Sunday, December 19, 2010

Why Obama comes out on top after tax deal

Following extension of the Bush-era tax cuts, it's apparent that many are frustrated with President Barack Obama, particularly those that he considers his base. Many are upset that the extension includes preservation of the tax rates for the wealthy. Most Americans, in fact, support raising taxes on the rich back to Clinton-era levels, when our economy wasn't in the terrible mess it's in now and our government was able to post a surplus.

But polls on Americans overall indicate that the president made the right move, that Americans can support this deal, especially since it will mean that they will get extended tax breaks as well as a cut in their Social Security income tax.

In two years' time, that cut may come to haunt Obama -- Republicans will pressure him to extend the cuts once again, causing the program to lose a significant amount of funding. It's clear what the Republicans' strategy is: defund the program as it stands now, and privatize it when they take over the government outright sometime down the road.

That's a concern that should be addressed in the near future, with one possible remedy being keeping the tax rate for Social Security at this new, 4.2 percent level but lifting the cap that only taxes the first $106,000 of income.

Until that time comes, Obama is set to benefit from this deal. In 2012, his administration will be credited with getting more cash in the pockets of more Americans. He should remind the public that the Republican Party -- and likely, his opponent in the presidential election -- supported holding the middle class hostage, and that the deal overall was his best option to preserve and protect wage earners across the country. He should also point out his willingness, from day one, to work with Republicans, who chose instead to hold their breath and hold the government captive from day one, using the filibuster a record number of times (interesting note: as of August of this year, the number of filibusters used in the past three years by Republicans totaled almost 20 percent of the number used in the past ninety).

It's a strategy that has worked before -- in 1996, Bill Clinton won re-election despite the fact that Republicans held the government hostage then, too, shutting down government for months before a compromise was reached. Clinton won out in the end, coasting to an easy re-election victory over Republican candidate Bob Dole.

Obama has an added advantage: he's got at least one of the houses of Congress behind his back. With the Senate still controlled by Democrats, the president is still able to get treaties signed, appoint executive officials, and perhaps most importantly, getting Supreme Court nominees confirmed with relative ease.

If this event has taught us one thing, it's that Obama can get things done, can make deals with the GOP when he absolutely needs to in order to get meaningful legislation passed that benefits the American people. The deal wasn't perfect -- the tax subsidy for the richest two percent and the tax holiday for Social Security will add to the deficit, with both issues being hot topics in December of 2012, when both will be set to expire.

But that won't matter much for the president, seeing as his re-election will come one month earlier -- and with polls leaning in his favor against GOP presidential prospects, that re-election vision is turning into more of a reality every day. The deal he has made, in order to help the middle class even more during this recovery, helps solidify his being president for another term.

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