Friday, April 08, 2011

President Obama & The Very Bad Deal

These economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power. Our allegiance to American institutions requires the overthrow of this kind of power ~ Franklin Delano Roosevelt, the 32nd president of the United States (3/4/1933 to 4/12/1945) as quoted in his Speech to the Democratic National Convention in Philadelphia, Pennsylvania (6/27/1936).

The following is an excerpt from the Thom Hartmann Radio Program, 12/8/2010, which I edited for brevity and clarity. The discussion concerns the president's tax cut deal with the Republicans that had not yet passed when the discussion took place...

Thom Hartmann: Greetings my friends, patriots, lovers of democracy, truth and justice, believers in peace, freedom and the American way. Thom Hartmann here with you. And of course the great debate going on now across the United States from living rooms to boardrooms to the United States Congress - what to do about this compromise that President Obama has come up with the Republicans to extend tax cuts for millionaires and billionaires for two years, and to extend unemployment benefits on a limited number of unemployed people...

Dan Pfeiffer is with us, he is the White House Communications Director. Dan, welcome to the program.

Dan Pfeiffer: Thanks Thom.

TH: This tax cut that was originally passed by George bush and the Republicans with less than 60 votes in the United States Senate, because it was passed by reconciliation. Why has the Obama Administration not attempted to use reconciliation in the last two years for any of their agenda items that could conceivably be passed by reconciliation - to expand Medicare for example, or in this case taxes?

DP: We did use reconciliation to pass the health care bill. You only get to use it once per budget year. [Even though the budget is from October to October] we don't have a budget for the next year yet [which is why we can't use reconciliation to pass tax cut legislation and instead need to get Republican votes].

TH: [Here's the problem I see with this deal...] unemployment only goes for a year, so Obama's going to be stuck during the election year, in 2012, during that entire year, trying to deal with unemployment. And at the same time the Republicans are going to come back and say, you know the Obama tax cuts just jacked the budget deficit and the debt up by almost a trillion dollars - and so we've got to cut more social programs.

DP: Well, Thom, I think it's important to understand a few things here. First is, because the Republicans had 42 votes in the Senate, and frankly there was not unanimous Democratic support for allowing the upper income tax cuts to expire, we were put in a position where you only have two choices, and there were only two. People can talk about this far fetched scenario or that far fetched scenario, but it boils down to two very stark choices.

Do we let taxes go up on middle class families who absolutely can not afford it - a tax increase of two to three thousand dollars next year - at the same time that the unemployed Americans, 2 million at the end of this year, will go without benefits, or do you try to find a compromise that works? Compromise means we are going to have to swallow some things we don't like and the Republicans are going to have to swallow some things that they don't like, but [the question is] is it a good deal for America? Is it a good deal for our economy? Is it a good deal for middle and working class people?

There is no question that this is a very good deal. The president was adamantly opposed to extending the tax cuts for the upper income brackets - he fought this for many years - but there is not a supermajority in the Senate that will allow that it happen. So if we can't do that, we need to get a deal that ensures that middle and working class families not only don't face a tax increase, but we were able to some things to help the economy in the long run.

TH: Dan, I would submit to you that there's a third option. Let me have 10 seconds, if I may [Thom plays audio of the FDR quote at the top of this post]. Why is the president not talking like that?

DP: Well, I think that is an excellent speech. A very historic speech. You're right, there is a third option, which is the same as the first option, which is to allow the taxes to go up, and then spend the next several weeks and months making a political case to the American people about why this is the Republican's fault.

TH: Do you really think, that if you just let these tax cuts expire, and then president Obama goes on TV and gives a [FDR type] speech, and says that, we already have legislation that has been passed by the House, [and all we need to do is present that legislation to the Senate and ask] are you guys going to vote for tax cuts for middle class people? Yes or no? You really think that they would not back down?

DP: They may eventually back down, but you would go months and months before that happened, and every day we were before the Senate making these political arguments, unemployed Americans would get no benefits. Middle class Americans would have a higher tax bill. The economy...

TH: [interrupts] Wait a minute. I was talking about tax cuts. Let's talk about unemployment. Don't you think he could go right now and... bring out some stories like Ronald Reagan used to do.

