NPR: Obama, GOP Reach Deal on Tax Compromise
Mara Liasson

President Obama faces opposition from Democrats upset over his tax-cut deal with Republicans. The deal gives away a position many Democrats thought was a winner for the party -- a refusal to keep reduced tax rates for the rich.

The Democrats wanted to keep lower rates for middle income earners, while letting cuts expire for households with incomes of more than $250,000. But the president on Monday said that position cannot prevail if the tax cuts his party wants are to be saved.

"We've got to make sure that we're coming up with a solution, even if it's not 100 percent of what I want or what the Republicans want," he said.

But many Democrats felt the president gave up too much and gave in too fast. Senate Majority Leader Harry Reid (D-NV) was noncommittal. Independent Sen. Bernie Sanders of Vermont said he would filibuster, and a group of progressive Democrats in the House circulated a letter in opposition.

Adam Green of the Progressive Change Campaign Committee called the deal a capitulation.

"Everything President Obama has done has signaled weakness and has sent a signal to Republicans that if they block tax cuts long enough, at the end of the day he will pass whatever comes across his desk. That is not how you negotiate," Green said. The Democratic leadership in Congress also chose not to have a vote on the tax cuts before the fall election.

Green said the main problem is that Democrats run from their own shadow whenever taxes are mentioned, even if "they're fighting for 98 percent of the American people and Republicans are clearly standing up for only the wealthiest 2 percent. That is an admirably winnable fight, so they shouldn't have put it off until after the election."

But they did. And when the Democrats finally did bring their plan to the floor over the weekend, they still didn't have a unified position. Some moderates in the Senate were opposed to letting the upper-income tax cuts expire, and in the House, centrist Blue Dogs and members from affluent districts like Virginia Rep. Gerry Connolly wanted a permanent extension of the middle-income cuts and a temporary extension of the rest. Connolly felt stuck in the middle.

"The Republicans are just into denial about the deficit implications of a permanent extension of everything. And the Democrats are into denial about the potential economic consequences of allowing the upper income bracket tax cuts to expire. And this is an opportunity for the White House to actually sort of carve out some common ground," he said.

Carving out common ground might be what independent voters want the president to do, but it's not what his base wants. MoveOn.org has created a television ad featuring Obama voters who ask, "What's happened to that bold progressive man we elected president?" The ad is aimed at the politically crucial state of Iowa.

But Martin Frost, a former member of the Democratic congressional leadership, says Obama's position is the best the Democrats can do.

"The worst thing that can happen for Democrats right now would be to block anyone from getting a tax cut because we're mad about the wealthy getting tax cuts, and then have the economy continue to deteriorate -- then we'd be in real trouble," Frost said.

But that raises an obvious question: Why wouldn't the Republicans be blamed for holding the middle class cuts hostage to a tax cut for the rich?

"You're asking me why the Democratic Party isn't very good at messaging right now? I don't have an answer for that," Frost said.

"The facts of the matter are the Republicans have run circles around us on messaging recently. The best the president can do is say, 'We did no harm; we did not make the economy worse,' " he said.

The Democrats may be smarting as they are forced to retreat on this issue, but with a two-year extension of all of the cuts, they'll get a chance for a do-over when the issue comes up again right before the next election.

*For interview audio click here.

http://www.npr.org/2010/12/07/131866488/democrats-frustrated-over-obama-tax-deal-with-gop

Wall Street Journal Editorial: Democratic Tax Dissent
Jan. 27, 2010

In Democratic Washington, it's supposed to be an article of faith that the Bush tax cuts "on the rich" were a disaster and must be allowed to expire at the end of this year. However, that means socking the economy with a record tax hike next January 1, and some Democrats are beginning to have second thoughts.

Harry Mitchell, a second-term Congressman from Arizona, wrote President Obama last week to urge him to extend the 15% tax rate on capital gains and dividends that will revert to 20% and 39.6%, respectively, next year. He also doesn't want the 55% confiscatory rate on estates restored, as it also would be in 2011.

"Given the unique economic difficulties we face as a nation, this is the wrong time to raise these taxes. We need to retain these tax cuts that encourage investment that stimulates growth and job creation," Mr. Mitchell wrote.

Those sensible words are echoed by Gerry Connolly of Virginia, who told Dow Jones Newswires that "I think there is a certain logic to leaving well-enough alone for now, given the fragility of the economic recovery," adding that "it's a question of prudent judgment and timing."

That timing also includes November Congressional elections which may be contested amid a very high national jobless rate, if not still 10%. Republicans are certain to tell voters the unfortunate truth that Democrats are determined to raise their taxes, despite what has so far been a less than roaring recovery.

You don't have to be a supply-sider to wonder about the wisdom of raising taxes amid a fragile economy, and once upon a time even Keynesians favored tax cuts as economic stimulus. Walter Heller helped to write JFK's tax cuts, and current White House chief economist Christina Romer has done economic research showing the superiority of tax cutting over spending as fiscal stimulus. That was before she sat in the White House mess.

Alas, these continue to be voices in the Democratic wilderness, and Secretary Tim Geithner recently squashed any suggestion that all of the Bush tax rates could be saved. Voters certainly deserve a good tax debate this fall.

Printed in The Wall Street Journal, page A14
http://online.wsj.com/article/SB10001424052748703906204575027672095659344.html