What he did was play a schoolyard game of picking teams with the Republicans. I'll take the unemployed and you take the uber-rich. Here's a little something for both sides. The jobless get to keep their $300-a-week unemployment checks and the rich get to keep their Bush-era tax breaks. Happy now? And then Obama surprised the referees with a little original thinking: He lowered the payroll tax by two percentage points for a year. Less will be deducted from workers' paychecks for Social Security.The plan also continues tax breaks for students and families that were in the 2009 stimulus package and allows businesses to write off all the investments they make in 2011. Perhaps these businesses will even consider investing in hiring? Who knows? Stranger things have happened.
The deal has both sides of the political aisle unhappy, suggesting that Obama has finally figured out that political consensus doesn't mean everyone agrees, just that everyone feels equally victorious. Both sides can say they fought for their constituents and won. And both sides can complain equally about the billions of dollars in additional federal spending or lower revenue coming at a time when the growing federal debt must be brought under control.
The federal debt is such a yawner in my book. It's like saying "tough noogies to the families who live in their cars and the 15.1 million unemployed who can't find work, but look, my checkbook balanced for the first time in half a century, so this is all good." It's not all good.
Even the deficit hawks say that running up short-term debt is OK if you have a plan for long-term deficit reduction. Spend it now to create jobs and keep a shred of a middle class alive and once you have people working, you can raise their taxes to pay it off. Or, here's a crazy idea: Eliminate a couple of the wars we're engaged in and save trillions by the end of the week.
Here are the best-guess numbers of what the December Surprise will cost:
- Restoring Bush's tax cuts to everyone for two years: $458 billion. A mere $75 billion of that is attributable to cuts to the wealthiest families, the rest goes to what's left of our middle class by sparing them the Alternative Minimum Tax.
- Keeping unemployment benefits in place for another 13 months: $56 billion. No, this doesn't give the unemployed another 13 months of checks, although many wish it did. It allows those cut off after 26 weeks to continue to get more help, which goes to 99 weeks in the states hit the hardest by job loss. It restored what was lost Dec. 1 when Congress failed to extend the benefit.
- Workers would pay 4.2% on their first $106,800 in wages instead of 6.2% of that to pay for Social Security. Cost: $120 billion.
- Tax credits for individuals: $40 billion. This is the extension of tax breaks aimed at helping lower-class and middle-class families. It includes child credits, earned income tax credit, and a revamped tax credit for college costs.
- Lowering estate taxes: $88 billion over two years. Another point scored by the GOP. The compromise, assuming it isn't changed, raises the tax exemption level to $5 million from $1 million and a top rate of 35% instead of 55%. Now I just need a rich relative.
So now we have a deal, or at least a tentative one. Will it be enough to stimulate the economy and restore enough jobs to bring the country back from the brink of fiscal implosion? No, but at least it's a step in the right direction.