November 15, 2010

The President wants a tax cuts deal. But so what?

The President really wants to extend the Bush tax cuts for the middle class. But not for what he calls the rich. At least not permanently. Should the GOP bite? In a word, no.

Firstly why the Obama drift towards any sort of tax relief? Because it is even evident to him now that he lost. He lost not just the election, he lost the middle. So he needs a tax cut. But this isn't a tax cut, it's an extension of the status quo. So he can look like a tax cutter without really cutting them.

It goes straight to the notion that liberals don't get who's money it is. The President has asked the Republicans how they intend to pay for not raising taxes on "the rich". Think about that - how do you pay for not raising taxes. That's twisted. The real question is without raising any taxes, during a recession in particular, how do the Democrats intend to pay for all their spending? That's the real question.

Yet the President politically needs to offer the trillions in non-tax increases on the middle class but is worried about the cost of the smaller $700 billion on those taxes on "the rich". He wants you to forget the faulty math. He wants you to forget the inequality of extending cuts for some and not others. He wants you to forget that those rich include small business and real investors in the economy who could use those extensions to invest in job creating investments. He wants to come across as a tax cutter, an economic savior. A compromiser and yet still a class warrior. And he wants that money.

He needs this and that makes him a little desperate. Conservatives shouldn't be willing to compromise so easily. True, that could be viewed as playing politics with the economy but it could also be seen as standing on your principles. In the end, the GOP will get more by playing it slowly. If the tax cuts don't get made by this Congress the Democrats will have NOTHING to go back to voters with except, er, health care.

So what is in it for the GOP and for the country? Waiting will get bigger concessions from the tax and spend liberal Democrats. Making the middle class cuts permanent, and extending the wealthy cuts for more than a couple of years is also possible. The more they stall the more the Democrats will be willing to compromise. Already Chuck Schumer has tried to change the game. He's offered to change the top tier to $1 million from $250,000 in hopes of extending the class warfare to include more people.

He doesn't get it, but he does get the need to compromise on Republicans' terms. Right now, my advice for the Tea Party adherents is that this would be a great time to slow down the pace of the game to a crawl. Run the clock.

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