What can you say when the expected happens? Look – it happened. That’s about it.
Those of us old enough to remember do remember what it was like that with the Yankees – they always finished first in the American League and then went on to win the World Series, year after damned year. That was really irritating. In fact there was an amusing musical about that – Damned Yankees – that ran for over a thousand performances on Broadway starting in 1955, in those years when the Yankees always won. The musical is about a deal with the devil – about a guy who says he says he’d sell his soul for a long-ball hitter – and does. And the pathetic Washington Senators get one, their long-ball hitter. It’s a Faust thing. And it’s a fantasy. The real Yankees always won.
Of course there was the 1960 World Series – the Yankees outscored the Pittsburgh Pirates 55–27 in those seven games, and outhit them 91–60, and batted a team .338 to the Pirate’s .256, and hit ten home runs to Pittsburgh’s four, and got two complete-game shutouts from Whitey Ford – and lost the whole thing, on a Pittsburgh home run in the bottom of the ninth of the seventh game. That led to a lot of theological musing in Pittsburgh. People started reading Goethe and listening to that Gounod opera. Someone had obviously sold their soul to the devil. Or something was up. But it sure did feel good. Maybe you had to be there.
But there is, in statistics, what’s called reversion to the mean. Unusual events do occur, but over the long haul, with thousands of events, the expected pretty much happens. The Yankees win. Of course the Greeks turned this into tragedy. Read Sophocles and the rest – everyone knew what was going to happen, Oedipus was going to murder his father and marry his mother and then find out what he had done and rave and put out his eyes and all that, and Medea was going to get ticked at Jason and murder their kids, and so on. Everyone knew the plots. But it was all in watching how it played out – the audience was supposed to groove on the tragedy of how the inevitable was, really, inevitable. Life is like that, damn it. Call it the Tragic Vision. And it’s not so odd. There’s the most commercially successful film of all time, James Cameron’s Titanic. You mean you didn’t know the boat was going to sink?
And so it goes, in all of life. What can you say when the expected happens? Look – it happened. And it happened again:
President Obama announced a tentative deal with Congressional Republicans on Monday to extend the Bush-era tax cuts at all income levels for two years as part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy.
Everyone knew this was coming. The Republicans wanted those tax cuts extended for millionaires and billionaires, and said if they didn’t get them extended they’d block all legislation on everything – and the insignificant peons who weren’t millionaires and billionaires would not get their tax cuts extended, and the long-term unemployed would be cut off cold, and just nothing would get done at all. It was the principle of the thing. And yes, what they wanted would cost seven hundred billion, unpaid for, but it was the principle of the thing. Someone had to stand up for millionaires and billionaires. We can’t have class warfare.
And Obama decided we cannot have a government shutdown, and we can’t let the taxes for those the Republicans seem to think are insignificant peons, suddenly jump up, with the average family having to shell out three grand more each year. And with twenty-two million unemployed we can’t have folks starving and dying in the streets. He folded, but he wasn’t happy about it. It just had to be done. Even if the Republicans didn’t have the votes to pass anything at all, they did have the votes to keep anything at all from coming to a vote – and they stick together. Watching Obama announce the agreement was like watching a guy say, look, these guys have the kid, with a gun to the kid’s head, and they say they’ll blow the kids brains out if they don’t’ get what they want – so I’m not going to tell them shoot the kid, I don’t care. And there was unmitigated joy at Fox News for the rest of the day – Obama was clearly a wimp, and a pathetic weak loser.
And the details are these:
The package would cost about $900 billion over the next two years, to be financed entirely by adding to the national debt, at a time when both parties are professing a desire to begin addressing long-term fiscal imbalances.
It would reduce the 6.2 percent Social Security payroll tax on all wage earners by two percentage points for one year, putting more money in the paychecks of workers. For a family earning $50,000 a year, it would amount to a savings of $1,000.
For a worker slated to pay the maximum tax, $6,621.60 on income of $106,800 or more in 2011, the cut would mean a savings of $2,136. That would replace the central tax break for middle- and low-income Americans in last year’s economic stimulus measure, White House officials said.
The deal would also continue a college-tuition tax credit for some families, expand the earned-income tax credit and allow businesses to write off the cost of certain equipment purchases. The top rate of 15 percent on capital gains and dividends would remain in place for two years, and the alternative minimum tax would be adjusted so that as many as 21 million households would not be hit by it.
In addition, the agreement provides for a 13-month extension of jobless aid for the long-term unemployed. Benefits have already started to run out for some people, and as many as seven million people would potentially lose assistance within the next year, officials said.
