The Tax Deal

I think I have a handle on the split among liberals about this tax cut deal. We all agree that tax cuts for the rich suck, and that doing a little bit of stimulus is worthwhile. I don't think there are very many liberals who would disagree that bribing a few rich people with a hundred billion dollars over a couple of years in exchange for stimulus is a bad thing to do, though we think it's regrettable that we have to do it. There are two fundamental schisms, though: some of us think that the Bush tax cuts will eventually be made to expire, while others assume that they will be made permanent; and some of us think that the payroll tax cut will destroy Social Security, and others of us don't.

I should just clarify that if in reality the payroll tax cut will destroy Social Security, then the deal is horrible and shouldn't be done. I can see the arguments on both sides, really, though I'm essentially certain that it doesn't destroy Social Security if Democrats make a strong fight about it in a year or two, and get the payroll tax raised again. If this cut becomes permanent, then it's a more complicated political argument; yes, the strength of SS was originally derived largely from its insurance character, but it's not clear at this point that the powerful senior lobby isn't strong enough to keep it safe and it also seems that the "we own it" thing about SS is mainly used to argue for privatization.

If this ends up with the Bush tax cuts becoming permanent, then I think you can make a genuine case that that's enough to make this a bad idea. But I think that's a much closer case, and when I read sentences like "this deal will keep 2 million Americans out of poverty," I have a hard time agreeing with that case.

So that's my take on this situation. In any event, the deal is going to pass. What I think we can all agree with is that if this deal ends up with, say, a further 1-year extension of the payroll tax cut and then that tax cut ends, and if the handouts to the rich end in two years, then this will have been a good deal. And what determines whether that happens is whether Democrats, and Barack Obama in particular, want to bring the fight over the next couple of years.