The Federal Tax Cut Conundrum — CBPP Offers a New Overview

Tuesday, December 14, 2010 at 2:00 PM by

A week ago when the President first unveiled the compromise he negotiated with Republicans on tax issues and unemployment benefits, the initial reaction from many Democrats was quite hostile. In some camps that’s still the case, but as different groups and lawmakers take a closer look at the proposal and the political alternatives, there has been at least a little bit of thawing in the opposition from the left side of the political spectrum, and it easily cleared a key procedural vote in the Senate yesterday.

I think a piece written last week by NY Times columnist Gail Collins provides an amusing and insightful analysis of the reaction of liberals to the proposed deal. This blog post describes her commentary and, more importantly, links to an overview of the compromise plan issued late Friday by the Center on Budget and Policy Priorities (CBPP), which sheds some light on why the number of liberals and moderates supporting the plan has gradually been growing.

Thus far, my favorite commentary on the proposed tax compromise has been a column written last week by Gail Collins, who began by using an advice column format to tell an advice seeker how to deal with her heartbroken liberal boyfriend, who has fallen off the “audacity of hope” bandwagon and climbed onto the “line in the sand” bandwagon.

The “bandwagon” column is worth the read, even if you don’t agree with Collins’ advice to “Miserable Moderate” that she should:
“Ask your boyfriend if he would rather spend the entire holiday season wondering what Senator Joe Lieberman will do next and whether Olympia Snowe will vote for cloture. Then he will turn pale and offer to take you out for a nice dinner.”

The gist of her piece and a number of other analyses is that the deal is probably the best that the President could strike, given the very weak bargaining position that resulted when the Senate ducked the tax issue before the election. Whether it’s a deal that liberal Democrats or conservative Republicans should support now – considering the intervening turmoil and the political uncertainties of holding out for something they like better – is a much more difficult question than deciding if the compromise is the sort of deal they wanted the negotiators to reach.

While you’re pondering whether your agree with Collin’s assessment, or just how strenuously you disagree, take a look at the short paper issued Friday by the Center on Budget and Policy Priorities (CBPP).  It describes how the compromise would divide roughly $850 billion over the next two years, and their analysis might give you a better perspective on why some prominent liberal groups, like CBPP, have (somewhat reluctantly) endorsed the plan.

A couple of our previous blog posts examine specific parts of the proposed deal. One describes the extension of the Recovery Act changes to the refundable tax credits, and another post explains the proposed continuation of federal unemployment insurance benefits, which could revive benefits for about 2 million unemployed Americans losing them this month, including about 40,000 Wisconsinites.  We’ll soon examine other aspects, such as the estate tax and how the plan could be very expensive for states.

When lawmakers advance a bill or proposal I find distasteful, I try to step back and look at the issue more objectively, and I can sometimes take solace in following the intrigue surrounding how the next stages of the political drama play out. In the case of the proposed deal on the tax cuts, there could be a lot more drama to watch unfold, and I think it will be as fascinating to observe as it will be painful. Thus, regardless of how these issues finally get resolved, I think Collins is right that the current debate “puts the drama in Obama.”

Jon Peacock

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