Sigh. That’s boring, as are the concessions:
In addition to dropping his opposition to any extension of the current income tax rates on income above $250,000 for couples and $200,000 for individuals, he agreed to a deal on the federal estate tax that infuriated many Democrats. The deal would ultimately set an exemption of $5 million per person and a maximum rate of 35 percent – a higher exemption and far lower rate than many Democrats wanted.
But it was goodies for the very wealthy or all congressional work would shut down – turn out the lights and everyone goes home. Obama decided to keep the country running. His general base and the liberal left are really angry with him – but the thing was framed as inevitable. The other guys had the gun to the kid’s head. Do you want a dead kid?
John Dickerson puts it this way:
President Obama could have worn a cape. Speaking to reporters about a deal to extend the Bush tax cuts and unemployment insurance, he offered a dire narrative of what might have been. Ideologues in both parties were locked in a dangerous game with no concern for the welfare of the American people. “Without a willingness to give on both sides, there’s no reason to believe that this stalemate won’t continue into next year,” he said. A stalemate would mean a tax increase for everyone, and tax cuts for the hardest-hit would expire, along with unemployment benefits.
In the nick of time a hero arrived to save the parties from themselves. Who was that quick-thinking citizen? Why, it was Man of Reason! “I know there are some people in my own party and in the other party who would rather prolong this battle, even if we can’t reach a compromise. But I’m not willing to let working families across this country become collateral damage for political warfare here in Washington.”
Ah, it’s the new superhero – Obvious Man!
But Dickerson says there a bit more to it:
Obama presented himself as a warrior for agreement. He was also a lecturer. “The American people didn’t send us here to wage symbolic battles or win symbolic victories,” he said. “I want everybody to remember over the course of the coming days, both Democrats and Republicans, that these are not abstract fights for families that are impacted.… We cannot play politics at a time when the American people are looking for us to solve problems.”
But there is Obama’s angry base – whether they buy into that, and whether they think the president somehow overpaid:
Not only did Republicans win on extension of tax cuts for the wealthiest Americans, they also won a new lower rate for the estate tax, and a higher exemption for it. Democrats in the House and Senate made it clear Monday night that they had not yet signed on to the president’s deal.
The president said the tax cuts for the wealthy would not last beyond the two-year extension, because after the coming deficit debate, Americans would see how the country just can’t afford them. He said he would “engage in a conversation” about the choices to help them get to this position. But he’s been engaged in that conversation about these tax cuts for months. Americans already agreed with him. Only 26 percent favor the GOP view in a recent CBS poll. It was the need to get a deal when faced with an immovable opposition (including some in his own party) that caused Obama to give in on his tax cut position. That kind of dynamic isn’t going to change in the next year, when the GOP will have more control.
So three quarters of the country thinks this giving into the demands of the very wealthy, the top two percent, is nuts. That’s fine. But they don’t have the votes; they don’t sit in congress, able to keep all business from coming to the floor. And the Republicans know that everyone loves a winner, the merciless warrior who really sticks it to the other guy – in his face. That’s why everyone despises wimps and losers, and why everyone always loved the Yankees. No, wait….
But Christopher Beam has an interesting question – How much will Obama’s tax compromise actually help the economy? And there this gets murky:
Obama said the new measures “will spur our private sector and create millions of new jobs.” Maybe so. But if the past decade of experience with the Bush tax cuts is any indicator, this new round of cuts and credits won’t do much.
On Meet the Press this week, David Gregory asked Sen. Mitch McConnell to defend the Bush tax cuts. “You’ve had these tax rates in place since 2001,” he said. “What’s been the impact on jobs?” “Imagine,” McConnell responded, “how much worse it would have been if we’d had the higher tax rate.” Never mind that McConnell has rejected that same argument – it could have been so much worse! – when Obama used it to defend the stimulus package. There’s little evidence that the Bush tax cuts have had any significant effect on job growth over the last decade. Indeed, there’s not a lot of evidence that tax cuts alone boost the economy much at all.
Here we’re in the realm of trying to prove a negative:
Republicans say the Bush tax cuts of 2001 and 2003 boosted job growth, reduced unemployment, and inspired porpoises to save Dick Van Dyke from drowning. Democrats would have you believe those same cuts precipitated the slowest GDP growth since World War II, not to mention the worst recession since the Great Depression.
Both sides overstate their case. The theory behind tax cuts and job growth is solid: Individuals are more likely to look for work when they can keep more of their wages, and businesses are more likely to hire people when they can keep more of their revenue. Lower taxes, more workers, more jobs – everybody wins.
But in practice, tax cuts don’t significantly boost jobs.
