Fiscal Constraint Can Wait
Considering the strum und drang of many Democrats reacting to President Obama’s “deal” with congressional Republicans to extend the Bush-era tax cuts, one would think that there was ever a serious chance that Congress would actually change tax policy while the economy remains in the ditch. Wasn’t gonna happen, but if there is a missed fiscal responsibility moment here it may turn out to be the failure by Obama and Democrats to leverage the moment to force a long-term deal to get the nation’s fiscal house in order. Time will tell whether it was a missed opportunity.
Announcing the tax deal, Obama acknowledged the obvious – the economy would not react well to a tax hike on the upper 2% or so of taxpayers even if most everyone else would see little if any change in tax rates. Add to that economic reality the fact that Republicans have largely won the broad political message battle over taxes and its impossible not to conclude – Keith Olbermann aside – that the President had little choice but to give way on his campaign pledge to let the tax cuts expire for the wealthiest taxpayers.
The stark fiscal reality remains however, even as the politics of the moment crowd totals up the winners and losers. The co-chairman of the President’s Commission on getting the budget deficit under control, Democrat Erskine Bowles, nailed the missed opportunity. Had Democrats been thinking along with Obama, they might have seized this moment to press for the grand plan to deal with the terrible mess both parties have created over the last decade. Democrats have yet to conclude that the country is ready for a call for shared sacrifice, pain and realistic action to cut spending, enhance revenue, scale back entitlements and reduce defense spending. Fiscal constraint will have to wait apparently, while all of us what for adults in both parties to begin to deal with nation’s real fiscal problems.
Still, given the push back from some Democrats, Obama displayed both political courage and political pragmatism in getting his deal. He also, importantly, got an extension of unemployment benefits that will have the benefit of keeping real money in the hands of real people who will spend it. Over the longer term, with this deal Obama may have also taken a step toward reassuring some of the independents who seem to have abandoned him in droves.
Here is the real political reality: if Obama and Democrats don’t make serious progress in getting the economy moving by Labor Day 2011, and moving in a way that most people feel in their bones as well as their pocketbooks, he and many othe Democrats won’t have to worry about being around in 2013 to deal with controlling the deficit.