Friday, December 24, 2010

On "Compromise"

I'm a little late on this, but a week ago today President Obama signed into law a "compromise" on the Bush tax cuts. While both parties are playing at being righteously indignant, Republicans and Democrats will both reap political benefits without actually having to put in the work of finding a deal that is consistent with the policy goals of both parties.

Before I get into the details of what happened with this deal, I'll give a quick summary. Essentially, Obama got everything he wanted while sacrificing almost nothing, and Republicans got to win a completely meaningless symbolic victory before taking over the House, while they can still blame Democrats for the increasing spending.

Obama got the Bush tax cuts extended, making the tax system more progressive (no, that’s not a mistype; see here and here). He got the estate tax reinstated (a tax which is both unfair and inefficient, but more on that later). And he got a stimulus package passed that is even larger than the first one. I'll agree that unemployment benefits might be a good thing, but they also might not. And if we're not sure, I tend to think that we're morally obligated to err on the side of not taking money from some people and giving it to others.

The Republicans got to say that they "won" by getting the Bust Tax Cuts extended for the wealthiest Americans. This not only looks like a victory for them, but distracts everyone from noticing that they agreed to over $800 billion in increased government spending without any tax cuts, which is not exactly the platform they took the House with. This makes the whole Bush Tax Cut thing completely symbolic. Increased spending without increased taxes now means increased taxes later, no matter how you look at it. That's why this Republican "victory" is completely hollow.

The Democrats achieved a policy victory by getting a more progressive tax system and a lot of stimulus spending (in this case, I don't agree with either), and the Republicans won a meaningless symbolic victory. What did American citizens get? An increased deficit, a small loan from our future selves, and a government that has even more of other people's money to spend. Doesn't look like much of a compromise to me.

Much of this post was inspired by an excellent post by Professor Landsburg. I recommend that everyone reading this post read his comments here.

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