Some Thoughts About the Obama-McConnell Plan

Obama's recent tax/unemployment deal with Republicans is a lot less demoralizing once one recognizes that Obama is a Republican, albeit not a completely batshit lunatic one. So I wasn't really going to comment on the most recent Obama capitulation. But several readers asked me for my thoughts on the subject, so here they are:

1) The anger by low- and moderate-information likely Democratic voters is astonishing. Today, completely unsolicited, I had five different people who, while they are likely Democratic voters, really don't pay attention to the details, rant about how weak Obama is and how he refuses to stand his ground against the Republicans. This is probably why Democratic House and Senate members are freaking out.

2) The Obama loyalists are infuriated (note: I am definitely not one). Among Democratic bloggers, Oliver Willis has to be counted as a fierce Obama loyalist; ideologically, he's best described as a moderate Democrat (he's definitely to right of the Mad Biologist). Here's how his post about Monday's deal announcement, "Obama Secures Peace For Our Time":

I see President Obama has returned from his meetings with the GOP leadership and has come back waving and bragging of the agreement that cedes the Sudentenland (background) to the Republican party on taxes.

This is analogous to the French Old Guard turning their guns on Napoleon: utterly inconceivable. The first time I read it, I thought it was satire. As someone who follows this stuff very closely, the anger and sense of betrayal among many, if not most, Obama loyalists is palpable.

3) It's angered the technocratic progressive wonks (which I thought was impossible). Matthew Yglesias writes:

But ask yourself about a theory of change in which Republican intransigence is rewarded with lectures to liberals about the evils of intransigence.

[In the future] I'm not sure what'll happen. It'll be a standoff. Someone will get criticized in the press. Someone will get nervous. Someone will need to back down. Does this deal make it more likely, per se, that it's Obama who'll back down? Not really, no. But the thought process he outlined at the press conference suggests that he will. That in response liberals will complain, and in response to that Obama will deliver the impassioned dressing-down that he doesn't deliver to the right-wing hostage takers.

Yes, it stings. Welcome to Liberalville.

4) The estate tax reduction is utterly demoralizing. If you can't hold the line on taxes on rich dead people, you really lack the ability to do anything. Obama punked himself--and it's not even clear how this got on the table. This is as relevant as deciding on a national flower.

5) It's not very good economic policy: Social Security payroll tax cuts. Regular readers will know that I really haven't been in favor of Social Security payroll tax cuts. As far as I can see, when people are economically insecure (not to mention pissed off and freaked out to boot), those in debt will simply use the money to pay off those debts. This is nothing more than a transfer of debt from the private sector to the public sector, with the added disadvantage that creditors (i.e., banks) aren't lending that money--the velocity in this case will be rather low. Those not in debt will simply hoard most of the money because they're nervous.

If you want to use deficit spending to employ people (and I think the employment deficit is a massive social and political crisis, so I do), then paying people to do stuff we need done is the way to go about it, not Rube Goldberg mechanisms that hope people might pump up demand.

I think the only reason a payroll tax cut was offered is that if only the income tax part went through, then the wealthy would actually receive more after taxes than middle class households which even Obama realizes would be political suicide.

6) This has radicalized people I didn't could be radicalized. Case in point, Blue Dog Democratic Senator Mary Landrieu (LA):

Extending the tax cuts for those making more than a million dollars a year is borderline immoral, Landrieu charged. "I'm going to argue forcefully for the nonsensicalness and the almost, you know, moral corruptness of that particular policy," said Landrieu, walking into a meeting with Vice President Joe Biden and Senate Democrats. "This is beyond politics. This is about justice and doing what's right."

..."It's what I'm calling the Obama-McConnell plan. We're going to borrow $46 billion from the poor, from the middle class, from businesses of all sizes basically to give a tax cut to families in America today, that despite the recession, are making over a million dollars. I mean, this is unprecedented. Unprecedented. I want to repeat that,"

...Landrieu put today's tax-cut debate in the context of the poverty and joblessness facing African Americans across the country. "The median net worth of African-American families -- net worth, not income -- in this country today, according to our census, is $5,000. You want me to repeat that? $5,000. So we are borrowing money from constituencies, and large segments of the population like this," said Landrieu. "I want you all to get your heads around this."

Remarkable. Landrieu is sounding like Martin Luther King.

7) This is another case where the timing is politically disastrous, as the stimulatory effect, such as it is, vanishes just in time for the 2012 election. Krugman is right:

...didn't the administration repeat exactly the same mistake it made on the original stimulus? The stimulus was too small; but it also too short-lived, with the maximum impact on growth coming in the winter of 2009-2010, then turning negative just in time for the midterm election.

Now we have unemployment insurance and payroll tax cuts for 2011, going away in 2012 -- just in time to put the administration in big trouble as the election looms.

If I were a Republican, I couldn't have planned it any better.

8) Somehow, despite controlling the White House and both houses of Congress, the Republicans are driving the agenda. Can the Coalition of the Sane sue for political malpractice?

I'm going to stop here, since this is making me depressed, but I'll reiterate: this is not a psychological flaw or powerlessness. At its core, this is how one would expect a Rockefeller Republican would respond--think George Bush, Sr.

The Democrats, elected and rank-and-file, for our own good, must come to terms with the notion that a Republican is in the White House, and that Democrats are the opposition party.


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And to add insult to injury, right around election time when everyone notices how much all those tax cuts for rich people added to the deficit, they're going to start pointing out how liberals are to blame for all of this, because Obama was behind it and pushing for it.

I know if there's anything I stand for as part of the left, it's handing as much money as possible to the upper 10%. It comes in just ahead of forcing poor people to deal with evil insurance companies, trampling as many civil liberties as possible, and ensuring perpetual war. American politics give me a headache.

By JThompson (not verified) on 08 Dec 2010 #permalink

I don't get what drives a human being to take money from people who need it and give it to people who don't need it.

By Katharine (not verified) on 08 Dec 2010 #permalink

I think you're dead on about viewing Obama as being part of the "opposition party", though much of the Democratic party is also part of the same opposition party. In many ways we have become a one party system.

I also think it helps to view all upper level politicians as what most average folks call "sociopaths" (I'm told by a psychiatrist I know, that that technically means something else). These people are not "principled" as in the way that is expected from little people. They are not troubled by the same sort of emotional and moral quandaries we debate in mediums such as this.

If you want some proof of this, consider the fact that these people speak comfortably in front of millions of people, something that does not come easily to most normal humans. Similarly, we require them to be "perfect" and nearly inhumanly flawless. They cannot betray simple human error and every word they speak is carefully chosen to avoid confrontation - something no normal person is capable of without breakdown, and yet they seem to seemingly pull off with regularity. Add to this - what drives one to be in such a difficult position and to seek such "power"? In short, you've really got to have a screw loose to be at the level of Obama et al.

Finally, taking your point that he is in fact a moderate Republican, maybe what we should push for is him to change tickets, thus freeing up the Democratic candidacy for someone, well, actually Democratic.

"As far as I can see, when people are economically insecure (not to mention pissed off and freaked out to boot), those in debt will simply use the money to pay off those debts."

While that may not be stimulative, it does help to reduce household debt, which has a lot to do with why we are in this mess in the first place. Reducing unemployment should be our first priority, reducing household debt should be our second priority.

"While that may not be stimulative, it does help to reduce household debt"

Except it's a transfer of debt from households to the government without stimulative effect. Because we ultimately owe the same money (via our government), it's not clear it's an advantage.

On the other hand, if it makes people comfortable to buy again (because they don't feel locked under a debt load), perhaps it has some positive effect.