Mid-term election results seem to have persuaded President Obama to cut a deal with Republican lawmakers rather than stand on principle. Agreement was reached on Monday on a wide tax package which will not only extend the Bush-era tax cuts on income for the next two years, but will also reduce worker payroll taxes for the next year and look more favorably on business investments.
Other features of the new tax package will include the reinstatement of the estate tax to the amount which many Republicans favor, 35%, on a temporary basis. There will also be an extension of benefits for the chronically unemployed.
Obama stated on Monday night that “We have arrived at a framework for bipartisan agreement.”
Timing here is everything. Final agreement on tax issues must come soon. If not, the Bush tax levels will expire on December 31st, creating a default situation in which practically every citizen will be paying higher income taxes as of January 1st, 2011. There is a real fear that increased taxes will negatively affect everything from economic growth to holiday shopping.
Some Democrats were “seething” that Obama gave-in to the tax cuts for the wealthy, interpreting the President’s action as “caving in” to Republican demands. Others see Obama’s compromise as a necessary evil to get the Republicans to sign. Whether the deal gets through the congress is an entirely different matter, as one congressman put it:
“I can tell you with certainty that legislative blackmail of this kind by the Republicans will be vehemently opposed by many, if not most, Democrats,” said Rep. John Conyers (D., Mich.).
It is prudent to remember that is there is now a Republican majority in the Congress, so really, who is blackmailing who?