Now that President Obama has reach a “compromise” with the Republicans on tax cuts for the rich — which are even more generous to the ultra-wealthy than any George W. Bush passed — it’s time for predictions.
Prediction 1 – Within 138 hours of passing these massive deficit-expanding tax cuts for the wealthy, Washington DC will once again be over run by “serious” people screaming about the looming deficit crisis and the need to make regular Americans’ “share the sacrifice.”
Prediction 2 – The deficit hysteria will lead Obama to embrace even more misguided policies like a pay freeze on federal employees that will counteract a large share of the stimulus effect of this deal.
Prediction 3 – President Obama has effectively endorsed an expensive “new normal” on the estate tax that is even more generous that what George W. Bush passed. It is unlikely to ever be raised. The result over the long term will be an even greater economic stratification and even more justification for the deficits hawks to lecture the middle class about how they must share the sacrifice so Paris Hilton can inherent an even larger family fortune.
Prediction 4 – The “payroll holiday” will be used as proof that Social Security is going bankrupt and needs “reform,” i.e. cuts. In the long run it will undermine the social insurance contract. That this weird deficit spending is credited to the trust fund cut in the “Social Security payroll tax” — instead of a “tax credit” designed to do exactly the same thing — shows it is part of a long term attack on the Social Security program.
Prediction 5 – The deal will end up a massive political problem because most of the middle class tax cuts and unemployment insurance extension expire after only one year. While their stimulative effect will help the economy in 2010, their end will cause most Americans real income to fall in the critical period leading into the 2012 election. It will put President Obama in a horrible bargaining position at that point.
Prediction 6 - The massive cost of this deal will be integrated into a very popular and effective Republican attack in 2012 that will go something roughly like this, “President Obama grew the deficit to a massive [some number] billions, more than any other president.”
Prediction 7 – In 2012 when the tax cuts are set to expire President Obama will once again fold like a broken lawn chair. At that point he will have even fewer Democrats in Congress than he does now. There is nothing in his past behavior with Republicans to lead anyone to believe otherwise.
Prediction 8 – Almost no one in the media will bother to mention this “deal” is totally unnecessary if Democrats were just willing to use their power to quickly end the filibuster. The Republicans in 2005 showed that merely threatening to end the filibuster is a very effective tactic. There is no need for Democrats to give in to these legislative hostage-taking tactics.