On taxes, Obama never delivered the right message

In the wake of a proposed tax package deal, there’s plenty of finger-pointing, especially by Democrats, about how Obama caved to the Republicans on tax cuts for the rich. There’s even whispering about mounting a liberal Democratic presidential candidacy against him in 2012. (Those who flirt with that should remember the lesson of Ted Kennedy’s taking on Jimmy Carter in 1980.) And many Democrats, including most of the Massachusetts delegation, are digging in their heels in opposition.

They have a right to be outraged about the debt-expanding “tax cuts for the rich.” And, as Paul Krugman notes, the deal sets itself up for a repeat scenario next year, with even worse results. The pity is that the President should have been more forceful earlier this year so the extension of unemployment benefits would have been less likely to be held hostage to the extension of the Bush tax cuts. And the Democrats should have handled the Bush tax cut extension issue, before and during the election, better. As Jacob Weisberg wrote in Slate, Obama failed at every step in the tax-cut poker game, and he ended up being the mark.

Ron Elving pointed out on WBUR, the Democrats have been outplayed at every step along the way. Had it been otherwise, the Congress now ending would have passed a public option in the health care bill, tougher regulations on banks, a tougher set of standards on carbon emissions and a totally different tax package to substitute for the expiring tax cuts from the era of George W. Bush
On the tax package, the President failed in strategy and in timing, and worse, he failed even to control the message.

The Democratic alternative, sustaining the Bush cuts for those earning up to $200,000 for an individual and $250,000 for a couple, might have been more saleable if the President had consistently said, Look, everyone will get the tax cuts on income up to that level. The Bush era tax reduction for incomes higher than that will expire because 1) given the growing structural deficit the nation can’t afford it and 2)the additional breaks for those who don’t really need it will not result in either job creation or new consumer spending.

This really needn’t have been portrayed as discriminating against the high earners; they would have been understood to be getting exactly what everyone else was getting. What’s unfair about that? And it would have meant that an equivalent amount would not now need to be borrowed from the Chinese to help keep the economy afloat.

But that’s history now. The Republicans are controlling the game, and they haven’t even officially taken control of the House! Perhaps the White House has the votes without those on his liberal flank, which leaves them free to vent their outrage. But what happens if their votes are really needed? I can’t believe that Barney Frank, Jim McGovern, Steve Lynch and Michael Capuano are going to leave the unemployed without benefits. Sure, some last minute tweaking of the bill could be in order, but waiting a month to try to work out a compromise after the first of the year with an even more cohesive opposition is not a prescription for national renewal. Some economists say that the impact of a month’s delay would cost a million jobs and render our recovery even more precarious.

At this late stage, the compromise to which President Obama agreed may indeed have been the best that could be achieved. So let them get on with it, pass the bill, then see if they can get the START treaty ratified. After the holidays, the agenda will be even more daunting.

Please let me know your thoughts in the comments section below.