The Problem With the Tax Deal

This is something Atrios has been saying for a couple days too, but Krugman and Baker get exactly at the problem with the tax deal. If you just look at the short-term numbers, Ezra is right that it looks like the Republicans got rolled, with the bonus that Obama got some stimulus that would have been impossible to get any other way. The problem is that these numbers are contingent on the extension of the Bush cuts being “temporary” — and in practice they clearly aren’t. If you think Obama will veto a further extension of the Bush tax cuts in an election year with the Republicans controlling the House…well, you probably also think that Republican “moderates” in the Senate are serious about trying to pass DADT repeal this session, and also you probably think it’s a good idea to lend your car keys, wallet, and ATM password to someone you just met at a halfway house.

Now it is absolutely true that the primary villains here are not Obama but the Blue Dogs and their Senate equivalents, whose refusal to allow a budget vote made the extension of the tax cuts inevitable. It may be better policy in the long-term to just let the Bush tax cuts expire, but 1)it would be irrational for a president to make the economy worse in the short-term for long-term benefits, and 2)to the extent that this action makes a Republican victory in 2012 more likely — and it would, not so much because Obama would be branded as a “tax raiser” but because the health of the economy is the biggest variable in determining the winner of presidential elections — it wouldn’t actually be good long term policy. But when Obama spends more time attacking the liberals who supported him than the conservative Democrats who put him in the box, it’s hard for him to expect liberals to rise to his defense. And Obama’s “and by the way, Sister Souljah really was wrong” speech was particularly ill-advised when he actually still needed liberals in the House to vote for the thing.