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Published: Wednesday, 12/8/2010

Bad tax deal

The tax-cut deal President Obama reached with congressional Republicans this week raises disturbing questions about his ability to lead the nation in a time of trouble.

The economy is a mess. Amid high unemployment and growing government debt, a cheerful, bailed-out Wall Street is preparing to pay itself a new round of huge holiday bonuses.

The tax deal does a lot for the rich, but much less for middle-class and unemployed Americans. The wealthiest taxpayers would benefit from not returning to the higher tax rates that preceded the George W. Bush administration, and from receiving more-generous terms on the estate tax. Investors would see capital gains taxes stay at a low 15 percent.

The middle class - defined by this plan as households with annual incomes of $250,000 or less or individuals with incomes of $200,000 or less - also would not see their taxes go up.

The Social Security payroll tax rate for all workers would be reduced by two percentage points for a year. Long-term unemployed workers would get their benefits extended for 13 months.

Parts of the deal would put more money into the struggling economy. But estimates suggest that 25 percent of the tax benefits in the new plan would go to the richest 1 percent of the population.

Mr. Obama's liberal critics, many within his own Democratic Party, say that he caved in again to the Republicans, just as he did on health-care reform by not fighting to retain the public option. The President says he is doing the best he can against the political forces that have emerged as a result of this year's elections.

But had the President fought harder on the tax issue - and even if he had lost after a tough battle - he could have portrayed Republicans more credibly as being unsympathetic to the unemployed while genuflecting to the rich. Instead, he appears to have surrendered preemptively to his and his strongest supporters' adversaries.

He can claim, with justice, to have inadequate support from congressional Democrats. But lawmakers don't rush to follow a leader they perceive as weak.

The result this time will be an estimated $900 billion more in national debt - 41 percent of it to be borrowed overseas, and a quarter of it going to the country's already privileged rich. This is change we can believe in?


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