Tuesday, December 07, 2010

A man unused to compromise

The President's speech last night on the deal he'd worked out with the Republicans on extending the Bush tax rates sounded particularly irritated. You could tell that he was not happy with the deal that he had to strike and that he was also doing his best to convince his own supporters that this is a good idea. What also struck me was this was perhaps his first time to truly work out a compromise with members of the other party for an issue on which he had campaigned promising to let the rates go up on those he calls rich. It doesn't seem to be working with the left. His base is angry. In fact, it is the Republicans, as Jennifer Rubin writes, who feel that they've won.
To say that Republicans are triumphant would be an understatement. They won the philosophical point (tax hikes impede economic growth) and, candidly, are more than delighted to have a repeat of this debate for the presidential campaign in 2012. Ryan Ellis of Americans for Tax Reform, which strenuously pushed for extension of the Bush tax cuts, tells me,"If 2012 is a referendum on Obamacare and tax hikes, we win." Well, there will be lots of other issues, and 2012 in political terms is a long way off. Still, I see his point.
James Capretta writes,
More broadly, the president’s agreement to this deal is an implicit admission that voters aren’t buying what the Democrats have been selling on the budget for the past year. The primary argument Democrats pushed throughout 2010 was that the country simply could not afford to “spend” anything more on tax cuts for the wealthy. The president went so far as to say he could find much better uses for the hundreds of billions of dollars that would be “spent” by extending the top Bush tax rate at 35 percent.

But this kind of language only betrayed an attitude toward the private sector that most voters find entirely distasteful. Democrats talk as if private earnings are somehow the property of the federal government and $100 billion not collected in taxes is the same as $100 billion spent on a new government program. Most voters don’t see it that way at all. To them, allowing today’s tax rates to rise next year is a tax hike, not a spending cut. And fiscal conservatism does not consist in piling more taxes on the productive sector of the economy in order to finance an ever growing federal government. What voters want is for the elected officials to concentrate on fitting spending within what’s available from today’s tax rates, not on back-door ways to hike taxes to cover increases in spending.
With the extension of unemployment insurance for another year on top of what we have already extended, do you realize that unemployment insurance now last longer than welfare benefits last under the Welfare Reform Act?

Some conservatives such as Michelle Malkin oppose the deal. Malkin points to the burden that extended unemployment benefits are putting on the states. The unemployment insurance systems in many states are going up. Malkin links to this story of what the cost of unemployment insurance has done to many Colorado firms.
Businesses are being hit with large premium increases to prop up Colorado's broke unemployment-insurance fund.

In notices that went out over the past two weeks, some firms are facing rates that have more than quadrupled from last year.

"I had to pick myself up off the floor after I opened the letter," said Linda Greene, owner of Westminster-based Merry Maids North. Her first-quarter premium for 2011 will be $2,200, compared with $497 a year earlier.

"Money doesn't just fall out of the sky, so I'm going to have to totally rework my budget and hope for the best," said Greene, who employs 28 workers.

The Colorado Unemployment Insurance Trust Fund covers the cost of payments to jobless workers. Record numbers of unemployment claims caused the fund to go broke this year, forcing Colorado to borrow, so far, $368.5 million from the U.S. government.

At least 40 other states also are borrowing from the federal government to cover their fund deficits.

Colorado's unemployment-benefit payments rose from $305 million in 2005 to $1.06 billion in 2009.
With rate hikes like those, how many of those small businesses are going to increase employment?

We're going to head into the 2012 election arguing once again about extending these tax rates and the unemployment benefits.