Tax cuts & Obama

I am as loyal a supporter of Barack Obama that you will find and I have been terribly disappointed by his decision to negotiate with the Republicans on extending the Bush tax cuts. For me, this was the issue the 2008 elections were about, just as the 1998 election was won by George W. Bush on the basis of his "no new taxes" pledge.

Two things have made this situation more interesting, though. One is the article by Ezra Klein in the Washington Post (http://voices.washingtonpost.com/ezra-klein/2010/12/can_the_white_house_win_in_201.html) arguing that by giving in on the tax cuts, Obama is getting more stimulus in the economy that he could have hoped to -- not just the tax cuts, but other benefits he will get in the negotiation, such as extended unemployment benefits, other tax cuts directed at the middle class, and so on. This is probably White House spin selling the idea to the left, but it does have a certain appeal.

But the thing that is truly fascinating about this moment is how fluid it is at this moment (6 December 2010). There are several different groups, any of which could derail the whole thing, but each of which has good reasons not to do so:

1. Left-wing Democrats, who would like to see the tax cuts renewed only for people making less than $250K/year, and use the money from the newly increased taxes on people making more than that to extend unemployment benefits, and provide some stimulus in other ways.
2. Right-wing Republicans, who are unalterably opposed to increasing debt (except when it involves a tax cut), who would like to renew all the tax cuts and do nothing else.
3. President Obama, whose major promise from the 2008 election was not to renew the tax cuts for people making more than $250k/year, and who is smart enough politically to realize that this is a defining issue for his base.
4. Republican leaders negotiating with Obama, who would like to roll this President on another issue, but who must also be aware that they can very easily end up looking like the President rolled them.

It is actually impossible to predict what is going to happen, on this major issue, which affects all of us.