Party time for Bush and Cheney!

Obama extends tax cuts for the rich that the GOP passed with chicanery and Cheney's vote. How did we get here?

Published December 7, 2010 5:07AM (EST)

I know they weren't the best of friends when they left Washington, but I bet former President Bush and Dick Cheney at least had a phone call tonight congratulating one another on one of the great heists in history. In 2001, they knew they couldn't make their budget-busting tax cuts for the rich permanent, so they agreed to phase them out in 2010, leaving the political consequences to another administration. Even with that chicanery, the Bush tax cuts were divisive enough that they required Cheney to cast a tie-breaking vote in the Senate. No problem. That's how Republicans play: They reward their wealthy base.

Increasingly, it seems, Democrats, too, reward the wealthy in their base, and ignore their much larger constituency of working- and middle-class voters, struggling in the economy destroyed by Bush and Cheney. President Obama's compromise was a long time coming, telegraphed for months, but depressing nonetheless. The good news is that he got a little bit more for caving than some Democrats expected. It's great that unemployment insurance may be extended 13 months; many Americans will appreciate a payroll tax cut, an extended Earned Income Tax Credit and the latest patch of the Alternative Minimum Tax.

But the concessions Obama apparently won from the GOP shouldn't obscure the fact that his party lost, and their party won. I want to agree with my colleague Steve Kornacki, who argues that in the end, with the package of small but not insignificant stimulative programs that are part of the deal, Obama got the best result he could. Steve may be right, but I still think a sharply drawn battle over both the budget-busting tax cuts for the wealthy, and extending benefits for the unemployed could have -- in some version of reality, maybe not ours -- strengthened the Democratic Party brand, to use a word I don't love, and reminded confused voters who and what we stand for.

Meanwhile, after the vast transfer of wealth to the top 1 percent of Americans in the last 30 years, this deal makes me feel like I live in an oligarchy. (I laid all of this out in this essay on "Winner Take All Politics" exactly a month ago.) To get a little bit of help for the unemployed, we have to deliver bushels of cash to the wealthiest Americans and their GOP agents?

Felix Salmon of Reuters wrote today about the fact that tax rates are the lowest in 60 years -- and some of the ramifications of that (with a chart well worth the click over to Reuters). Salmon notes:

• Federal taxes are the lowest in 60 years, which gives you a pretty good idea of why America's long-term debt ratios are a big problem. If the taxes reverted to somewhere near their historical mean, the problem would be solved at a stroke.

• Income taxes, in particular, both personal and corporate, are low and falling. That trend is not sustainable.

• Employment taxes, by contrast -- the regressive bit of the fiscal structure -- are bearing a large and increasing share of the brunt. Any time that somebody starts complaining about how the poor don't pay income tax, point them to this chart. Income taxes are just one part of the pie, and everybody with a job pays employment taxes.

• There aren’t any wealth taxes, but the closest thing we’ve got -- estate and gift taxes -- have shrunk to zero, after contributing a non-negligible amount to the public fisc in earlier decades.

The giveaways to the rich also mean that with a Republican House next year, Obama will be under constant pressure to cut spending, not expand it. More programs to help the jobless are unlikely. Kornacki and Ezra Klein, someone else I respect, argue this package is the most stimulative Obama could have hoped for, and that's his ultimate win: a prayer that this hodgepodge of trade-offs might goose the economy, and bring down unemployment in time for the 2012 elections.

I sure hope they're right, but I am not optimistic. Tax cuts for the wealthy are just about the least stimulative notion around. The rest of the package may help. Corporate America is already sitting on bags of loot it refuses to spend to help the economy. It's hard to believe tax cuts will pry any of that money loose.

But I hope I'm wrong -- for the sake of the victims of our economy, and the president I supported. Here's my take on the mess from MSNBC's "The Ed Show" Monday evening:

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By Joan Walsh

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2012 Elections Barack Obama Taxes