So is this a good deal? It's a lot better than I would've told you the White House was going to get if you'd asked me a week ago. There's some new stimulus in the form of the payroll-tax cut and the expensing proposals. The older stimulus programs that are getting extended -- notably the unemployment insurance and the tax credits -- probably would've expired outside of this deal. The tax cuts for income over $250,000 are a bad way to spend $100 billion or so, and the estate tax deal is really noxious.
It's bad news for the deficit, though the White House and Congress are right to make the deficit less of a priority than economic recovery. And speaking of that economic recovery? This isn't enough, and it's not well targeted. The deal amounts to the White House throwing some bad money after good. But the end result is between $200 and $300 billion more in tax breaks, tax credits and unemployment insurance than there would've been if not for this deal (I say $200-$300 billion because of the uncertainty over what would've been extended in the absence of this package). That's better than nothing -- or to be more specific, better than backsliding.
Most of the money just keeps programs that are currently in effect from expiring, so in some ways, it would be more accurate to say that this money is anti-contractionary rather than stimulative. It's important that the White House doesn't repeat the mistake it made in the original stimulus and overpromise how much this will do for the economy. What you can say about this policy is that, for the moment, it doesn't make things much worse, and it probably makes them a bit better. This is not the government making a major new commitment to the recovery. It's the government not getting in the way, and maybe doing a bit to help, the horribly slow recovery that's happening anyway.
Both sides are relishing the coming fight in 2012 over extending these tax cuts. And the payroll tax cut is actually something I've advocated for, so I am impressed with that. Unemployment benefits will be extended for another 13 months, and Republicans get their heavily marbled Kobe beef tax cuts too. Jennifer Rubin, at her new digs over at the Washington Post, is already declaring complete victory. In her true hacktastic style, she's ignoring the facts.
What this does politically is blow a hole in the notion that Republicans give a damn about deficit reduction. This deal will add roughly $300 billion to the national debt by itself. The Tea Party is not going to be happy with this arrangement in the least and they are going to make it painfully clear that anyone who votes for this is waking up with a Lipton bag the size of a beach ball next to them in bed and an instant primary challenger. There's no way they go along with this, the Paul Ryans and the Michele Bachmanns and the Jim DeMints. I honestly don't think it's going to be the left that kills this. It will be the right.
As this is a completely reasonable deal and as Ezra said much better than I thought the White House was going to get even as of this time yesterday, I completely expect the Republicans to be split over this and revolt, because a healthy majority of the GOP doesn't want a reasonable centrist bipartisan deal, they want President Obama covered in bees made out of lava and thrown into a vat of acid-breathing wolverines.
And as I said earlier, this kills the "Republicans as deficit hawks" thing cold. The Tea Party is never going to stand for adding $300 billion to the deficit. I know all the headlines read "Obama sells out liberals!" but they should be reading "Republican leaders tell Tea Party to go to hell". We're right back to the famous Cheney mantra "Deficits don't matter". As such, I think there's going to be enough folks on the left and the right to stop this thing.
The question I'm asking is "What's Obama's Plan B when this thing blows up like a fuel air bomb in a paper mill?". This would be a serious Centrist victory for the President and that's going to be completely unacceptable to a large number of Republicans. There's also more than a few folks on the left who won't accept this deal either.
No way this deal happens. None. Whether or not you like or loathe this deal, it's not going to turn into legislation on the President's desk.
Who will get blamed when this deal falls through? Already the Village is warning that those Dirty F'ckin' Hippies will sink the deal, but
Worst case scenario is that the Republicans run out the clock, absolutely nothing gets a vote, and it's all seen as Obama's fault. In fact I fully expect Republicans to spend the rest of the week denying there ever was a deal in the works.
If I'm the GOP I run out the clock and first thing in January I introduce a permanent tax cut bill in the House and put everything I want in it, then dare the Democrats to kill it. They cave, total victory.
Because I don't see an Obama back up plan here, which should be to put one last omnibus bill on the floor and say take it or leave it. The Republicans know they win if they run out the clock on the 111th Congress. Unless Obama is willing to fight right now, immediately, we're all screwed.
Time for Plan B, Mr. President. Plan A won't survive much longer most likely. Now's the time to wade into the fray.
[UPDATE] Some clarification: Why would the Tea Party accept this deal? Can anyone give me a good reason? I can't think of one, which is why I believe they will kill this.
[UPDATE 2] Both Steve M and Betty Cracker argue that the Estate Tax part of the deal is just too good for the Republicans to pass up, even the Tea Party ones.
[UPDATE 3] Gaius Publius at AmericaBlog argues the long game and makes the compelling argument that the payroll tax cut will continue to be extended, and as such will make cutting Social Security benefits (which is funded by payroll taxes!) that much easier for our Centrist Dalek Overlords.
[UPDATE 4] David Leonhardt argues this was the right thing to do because it amounts to the only way Dems would get a second burst of badly needed economic stimulus.