The White House just announced that it has settled on the details of the deal it has been cooking up with Congressional Republicans over the coming expiration of the Bush tax cuts. In return for a two-year extension of all the Bush tax cuts — including those for the richest two percent of Americans and those on capital gains and dividends — currently expired unemployment benefits will be extended for 13 months, there will be a two percent reduction in payroll taxes for one year, and both the expanded Earned Income Tax Credit and Child Tax Credit enacted in the 2009 Recovery Act will be retained.Washington Post—Obama, GOP reach deal to extend tax breaks: "The package would add more than $700 billion to the rising national debt, said congressional sources who were briefed on the deal. But with the unemployment rate at 9.8 percent, the White House was focused on winning a compromise that could boost the fragile recovery while preventing the economic damage that could result from letting the expiring tax breaks affect paychecks next month."
The deal also includes reinstating the currently expired estate tax in a way proposed by Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) — 35 percent with a $5 million exemption (which means that $5 million can be passed on tax free).
...Now, many are arguing that this is a way for the Obama administration to bring in new stimulus spending through the back door, boosting the economy in the short-term. While this is true, conceding on the Bush tax cuts and the estate tax is a big price to pay in terms of perpetuating irresponsible and unaffordable Republican tax policy.
New York Times—Tax Deal Suggests New Path for Obama: "The deal appeared to resolve the first major standoff since the midterm elections between the White House and newly empowered Republicans on Capitol Hill. But it also highlighted the strains Mr. Obama faces in his own party as he navigates between a desire to get things done and a retreat from his own positions and the principles of many liberals."
The Hill—Obama, GOP strike deal:
Obama repeatedly said that he opposes extending the high-end tax cuts, but he said it is "abundantly clear to everyone in this town that Republicans" would block an extension for only the middle-class cuts.Washington Post—Obama's tax cut extension part of strategy to show bipartisanship: "Although his liberal supporters are furious about the decision, President Obama's willingness to extend all of the George W. Bush-era tax cuts is part of what White House officials say is a deliberate strategy: to demonstrate his ability to compromise with Republicans and portray the president as the last reasonable man in a sharply partisan Washington. The move is based on a political calculation, drawn from his party's midterm defeat, that places a premium on winning back independent voters."
Obama said there is "no reason to believe that this stalemate won't continue well into next year," which he said would have a "chilling effect" on the economic recovery.
"I am not willing to let that happen," Obama said.
The president acknowledged the anger of many Democrats who think Obama caved in to Republican demands, saying he is "sympathetic to those who prefer a fight over a compromise."
But Obama said a protracted battle would mean letting the tax cuts expire for all Americans, an outcome that he said would cost $3,000 per year for typical families and could cost more than 1 million jobs.
"The American people did not send us here to wage symbolic battles or win symbolic victories," Obama said.
No word on whether the president is interested at all in winning back progressive voters.
"Don't worry, boys—we've always got protecting Roe to hit 'em with come 2012!"