DP: When Democrats had 59 votes in the Senate it took nearly six months to pass unemployment benefits. There is...

TH: [interrupts] Because there was no presidential leadership, Dan.

DP: I entirely disagree with that Thom. [The choice was to] let taxes go up which endangers our recovery and hurts middle class folks who can't afford it, or you can cut a deal. This is a good deal. It, uh...

TH: [interrupts] Dan, when George bush sold this thing we were told that the average cut on a median income individual with a family of four was $300 a year. That was the Democratic response to George bush's tax cut, "It's only 300 bucks a year". If someone making 50 grand a year is only going to see their taxes go up $300 a year where's the damage?

DP: There's a huge damage. The president talks to middle class and working class folks all the time who are scraping nickles together to...

TH: [interrupts] But income tax rates right now in the United States are lower than they've been in 60 years.

DP: Thom, if you want to make an argument that we should allow taxes to go up on middle class Americans to prove a political point, then we are at a...

TH: [interrupts] No. I'm saying that if anybody should be held hostage, it should be the Republicans rather than working Americans.

DP: What the president has said is that he has gotten a very good deal for working Americans. And a lot of measures that are going to create jobs for unemployed Americans who don't currently have them, and...[music signifying the end of the segment begins to play].

TH: [interrupts] Dan, I'm sorry we're out of time. You're doing a great job. I wish you well, but I disagree. Thank you for coming on.

DP: Thanks Thom. [Dan Pfeiffer disconnects].

TH: [addressing the listeners] I'm suggesting that we all be calling our Senators and our Congressmen and say "filibuster this thing. Stop it. Kill it". [End of segment]

My Commentary: Normally Thom Hartmann does not continually interrupt his guests. This interview was very atypical for the Thom Hartmann program. The reason for the "rudeness" (if that's what you want to call it) is that Thom felt this was a very bad deal. In retrospect, I believe Thom Hartmann was entirely correct. President Obama got teabagged. This was a Republican trap that he walked right into. Due to his quest to be even more bipartisan - which is the message he wrongly believed the voters sent by turning the House over to the Republicans.

In the next segment Thom explained another aspect of this bad deal, which is that "part of this legislation is a two percent reduction in payroll taxes". In regards to the payroll tax holiday Thom says, "What's that going to do? Over the short term, not a whole lot. But if you could make that permanent, it would take such a bite out of Social Security that it would require you to consider privatizing part of Social Security, or cutting benefits, or raising the retirement age".

This is the strategy behind the payroll tax holiday - it's a stealth move to sabotage Social Security. If further cutting the taxes of working people is a good idea - then do it. There is no reason to specifically target funds that should be going to the Social Security Trust Fund.

Finally, because the extension of the bush tax cuts added significantly to the deficit, Republicans yelling and screaming about how we're "broke" gain a lot more credibility. All over the media and blogosphere Conservatives insist that "it doesn't matter how we got here, what matters is we're broke and need to do something about it".

Of course that "something" is to cut programs that benefit middle and working class Americans, which is exactly what Thom predicted. And it certainly does matter how we got here. We are where we are because Conservative deregulation created a housing bubble that crashed the economy.

What President Obama and the Congressional Democrats could have done to get us back on the right track would have been to kill the bush tax cuts. Immediately. Repeal should have been the first order of business as soon as Barack Obama assumed office. Failing that, they most certainly should not have been extended. Some Democrats say if Obama hadn't made the deal good legislation like the repeal of DADT or health care for the 9/11 first responders wouldn't have been passed.

President Obama was RIGHT when he said the GOPers were holding tax cuts for the middle class hostage, but he was wrong when he decided to negotiate with the hostage takers. You don't negotiate with TERRORISTS - which is what the Republicans are. If you negotiate with a terrorist the terrorist will surely return to terrorize you again. Because they know they can get what they want by doing so.

This is what is happening RIGHT NOW with the battle over the budget and looming government shutdown. This time it's the Tea Party Representatives doing the terrorizing. The question now is - will Obama cave and give them exactly what they want? Will the President allow himself to be teabagged yet again? The strategy has been working for the entire Obama presidency thus far, so I see no reason why they'd abandon it now.

SWTD #71

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