Word has come in that the Obama administration has reached a bipartisan agreement with Republicans over extending the Bush tax breaks for the wealthy, where ‘bipartisan agreement’ is a political expression that means ‘abject surrender’.
For those of you who’ve been too caught up in the Wikileaks scandal or Justin Bieber’s latest single, what was at issue is this: with Bush’s tax breaks set to expire, the Obama administration proposed that, given the tough economy, the breaks should be extended for most taxpayers. They should not, however, be extended for the super-wealthy because, well, they already have a lot of money. Predictably, the Republicans pitched a fit and threatened to torpedo the whole deal if their favored constituency - the mega-rich that the breaks were created for in the first place - didn’t get what they wanted.
The argument in favor of letting the breaks expire for the very richest is that, with the economy in shreds, we can’t really afford to lose $4 trillion from the public purse over the next ten years (if the breaks become permanent, as the Republicans intend they will, that’s the estimated loss in tax revenue). The argument in favor of keeping them is that if we don’t, then the Republicans will fuck things up for everyone. No, that’s not actually the argument that usually gets put forward, although it is the one that ultimately prevailed. The usual argument is that if the richest get to keep more of their money, they will kick-start the economy by ordering new swimming pools and tipping generously (rather than, say, moving all their money to some place whose economy isn’t in a death spiral). This is called the trickledown theory, and those of us who lived through the Reagan years remember how well that works.
Some commentators, like Paul Krugman, argued that Obama should call the Republicans’ bluff. He should just tell them that it was his way or the highway. When, predictably, the Republicans called his bluff right back and blocked his proposal, he should remind the American people exactly who they had to thank for their new higher taxes.
Reading Krugman’s piece, you can tell that he didn’t believe for a moment that was actually going to happen, any more than he believes the Republicans when they say that they want what’s best for Americans. He’s just indulging in one of those little day dreams that liberal economists like to have. He’s a smart man, he knew what was really going to happen.
Which is this: Obama caved, and the Republicans got what they wanted.
You can argue about whether this is a good thing or not. Maybe this time around trickledown will magically work. Maybe we should let the rich keep their money because they can’t use it any worse than the government will. Maybe taxes are a fundamental violation of human dignity and we should have as few of them as possible.
What you can’t argue about is what just happened. The Republicans blackmailed the administration and won. And that’s how it’s going to be for as long as Obama remains in office. Because when you deal with an extortionist, everything they squeeze out of you is just the prelude to the next thing.
