This editorial will appear in tomorrow’s print edition.
There’s a lot more to Obama’s tax-cut deal with Republicans than you’d imagine from the Democratic hand-wringing over it.
Symbolically, it seemed a huge GOP victory, because many liberal Democrats had framed the whole argument in terms of giveaways to the wealthy and Republican callousness toward the unemployed. They wanted to decouple the tax cuts given to high-income Americans in 2001 and 2003 from the cuts given to households of lower income.
Democrats wanted to renew the latter while letting the former to expire on schedule at the end of December. This would make the tax code more progressive – a Democratic dream and a nightmare of many Republicans.
In the current economic distress – huge deficits combined with deep recession – the Democrats had the better side of the argument. Renewal of tax relief for the most affluent would be a missed opportunity for whittling down the immense gap between federal revenue and spending. Letting rates suddenly rise in January for less wealthy Americans – who pump most of their discretionary income into the economy – would have been disastrous.
But on Monday, Republicans held the line, and Obama abandoned his previous demands to squeeze more from the affluent. Many Democrats are gnashing their teeth and accusing their president of spinelessness.
But a closer look at the deal – the actual deal, not the symbolic one – tells a different story.
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