President Obama should draw a line in the sand and let the Bush tax cuts expire. Use your veto pen to reject any legislation that includes tax cuts for the rich. If the Democrats pass these tax cuts for the rich, you will sabotage their own reelections in 2012. The Bush tax cuts make the budget deficit much bigger. In particular, there is no justification for cutting tax cuts for the rich, which will add $700 billion dollars to the deficit. If we believe the deficit is a real problem, then more tax cuts are simply irresponsible. Right now, the Democrats are letting the Republicans make two completely contradictory arguments, and appear to be ready cave in the face of their illogical and unjust tax policy.
If the Democrats cave on the tax cuts, they will make the deficit bigger. The Republicans will get the political credit for forcing the Democrats to allow tax cuts. President Obama and the Democrats will get the blame for the growing deficit. The Republicans will then attack Democrats on the deficit issue and demand that they cut social programs for the middle class, such as Social Security, Medicare, and the wages and benefits of federal workers and soldiers. It the Democrats implement the demanded cuts for the social programs, they will be implementing an unjust policy, and they will take the political heat for it. President Obama is the President and has the veto pen. The Democrats will control the Senate in the next Congress. The Republicans cannot pass anything the Democrats do not agree to. The Republicans will say the cuts were "bipartisan" and for the good of the country. They will get the credit for handing out the candy of tax cuts, you Democrats will get the blame for handing out the bitter medicine of budget cuts. These cuts aim to balance the budget on backs of middle class workers and retirees, while the rich, who already take in nearly 25 percent of all income will enjoy a continued tax holiday. In the "patriotic" plan to balance the budget on the back of working class Americans, the rich will sacrifice nothing.
The path that Obama and the Democrats seem to be ready to take on the tax cuts sets the stage for the Democrats to get beat up by the Republicans on spending issues for the next two years. If you let the tax cut expire, you will take some political heat on now, to be sure. But since letting the tax cuts expire reduces the deficit, you will drastically reduce the number of fronts on which the Republicans can attack. Signing the tax cuts for the rich reinforces the narrative that the Democrats are unprincipled and do not have the guts to fight for anything. Letting the tax cuts expire calls their bluff. Go on the offensive. Explain to the American people we simply cannot afford tax cuts for billionaires in the face of a growing budget deficit. Period. It is the Republicans who have refused tax cuts for 98 percent of Americans unless the billionaires get a special gift. You will take some heat for this position, but you will also get much more support if the public understands that you are willing to fight and what you are fighting for. If the Democrats take a stand, it will invigorate their base and reduce some of the "enthusiasm gap" between. If you pass the tax cuts, and then go on to cut the social programs such as Social Security, then by 2012, the enthusiasm gap of 2010 will look like the good old days.
The Republicans have the Democrats in a brilliant trap designed to force Democrats to implement Republican policies. Notice that the Republicans did not implement these cuts in social programs on their own when they controlled both houses of Congress and the White House. They want to let the Democrats do their dirty work for them. Let the Democrats take the heat for sabotaging the legacy of Franklin Roosevelt and Lyndon Johnson. The Democrats will be committing political suicide to do the Republicans bidding.
In terms of impact of the tax cuts on the economy, it may help a little to have middle class tax cuts. However, if low taxes were the key to rebuilding the economy, then why do we have 9.8 unemployment, given that the tax cuts have been in place for ten years. Under the higher tax rates that were in effect under the Clinton administration, the economy created about 22 million jobs. Under the lower rates during the Bush administration, the economy created only about 3.5 million jobs. Clearly tax cuts for the rich do not lead to high levels of employment or we would not have high unemployment now.
Letting the tax cuts expire is the right policy in principle, and is the only path that will slow down the Republican juggernaut. Letting the tax cuts expire takes the deficit issue away from them. Passing the tax cuts for the rich accelerates Republican attacks on the Democrats because it increases the deficit. Caving to the Republicans will also demoralize your supporters. Standing up to them, even if it results in somewhat higher taxes is actually the long term winning position. You can’t win a fight by only blocking and ducking. Sometimes you have to throw a punch.