Iowa reaction to Obama's capitulation on Bush tax cuts

President Barack Obama announced the "framework" for his unilateral surrender betrayal of core principles deal with Republicans on extending the Bush tax cuts today. It's worse than I expected, which is saying something. Republicans get tax cuts for all income levels extended for two full years (we're supposed to believe Obama will stand up for letting them expire during a presidential election year). They agreed to extend some unemployment benefits, but only for 13 months. Although long-term unemployment is at historically high levels, the "99-ers" (people who have exhausted 99 weeks of unemployment benefits) will get nothing out of this framework. To sweeten the deal for Republicans, the estate tax will be reduced to 35 percent, and it will apply only to estates exceeding $5 million in assets. That's very costly and not at all stimulative. To provide more disposable income for working people, the payroll tax on employees will be cut by two percentage points for a year. That's good as long as it doesn't become an excuse later to cut Social Security benefits. UPDATE: David Dayen reports that a senior administration official told him the payroll tax cut "would be paid for out of general revenue through a credit, and so would not impact Social Security and Medicare finances in any way."

It astounds me that Obama could think he will gain politically from this bargain. How many videos like this one are floating around? October 30, 2008: "Why would we keep driving down this dead-end street? [...] At a moment like this, the last thing we can afford is four more years of the tired old economic theory that says we should give more and more to billionaires and corporations and hope that prosperity trickles down on everybody else."

After the jump I've posted some Iowa politicians' reactions to the deal. I'll update as more statements become available.

UPDATE: Late on Tuesday afternoon, the offices of Representatives Bruce Braley (D, IA-01), Dave Loebsack (D, IA-02) and Leonard Boswell (D, IA-03) have not responded to my requests for comment on the tax deal. How hard is it to express an opinion about the major decision of the lame-duck session? U.S. Senate conservadem Mary Landrieu of all people came out guns blazing today against the "moral corruptness" of the deal.

Republican U.S. Senator Chuck Grassley released this statement:

"Republicans support tax relief across-the-board, including the middle class, and have fought for it.  The middle class and the unemployed need job-creating policies that expand the economic pie, not shrink it.  Growing the economy expands the tax base.  Jacking up taxes would be a sure-fire way to deep-freeze hiring and kill the fragile economic recovery.  Job-creating small businesses storing up capital have been reluctant to create jobs and take on new payroll obligations, not knowing what their taxes will be in January.  Part of the blame is attributable to the uncertainty over the direction of tax policy.  Tax incentives that create jobs in renewable energy have been expired for a year, with no action, costing jobs.

"The current leadership is starting to face the reality of last month's elections.  Americans want Washington to stop overspending and overtaxing.  Contrary to what a lot of Democratic leaders have said, raising taxes is not the magical cure that will shrink the deficit.  Higher taxes give big spenders a license to create new layers of government and put taxpayers on the hook for even more entitlements.  Higher tax rates siphon money out of the private sector and shrink the Gross Domestic Product.

"During the lame-duck session of Congress, arguments have been made that seem to say letting taxpayers keep the same amount of their own money is like handing out 'bonuses.'  Iowa families who are worried about less take-home pay in January don't consider preventing a tax increase on them a bonus, a windfall or a handout.  Tax revenue comes from taxpayers' hard-earned money.  It doesn't grow on Christmas trees, no matter how fanciful the rhetoric gets about millionaires versus the unemployed."

If money "doesn't grow on Christmas trees," perhaps Grassley will spell out $900 million in spending cuts over the next two years to offset the expected cost of this deal.

Democratic U.S. Senator Tom Harkin released this statement:

"To say that I am disappointed with the deal the President laid out tonight is an understatement.  Senate Republicans have successfully used the fragile economic security of our middle class and the hardship of millions of jobless Americans as bargaining chips to secure tax breaks for very wealthiest among us.  With record unemployment and millions of Americans falling off the benefit rolls just as we near Christmas, America faces an emergency situation, and under these circumstances the validity of extending unemployment benefits and tax rates for the middle class stands on its own.  The same cannot be said for extending tax breaks for millionaires - they face no immediate hardship, such a move will not spur economic growth, and doing so will only add hundreds of billions to the deficit.  In addition, by extending tax rates for two years but unemployment benefits for only one, we almost ensure that a Republican-led Congress will be able to block a further extension of unemployment benefits if they are needed.

"I've asked this question before, and tonight I ask it again - Have the Republicans lost all sense of fairness? Have they lost all sense of justice? Have they lost all sense of what's right and wrong? They can fight for their tax breaks for the wealthy, fine. But to say that we cannot extend unemployment benefits for people out of work without giving tax breaks to the wealthy - that's a moral outrage."

I'd like that statement better if Harkin had acknowledged the president's betrayal and/or had promised not to vote for the package. What does he have to lose? He's probably not running for re-election again anyway.

