Wednesday, December 08, 2010

Obama's tax cut cave/compromise

The left is fully up in arms about Obama's compromise with Republicans regarding the extension of the Bush tax cuts. There are talks of Democrat Senators filibustering the bill, of primary challenges to Obama in 2012, and all other sorts of nonsense. I wish I had some insight into Obama's decision making process, because from our perspective it is very difficult to distinguish between Obama being spineless / indecisive and Obama having extraordinary strategic insight, a knack for predicting the outcome of political battles, and reacting appropriately.

I'm not a huge fan of Paul Krugman, because he is such a partisan. For months his NY Times opinion column has called for more fiscal stimulus and expansionary monetary policies in order to get the economy moving. I agree with him on the need for those programs! However, in the current political climate there is no way Obama is going to get another stimulus bill. There is no way he is going to get the GOP to go along with all sorts of other reasonable proposals that would improve the economic situation. The only remotely stimulating policy that Obama can get in the short term is an extension of the Bush tax cuts, and furthermore there is no way the GOP will let the cuts for the top 1% get decoupled from the rest. And yet Krugman has blasted Obama's compromise on these cuts as a policy sell out.

Every time the North Koreans do something provocative, there will inevitably be a bunch of loud people who puff up their chests and say its time to take a stand and "do something" about the DPRK. The South isn't afraid to fight, but the consequences of that fight are too great. Even if the ROK could conquer the DPRK in a week, the DPRK could still level Seoul in hours and kill tens of thousands of people. Obama, like the South Koreans, knows that it is stupid and rash to escalate a situation if unprepared for the consequences of escalation. That is why the South Koreans don't "stand up" to the North - because if the North calls the bluff, the South looks even worse. Likewise, the left is furious that Obama isn't "standing up" to the GOP. But what if he did, and the GOP called, and taxes went up for everyone? Obama would then have to either back down, and look far worse, or accept the damage to the economy and the middle class. And as he put it in his address to the nation the other night, Obama is not willing to let the middle class get hurt as a consequence of political theater in Washington.

Four more related tidbits:

1. I read that Obama and Pelosi pushed Reid to bring up the issue of the Bush tax cuts before the 2010 election and Reid refused b/c two Dem senators didn't want to be on record voting for tax increases before the election. This revelation makes all of this self-righteous indignation coming from Democratic congressmen about the issue even more humorous, since they are the reason the issue was punted in the first place.

2. In the 2008 election, everyone projected their own values onto Obama with regards to his message of "change", and of course he was willing to let everyone do that for political reasons. For many on the left, that meant a shift to left-wing progressive politics. It never meant that for me. "Change" never meant going from partisan and divisive right-wing politics to partisan and divisive left-wing politics. It meant going away from partisan and divisive politics. This tax cut compromise is vindicating my interpretation of what Obama actually based his presidential campaign on.

3. Who wins politically here? Certainly, Barack Obama. The long game on this issue is in the Democrats' favor anyway because they can just vote down or filibuster tax extensions for the wealthy in 2012, when the economy is stronger and Obama isn't up for re-election. Meanwhile, the Republicans just compromised with this supposedly radical left wing socialist president and greatly legitimized him in the process. When this goes through, the American people are going to recognize that Republicans were willing to hurt the economy to protect the wealthy and the Democrats were willing to hurt the economy to grandstand about the middle class. Meanwhile, Obama made a politically challenging decision that will benefit the American people.

4. The issue on which I remain the most torn is whether Obama is actually a strategic thinker or an indecisive leader. Clearly he has been naive at some points, but that doesn't really strengthen or weaken either scenario. Regarding health care reform, geopolitical dealings with Iran, and this tax cut compromise he has looked like a great strategic planner who figured out how to get the most he could given nontrivial political constraints. On other issues, especially with dealings with Israel and the Palestinians, he has looked incompetent, unprepared, and weak. The jury is still out for me.

No comments: