When Barack Obama walked out of last week’s meeting with Mitch McConnell and John Boehner and started talking about developing a "productive" working relationship with Republican Congressional leaders who have sworn the political equivalent of a blood oath to destroy his presidency, it was clear that the president planned to abandon his many years of advocacy for ending Bush-era tax breaks for millionaires.
Now, with the lame-duck session of a Congress still entirely controlled by Democrats racing toward a earlier-than-necessary conclusion, the deal has been done.
Obama’s representatives—Treasury Secretary Tim Geithner and White House budget director Jack Lew—caved at every turn to the Republican team of Arizona Senator Jon Kyl and Michigan Congressman Dave Camp.
The final product, which the president referred to as a "framework for a bipartisan agreement," is by being celebrated by Republicans as a total victory.
And rightly so.
The GOP negotiators got a two year extension of Bush-era tax cuts for the wealthiest Americans.
They alsio got the elimination of the Making Work Pay tax credit, which was developed as part of a broad plan to stimulate the economy without breaking the bank. The tax credit will be replaced by a far more expensive — and more fiscally unsound — two percentage point reduction in the payroll tax.
Perhaps most unsettling was the administration’s acceptence of a Republican proposal to establish a new estate tax exemption of up to $5 million for individuals and $10 million for couples — a huge concession that will be in place for at least two years.
Even Obama admitted that the estate tax deal "may cause Democrats heartburn."
And what did Democrats get in return? A 13-month extension of unemployment insurance benefits.
What this trade-off means is that, while billionaires will be enjoying their tax breaks until after the 2012 presidential election, the unemployed will be threatened with another benefit cut just after Christmas 2011.
Then he tried to put a positive spin on the capitulation by claiming that: "The American people did not send us here to wage symbolic battles or win symbolic victories."
Actually, there were no real victories — symbolic or otherwise — for the Democrats.
The argument will be made that Obama and the Democrats had to fold in order to secure an extension of unemployment benefits.
But the political, fiscal and logical calculus does not add up.
Let’s begin with the politics:
As draconian as the new Republican leadership may be, the fact is that a substantial portions of the current Republican caucuses in the House and Senate—and even larger portions of the incoming Republican caucuses in both chambers—represent states where unemployment is rising. For decades, Democrats have known how to pressure Republicans from New England states such as Maine, Masschusetts and New Hampshire, as well as GOP representatives and senators from Pennsylvania, Ohio, Indiana, Michigan and other Great Lakes states, to back extensions of unemployment benefits. Nothing has changed, except that the unemployment rate is now higher than at any point in decades—and that the hurt has extended to states such as Nevada, where more Republican votes should be available for the picking.