The game of chicken over cutting off unemployment insurance payments, for many the only way of paying any of their bills, is resolved. The White House has announced that unemployment benefits will be extended for another 13 months and in exchange, the Republicans will be able to extend tax credits for millionaires.
From the Los Angeles Times:
President Obama proposed a compromise on the thorny political issue of tax cuts on Monday, describing a tentative agreement that would extend all of the George W. Bush-era reductions set to expire the end of this year and continue unemployment benefits for 13 months.
In a televised statement, Obama announced what he called “a framework for a bipartisan agreement” that would temporarily extend the tax cuts for the middle class and for the rich alike. The tentative agreement reached Monday likely means that taxes will not increase on Jan. 1 as originally scheduled.
Such a tax increase, “would be a chilling prospect for the American people,” Obama said “I am not willing to let that happen.”
Obama defended his decision to compromise as needed for the economic recovery.
Recognizing that the agreement could cause problems with some Democrats, who have urged him to stand firm against the Republicans, Obama insisted that it “would be a grave injustice to allow these” tax cuts to expire.
The statements make a sharp contrast to the President’s earlier remarks regarding concern for the great burden extending tax cuts for the wealthy would place on the deficit, but show that his urge to find some sort of compromise outweighed any desire to force Republicans to justify their preferences for giving more money to the wealthy over assisting the poor.
For months, President Obama insisted that permanently extending tax cuts for the wealthy would be unfair to middle class Americans and add $700 billion to the government deficit.
What the president calls a framework agreement involves a two-year temporary extension of all Bush-era tax cuts, continuing unemployment benefits for 13 months, and reducing payroll taxes for workers to encourage businesses to hire new employees.
Citing what he called real and profound differences between Democrats and Republicans, Mr. Obama said he decided to move to break a stalemate that could have continued into the new year.
“I know there are some people in my own party, and in the other party, who would rather prolong this battle, even if we can’t reach a compromise,” said President Obama. “But I am not willing to let working families across this country become collateral damage for political warfare here in Washington. I am not willing to let our economy slip backwards, just as we are pulling ourselves out of this devastating recession.”
For those who realized the fight was already over when the White House put out a statement declaring private talks and the need to compromise only minutes after the House voted to reject extending the millionaire tax cut extension, the President appears simply to be the worst negotiator ever. But TIME Magazine is painting this as a brilliant strategic move.
The president presented a series of major concessions to the Republican Party, proposals he had campaigned against and with which he said he still disagreed. For two years, expiring income tax cuts put into place by President Bush would be extended for all income groups, including the richest two percent of households. A cut on the estate tax would also be extended, in a modified form, with no taxes on the first $5 million of inheritance and a 35% tax on everything else.
In exchange, Obama said he had secured an extension of unemployment benefits for 13 months and a number of tax cuts, for education expenses, families with children and the low income from the 2009 Recovery Act that were set to expire. One of those tax cuts, which had long been criticized by Republicans, the Making Work Pay Tax Credit, would be traded for a similarly generous 2 percent decrease in the payroll tax for workers. There was also a deal to extend certain business incentives.
A cynic could read the deal, which still needs to be accepted by rank and file members of Congress, as a classic Washington giveaway. In order to gain acceptance for budget-busting benefits that Republicans wanted, Obama had negotiated budget-busting benefits that Democrats wanted. The White House offered no estimates for the costs of the two-year deal Monday night, but it is likely to cost as much as $200 or $300 billion, money that will simply be borrowed with expectation that another generation can foot the bill.
But at the White House, where there is much anxiety about the staggering performance of the economy, this is considered a victory. In crafting the compromise, Obama may be able to effectively able to sneak another stimulus bill through Congress, by capitalizing on the Republican habit of refusing to acknowledge the deficit impact of tax cuts.
One thing is for certain — the President is most definitely working in the way that he believes will best position himself for his 2012 reelection. We can only hope that as we progress, that coincides with what is best for the country as well.