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.