Supply-side economics prevailed—at least politically—late Thursday, as the US House grudgingly approved President Obama's deal with congressional Republicans to extend Bush-era tax cuts for billionaires, creates broad estate-tax exemptions for millionaires and shapes economic policies based on tax cuts rather smart investment in job-creating infrastructure projects, schools and an engaged public sector.
The House vote ended two weeks of wrangling over the deal that was generally popular with Republicans who almost giddy at prospect that a Democratic president would make tax cuts so central to his economic agenda, but was sharply criticized by leading Democrats and Vermont Independent Bernie Sanders as a reanimation of Reaganomics that would widen the gap between rich and poor, starve federal, state and local programs of needed resources, expand deficits and potentially undermined Social Security.
Some of the tax cuts White House included in the agreement were beneficial to working families, and the deal also includes an extension of unemployment benefits. That, and pleas from Obama that a defeat of the package could end his presidency, secured sufficient Democratic support to clear the House—where opposition had threatened the measure.
“I applaud President Obama for his side of the ledger,” a restrained House Speaker Nancy Pelosi, D-California, said after the House voted 277-148 for the measure . “I’m sorry the price that had to be paid for it is so high.”
What was the price?
“This basically concedes the argument to the supply-side Republican failed economic policies,” explained Oregon Democrat. Peter DeFazio, a prime mover in efforts to block the bill's tax cuts for the wealthy.
DeFazio's allies, and there were many of them (even among the Democrats who ultimately voted for a bill after their party's president pleaded for support), argued that the measure would do little to help the hardest hit Americans while returning to the unsustainable defficit spending of the Reagan era.
“Wake up and listen to the sirens,” California Congressman Sam Farr shouted on the House floor. “I can’t believe you talk about this bill as fiscal sanity. It’s fiscal insanity.”
The fiscal insanity is likely to spread, as Senate Democrats on Thursday abandoned efforts to pass an omnibus spending bill to fund the federal government in the coming year. That move, in the words of veteran Washington observer and Politico Capital Hill writer David Rogers has the effect of "pushing major spending decisions into the next Congress and giving Republicans immense new leverage to confront President Barack Obama priorities.
Ultimately, most Democratic leaders in the House recognized that threat.
Pelosi did not vote on the measure that she steered to approval in one of the last acts of her speakership, while most members of her leadership team cast "no" votes.
Only Majority Leader Steny Hoyer, of Maryland, backed the final measure. Majority Whip James Clyburn, of South Carolina, opposed the deal, as did Democratic Caucus chair John Larson of Connecticut, Caucus vice chair Xavier Becerra, of California, and Assistant to the Speaker Chris Van Hollen, of Maryland.
Ultimately, 112 House Democrats, most of them members of the Congressional Progressive Caucus and the Congressional Black Caucus but with a smattering of Democrats from across the party's ideological spectrum.
Thirty-six Republicans, led by Tea Party-tied conservatives such as Minnesota Congresswoman Michelle Bachmann and Iowa Congressman Steve King, also opposed the deal. But there was sufficient Republican support so that Republican Whip Eric Cantor, of Virginia,at one point offered to help Hoyer whip support for the deal if a boost was needed from the GOP caucus that will soon control the chamber.
While Thursday's House vote ended the fight over this particular deal. It also set up the next round of fights over essential questions regarding Social Security.
"I think it’s a bad deal," explained DeFazio as he outlined flaws in the package. "It will add $858 billion to our deficit over the next two years. This is done under the premise that these sorts of tax cuts, trickle down tax cuts—on estates over $10 million, incomes over $250,000, and 100% expensing for wealthy corporations who are sitting on huge piles of cash—are necessary to put Americans back to work. I think we could have taken many more effective measures at much less cost to put Americans back to work."
But, the Oregon Democrat added, "one of the worst aspects of this bill is that it will take $112 billion from the Social Security Trust Fund and require that we borrow money, probably from China, to replace that money to make Social Security whole. It’s the first time in 75 years, since President Roosevelt created Social Security that opponents of the program are poised to undo the New Deal and turn it into a raw deal for America’s seniors, the taxpayers and working men and women. At the end of 2011, the Republicans will insist on extending the payroll tax holiday because the expiration of the holiday would increase taxes on working people. And to pay for the extension, it’s likely they will demand cuts in Social Security benefits."
DeFazio's right when he says: "That’s not the kind of security the American people who are dependent upon Social Security, or who will be dependent upon Social Security, need. This is a raw deal for seniors, taxpayers and working men and women."