of Congress, this deal may be the best we can hope for now. Republicans should fight to resist wasteful spending, but tax hikes must be prevented. If they are, taxpayers will keep billions of their hard-earned dollars over the next two years. With that renewed tax stability for small businesses, unemployment should go down, though not as much as if the rates were permanent. In 2012, Republicans could be in far better position to win a permanent solution.
Tags: epic fail obama, News, Politics, Taxes
Conservative Libertarian Outpost 
December 10, 2010 at 11:30
[It’s a wrong assumption, demonstrable by the fact that federal revenue actually went up after the Bush tax cuts went into effect.]
No it didn’t. It took five years before revenues were back to where they were when Bush took office. Like the saying goes: if you can’t make your argument without lying, you have no argument.
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December 10, 2010 at 18:03
In Economics there is a cause and effect thing Ben, and yes, sometimes, most in fact, do take some time. So, the author didn’t lie. You just can’t understand that though.
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December 10, 2010 at 18:56
So if the economy recovers in five years, that will be the result of Obama’s Stimulus bill. Okay.
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December 11, 2010 at 08:16
If a direct link can be shown yes. Hell, if a direct link can be shown that the porkulus package actually did keep us from getting into an even worse recession / depression I will be more than happy to admit it.
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December 11, 2010 at 09:03
Excellent and prompt review… The comments were also clear and thoughtful.
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December 11, 2010 at 10:41
[If a direct link can be shown yes. Hell, if a direct link can be shown that the porkulus package actually did keep up from getting into an even worse recession / depression I will be more than happy to admit it.]
What direct link is there that the Bush tax cuts caused revenues to increase?
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December 11, 2010 at 14:45
Ben, I’m not going to go through all the various Microeconomics curves that add up to a Macro curve and the applied Calculus involved. People such as Thomas Sowell already have, and I’ll take their words for it.
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December 11, 2010 at 14:46
Thanks Pan Am, after a careful review, I think we could draw an analogy between this, and Hugo’s sorry state of affairs as well.
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December 11, 2010 at 21:33
[People such as Thomas Sowell already have, and I’ll take their words for it.]
I doubt very seriously that you understand the “math” involved. You just take his word for it because he reinforces your ideology.
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December 12, 2010 at 07:56
Really Ben? I’ve had six semesters of Economics with five “A’s” and one “B.” BTDT TYVM.
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December 12, 2010 at 15:35
You can find an economist that supports any hair-brain theory. Funny how all of Sowell’s awards come from right-wing organizations. That’s because he spins the facts to support right-wing ideologies. Take a look at all the lies cited by MediaMatters:
http://mediamatters.org/search/index?qstring=Sowell&from=&to=&tags=thomas_sowell&tags=&tags=&tags=
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December 12, 2010 at 18:55
Oh come now Ben. Media Matters..? They have hammered me for calling them out when they did a Twist & Spin on Gunny Bob. Not to mention how they distort virtually anything that comes out of the Independence Institute, or anyone that’s on staff there. Or the future of Freedom Foundation, Cato Institute, and Ludvig Von Mises as well I believe.
I follow the Austrian School of Economics in general. As such, I deplore Keynesian theory because it has over time proved to be almost as valuable a a hit of cocaine in a crack pipe.
Anyone Ben, from Media Matters to yourself, or myself, anyone can and will put spin on things. It’s human nature to support what you believe in. As stated on opening day here I believe that Freedom and Liberty, which includes Free Markets (Economy) offer solutions where Government most often just creates more problems. So yes Ben, I will support those ideologies, and even “spin” them if I feel like doing that. Most often, I re-post things from others in order to stimulate conversation and thought, always linked / sourced back.
Most often though, you just call people names. You used to be able to do better then that Ben. What’s changed..?
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December 12, 2010 at 20:40
Shut the fed govt down!!!! Stop spending now!!!!!! Do ya suppose that might slow down the deficit???? Stop accepting the propaganda that spending has to continue!!!! STOP!!!!!! End of story.
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December 13, 2010 at 08:45
I regretfully agree that this is perhaps the best deal that we can expect at the moment and with the Democrats and their hysterical Progressive chorus still in control it is hard to see what other option is available – other than to reject the bill and keep the economy in turmoil for another few months until the new Congress convenes.
Once again, the lesser of two evils prevails.
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December 14, 2010 at 08:14
Agreed Maine. This fiasco is the very definition of compromise: nobody’s happy…
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December 14, 2010 at 16:32
[Anyone Ben, from Media Matters to yourself, or myself, anyone can and will put spin on things. It’s human nature to support what you believe in.]
No, people who lie all the time defend it by claiming “everyone lies.” If you have to lie to defend your point, you have no point.
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December 14, 2010 at 16:58
I haven’t told a single lie here Ben, ever. I post my opinions as my own. I post articles from others in order to stimulate intelligent conversation.
Sometimes, I’ll admit though, I allow others to post out of sheer humor and fun. I do that by allowing them to show themselves to the world for what they are…
From PolySci 1301: “Spin is the art of not lying but turning things toward your favorable argument.” They are quite similar to “Talking Points” unless you are in the Damage Control Mode.
Have a good one Ben. I’ll be closing comments again soon as I will be away again for an extended period.
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May 4, 2011 at 10:16
This deal may be the best we can hope for now. Republicans should fight to resist wasteful spending, but tax hikes must be prevented.
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