On policy grounds, I’m not happy about President Obama’s decision to go along with a two-year extension of the Bush tax cuts for those making over a million dollars a year and with a scaled-back estate tax. But there’s an economic and political logic to it.
Economic: The most important thing our federal government can do at the moment is to help the economy. Fiscal policy options are limited; there’s no chance of a second stimulus package. Extending the tax breaks for the richest will help — not a lot, since much of the money the rich get to keep will be saved rather than spent, but a little. More important, in exchange the administration got an extension of unemployment benefits for several million people and additional tax reductions for low- and middle-income Americans.
Political: The general line of commentary on the left suggests that compromising with Republicans on this issue hurts Obama politically. Comparisons to Jimmy Carter are becoming commonplace. But Bill Clinton got the same kind of flak. In the end, the key difference between the Carter and Clinton presidencies wasn’t clarity of vision, a big idea, decisiveness, toughness, progressiveness, or partisanship. It was how the economy performed as each approached reelection. If our economy gets back on its feet, President Obama and his party are likely to fare well in the 2012 elections, and images of Obama as Carter redux will be a distant memory.