An interesting column by Paul Krugman today hints at perhaps the most conclusive reason Democrats should reject the tax “compromise” that Barack Obama negotiated with Republicans. It just may ensure a catastrophic defeat for Democrats in 2012.
Krugman concedes that on the surface Obama got something back from Republicans for agreeing to make the rich, richer. Republicans get their tax cut extension for the wealthiest 2 percent of Americans and hand the super-rich a free estate-tax ride for at least the first $5 million handed down to heirs. But the president and American people, meanwhile, would get a back door stimulus with the extension of unemployment benefits, a 2 percentage point cut in Social Security payroll taxes and tax breaks for business investment.
The reason this is such a bad deal, then, is not merely because it seems obscene for America’s rich to get a whopping break on inheritance taxes at the same time they’re taking home a disproportionate share of income tax cuts. It is, Krugman points out, that the stimulus part of the deal lasts for just one year while the tax cuts for the wealthy last two.
In this way, Republicans have set Democrats up for a big fall, he suggests. The modest stimulus might boost the economy some next year, he says. But since it ends then, unemployment likely would be heading up again just in time for the 2012 election.
Since, as James Carville so aptly said, American elections are won and lost on “the economy, stupid,” this deal could be setting up a Republican check-mate in 2012. Of course, that is also when the Republican’s rich benefactors would pull the strings of their Congressional marionettes to make the tax cuts for the rich permanent.
It’s a beautiful thing, American democracy in action.