The Problem with Obama’s Tax Deal

Since the election last November, I’ve had some time to think. About 2 months worth of time actually. During my reflection Pres. Obama compromised with Republicans to pass a bill on the Bush tax cuts. I’ve written before that I think he did the right think, but there is one thing about it that I don’t understand. That’s the number two.The deal extended the tax cuts for two years. That means right in the middle of the presidential campaign of 2012 this is going to be an issue. As far as I can tell it’s a losing move for Democrats. The unfortunate truth for Democrats is that lower taxes always sound better.

We live in a time of huge budget deficits. If we look at the reality of the situation two things almost certainly need to happen. We need to cut the amount of money we spend, and we need to raise taxes. The Tea Party movement is built upon fiscal responsibility. at least in theory. The rhetoric you hear from them doesn’t support that, however. What we heard in the last election was that taxes are too high, and government spending was out of control. What is most interesting about that argument is that taxes are exactly what they have been for 10 years, and spending (along with the deficit) has been growing that entire time. Where was the outcry then? Why weren’t Tea Partiers angry in the last year of Pres. Bush’s administration when the budget deficit went over a trillion dollars for the first time? The truth is that the Tea Party cares little for fiscal responsibility and more for the government not taxing them at all. They don’t consider the consequences of that, however.  It is easy to say the government should take less of your money, but not so easy to deal with the reality of what will happen if they don’t. It’s easy to want your paycheck to be bigger, but difficult to deal with the fact that you can’t survive in retirement and old age because Social Security and Medicare are not funded.  The Tea Party is existing in a world that will never come to reality, because it is impossible. They want the services that the government provides, but don’t want to pay for them.

Unfortunately for Democrats it is easy to buy the Tea Party’s vote.  All you have to do is follow the formula that Republican’s used in the last election. Promise lower taxes, say the problem is just government spending. If you simplify the argument to the point that it doesn’t make any real sense, it will probably work. Kevin Yoder, who is the new congressman for the Kansas 3rd district, ran a campaign commercial in the election where he said, ” Washington taxes too much, borrows too much, and spends too much.”  He never mentioned what would happen if they did less of any of those things. That wasn’t important. What was important was saying Congress is wasting money. He wouldn’t want to mention that they were wasting money on things like helping the poor, old or disabled. He wouldn’t want to mention that we spend billions on military programs that go nowhere, only to further the most technologically advanced military in the world unnecessarily. He wouldn’t want to propose real solutions, because real solutions almost always have side effects that some people don’t like.

The real problem with the tax deal is that it makes it more difficult for Obama to be re-elected. It they had extended the cuts for 1 or 3 years, it would be an entirely different situation. Democrats have little to gain from a tax argument in an election. Any real fiscal conservative would say that when the time comes we need to eliminate the Bush tax cuts. I’ve heard a few say just that, but in an election year logic takes a back seat to winning. In a year where the future of not only Congress, but the White House, hangs in the balance, we can expect a lot of politics, and little of sensable policy.


5 responses to “The Problem with Obama’s Tax Deal

  1. I was against the deal. I amend that. I thought he could have tweak the GOP a bit on running as deficits hawks, then quickly adding damn near a trillion with tax cuts for the uber-rich.
    As for your point …if the economy improves, say to even 8% un-employment Potus and his party can run to tackle the debt. The GOP is locked in to the “Club for Growth” no tax pledge. But the no tax never stand is beginning to teeter. Watch Huckabee and Mitch Daniels. The party may split over the issue and if so, it’s Obama in a walk.

    Nice post


    • I think you’re right that the Republican’s could split on this issue. The Tea Party and Sarah Palin movement could cause them a lot of trouble if they’re not taken seriously. I would be very interested in how Mike Huckabee reacts. I’ve long said I thought he was the Republicans best pick for a nominee. That may be why he’s never been a nominee. The next two years are going to be a ride, no doubt.

  2. Your lack of understanding of what the real tea party is proclaiming aside, I think you are closer to supporting them than you realize.

    Fiscal conservatives have been saying for years that we need to cut spending to under the tax receipt of the federal government. Extending the tax rates put in by the Bush tax cut legislation does not add to the deficit, spending adds to the deficit. Now if we lower the current tax rates that would cause our deficit to go up and no fiscal conservative would be for that, at this time.

    When Democrats hide their wasteful spending behind social programs the bleeding heart liberals are quick to defend it, so then anyone that talks about cutting funding to any social programs is demonized as hating the poor or some minority group. If you believe that there is no waste in government agencies, I have a piece of ocean front property in Arizona I can sell you cheap.

    Reducing the government budget for a social program does not mean in any way eliminating the program as a whole. Even if I believe that programs like Social Security have no place in a free society, there is no way to eliminate it at this time. But there is plenty of waste from those programs that can eliminated if politicians acted responsibly.

    The problem with Obama’s tax deal was that it was all a political game and no one was actually trying to fix a problem with it. The problem we need to address is Jobs. America now has the highest corporate tax rate in the world, why would anyone want to do business here? It cost more, out side of wages, to employee an American than any other nationality in the world. Why would any company create jobs in America? We need to reduce the burden on businesses that create jobs so that we have more Americans paying taxes. Then in the mean time, we need to cut spending in every area of the government to a level we can afford. Stop deficit spending.

    But there I go thinking realistically. As long as we have politicians worrying about keeping their jobs, they will not worry about doing their jobs, term limits anyone?

    • I wouldn’t be against supporting the Tea Party if I really believed the rank and file Tea Partier really believed what the leaders of the movement say. I agree that the deficit is a huge problem. I just believe that thinking realistically means we acknowledge that we are not going to cut spending to the point that it balances the budget. Reinstating Clinton-era tax rates will make a huge dent in the problem. I disagree that lowering any taxes on corporations will help. The corporate mentality sends companies to the cheapest job markets and the U.S. will not be able to compete with that. We have to pay people a certain amount, and that is more than people have to be paid in other places. I also believe that we will have more jobs when people spend more money. An increase in consumer confidence and demand for products will create jobs.

      I do agree with you about term limits. The term limit proposals that I’ve read would still allow a person to represent the public for quite awhile. While I question his motives, I have to admire the fact that Sam Brownback, the new governor of Kansas, set a term limit for himself in the Senate and lived up to it. I think that term limits would encourage legislators to try and accomplish as much as possible in the time that they have.

      Thanks, for the comment. It’s nice to have someone questioning my logic and opinions. Most of the reason I started this blog was the hope that people could have a real discussion. Viewpoints may differ, but the discussion between them is what will make this country better.

  3. Matt, great article, but I’m hoping the Democrats are smarter than that. (I know, that’s a long shot and the evidence is against it!)

    The democratic response in 2 years should be “We gave the wealthy their tax cuts for another 2 years. Now it’s time to pay some bills.”

    “The middle class can keep their cuts, they need it.
    But the wealthy need to pay more”
    The republicans will be against it.
    The democrats will claim they’re just trying to reward their ‘fat cat’ supporters.
    They bring in a couple rich democrats (ex. Warren Buffet, Bill Gates) to say they think they should be paying more, and suddenly
    the Republicans are on the defensive for the first time in 20 years.

    Most of the true TeaParty’ers are middle class folks. Hopefully we’ll split them up a bit, and pull the election out of the hat.

    Granted, this assumes the Dem leadership thought this far ahead, and that they won’t shoot themselves in the foot in the meantime, but I’m hoping that this is the plan.

    We’ll see.

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