  • Aggravating

    What bothers me is the fact that no one is mentioning that if the tax percentage for businesses making over $250,000 was over 50% like it used to be,  businesses would not want to lose that profit,  so they would reinvest in the company.  Everybody thinks that taxes would hurt business.  However,  the taxes are paid only on the net profit, after expenses, etc.  I remember high school bookkeeping (before the computer, back in the dark ages),  when the instructor made several comments about when the tax rate is high,  businesses stimulate the economy because they don't want to lose that money.  Its better to invest,  instead of pay it out in taxes.  the lesser of two evils.  people are not mentioning that.  Its not like a business is making $250,000.  then paying all the expenses of business,  has $1000 left after expenses,  and 31% of $250,000 is paid in taxes.  No.  if there was a profit of $1000,  no taxes would be paid on that.  If they showed a profit of $1,000,000.  then of course they would pay 31% of that.  

    I am not very pleased at all.  Even John Boehner said a few weeks ago that he wouldn't be happy about it, but he would vote for saving the tax cuts for the middle class, even if they couldn't get the tax cuts kept for the rich.  So what happened there?  Only Obama knows how to compromise?  Now they are all going to begin screaming that we must cut our budget,  and what will they want to cut?  All the entitlement programs.  The poor don't have any more to give.  The middle class is suffering.  And that's who will have budget cuts,  education, assistance with medical,  infrastructure, etc.  And then they are going to try to go after social security.  I'd bet the farm on it.

  • Dayen quotes a fool

    Only a fool (or someone trying to fool us) would say this plan won't weaken social security.  If it increases the deficit, it will hurt social securtiy.  The main reason the Republicans wage war on the deficit in the first place is so they have an excuse to cut social security.  The finances of the SS system are minor details.

    Harkin should vote NO.  Boswell, Braley, Loebsack as well.

  • Perception

    This is all about perception in my view.  I have talked to seven people in the last year who voted for Obama who now can't stand the guy because they think their taxes are going to go up.  They voted largely for Republicans in 2010, either people didn't know what they were voting for in 2008 or they've been fooled.  

    Then there are my friends on the left who wanted a non-interventionist foreign policy who are disgusted with Obama as well.

    I largely still support the guy, its the people on the left who wanted much more and then the right-ward leaning yet still independent person who didn't do their research that bother me.  

    • their taxes probably went down

      because of the stimulus, but most people don't realize that.

      I think this deal just makes Obama look weak and unprincipled. I doubt it helps him with anyone who had already decided they don't like him because he's going to raise their taxes.

  • How can you have a "War on Terrorism" and not pay for it?

    Sorry, I'm really pissed off right now.  I'm in Tacoma watching any semblance of democratic process in this country collapse.  

    Having lunch with retired Colonel Ann Wright discussing Julian Assange and WikiLeaks.

    Democrats?  The Left Wing of the ruling fascist elite.

  • Maybe I had more sympathy

    for the lib congress folks who are bitching and moaning now had they had the balls to bring this up before the election. Pathetic.

    You, me, Obama and libs obviously all agree on the substance of this.  But at some point of time you have to move on and get things done.  That's what governing is all about. It's always been about compromise.

    • they didn't move before the election

      because they were afraid the Blue Dogs would go with Republicans to add the top-tier tax cuts to any bill. So don't blame liberals, blame the conservadems.

      Obama has much more leverage than House progressives, because he holds the veto pen. Nothing can become law without his signature.

      • They were afraid? In other words,

        the libs had no balls before the election. How is the situation better now? And isn't it time we all acknowledge that D's would have never had a majority in the House without those conservadems.  If we want them come election time, we need to live with their priorities too.

        • Obama could have changed the equation

          by making clear he wouldn't sign any tax bill that extended the top-tier cuts. That would have strengthened the bargaining position of the House Democrats who wanted to hold a vote before the election.  

      • I can't blame the Blue Dogs if they voted for the tax cuts

        It wouldn't have necessarily helped to vote for them, but I don't see how it would hurt in most of those districts.  I think if people like Walt Minnick, Bobby Bright, Chris Carney had been able to somehow change the subject from "Pelosi, Obama, Reid" they could have survived.  Patrick Murphy of PA was a rising star in my eyes and he got beat fairly handily in a district where we should be able to win consistently now.  

        Travis Childers has pictures of FDR in his office, I think there's no question he would have voted more "progressively" if he could, these people in these districts have been hypnotized by Fox and talk radio, what can you do?  

  • Caucuses

    In the 2012 caucuses we need to vote for Uncommitted.  Obama is interested in bowing to and bending over backwards for the republicans.  I can see in 2009 he might have wanted to get along with the repubs.  But when it became apparent they didn't want to work together he should have taken a page from FDR and used his bully pulpit and steam roll them.

    He needs to grow a pair.  Or maybe borrow Hillary's.  

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