And the evidence is ambiguous:
Bush created fewer jobs than any president since World War II – except his father and Gerald Ford. GDP growth between 2001 and 2007 was also the slowest over the same period, at 2.39 percent. McConnell is right that without a counterfactual history, it’s hard to pinpoint the exact effect of the Bush tax cuts. (For that reason, a 2008 report by the Congressional Research Service concluded that “it is hard to be certain what effects the tax cuts have had on the economy.”)
But his premise is flawed: Economists who study the elasticity of taxable income – that is, the extent to which raising taxes makes workers work less – have found that the effect is pretty small. Same when it comes to corporate tax rates: There’s just not much evidence that businesses behave differently when they’re taxed at 30 percent instead of 35 percent.
Beam offers links to all the evidence if you want to drill down, but what he’s getting at is clear. This is talk about nonsense:
Extending the Bush tax cuts will help the economy – but just barely. The Congressional Budget Office recently estimated that extending the cuts through 2012 would reduce unemployment next year by between 0.1 percent and 0.3 percent and by about twice that the following year. It would also boost GDP by anywhere between 0.3 percent and about 1 percent. But that’s just the first two years. If Congress continued to extend the tax cuts beyond 2012, it would soon start hurting growth, since more government borrowing would crowd out investment, and interest rates would go up.
And there’s this:
The new plan will also extend unemployment insurance. An analysis by Mark Zandi of Moody’s Analytics finds that extending unemployment insurance (which Congress let expire last week) would generate more economic activity than cutting taxes for people with incomes above $250,000. The logic is simple: Poor people are more likely to spend their extra money than rich people, giving more bang for each federal buck. If Republicans were serious about helping the economy – and not just their constituents – they would have been pushing to extend unemployment insurance, not just granting it as a concession.
But then, if taxes don’t affect the overall economy much – letting them revert to their previous level or not – the question is why politicians “talk about cuts and hikes like they determine the fate of the earth.” Beam argues that politicians talk about tax cuts and tax hikes because that’s one of the few things they control, and “at the very least, they can show voters that they’re doing something.”
But that’s what some of us worry about. When these guys are doing something there’s no end of trouble. But Beam ends with this:
Obama’s compromise was a smart move. “I have no doubt everyone will find something in this compromise they don’t like,” he said on Monday.
But he couldn’t let the tax cuts on the middle class lapse in the new year – even if it meant extending cuts for the rich. Now, if the economy improves in the next two years, Obama can take some credit. If it doesn’t, well, it probably wasn’t going to anyway.
What can you say when the expected happens? Look – it happened. That’s about it.
And one can live with this. See John Cole:
As much as I hate to say it, if they can get 13 months of unemployment benefits, I’d take it. I figured the most they would get would be six months. Thirteen months might save a lot of families. As bad a policy as I think the tax cuts for the rich are, thirteen months of keeping people from the brink of disaster is a mighty good sweetener….
I just hate the fact that what we might have to do to keep the poorest of the poor afloat is toss out tons of cash to the already rich. God, I hate Republicans.
Of course Jonathan Cohn says here that Republicans were “flexible” for just one reason:
They are willing to deal away a lot if they’re getting tax cuts for the rich. President Clinton got Republicans to establish a Children’s’ Health Insurance Program in 1997 in return for a capital gains tax cut. Now Obama got a fair amount of stimulus in return for upper-bracket tax cuts. Unfortunately, it tends to be terrible policy. But it’s the party’s core policy goal, and if you help them attain it they can be surprisingly reasonable.
Yeah, it’s a trick. You know what they want. You give it them, to get at least some of what you want, and what will keep folks alive. It’s a grand game.
Of course there’s this:
A House Tea Party leader said Monday that GOP lawmakers might vote down an extension of tax cuts if it’s tied to an extension in unemployment aid.
Rep. Michele Bachmann (R-Minn.), the chairwoman of the House Tea Party Caucus, said Republicans could balk at voting to extend all the tax cuts for two years if it’s tied to a long-term extension of jobless benefits.
“I don’t know that Republicans would necessarily go along with that vote. That would be a very hard vote to take,” Bachmann said on conservative talker Sean Hannity’s radio show on Monday.
The argument seems to be that we can go into deep debt to extend the tax cuts for the unworthy, if we must – as long as we go even deeper debt, far deeper debt, to extend the tax cuts for the millionaires and billionaires. But a long-term extension of jobless benefits is a bridge too far. You have to draw the line somewhere.
That too was inevitable. And now it’s turning into a Greek tragedy, or that James Cameron movie. We know the plot. The boat sinks. And oh yeah, the Yankees always win. And whatever Lola wants, Lola gets.
Oh well. Obama did the right thing, the inevitable thing. And that’s that.