The Tax Cut Compromise

Obama realizes he can't get everything he wants in this lame-duck session, and unless he gets a deal on extending the Bush tax cuts he will become a lame-duck himself, so he's looking for a deal:

President Obama told Congressional leaders Saturday that he was open to a compromise on extending the Bush-era tax cuts, but threatened to veto if the deal didn’t include an unemployment extension.

Speaking with Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, Obama said he would consider permitting a renewal of Bush era tax cuts for all taxpayers, including the wealthy, but that Republicans would be expected to include commitments to some Democratic priorities.

Obama wants an extension of jobless benefits in addition to extensions of the tax cuts that benefit middle class families.

“Without them, taxes would still rise for 95 percent of Americans,” a White House aide told Fox News.

There's one problem with that last sentence - taxes can't rise on 95% of Americans because 95% of Americans don't pay income taxes. Barely more than 50% do these days which makes the impact on those people more significant. The guy who's not paying any taxes isn't going to care one way or the other.

The GOP shouldn't worry about an extension in unemployment at this time. Go ahead and give him 3 months, but get at least a 2 year extension on tax rates at all levels. Try to get that extension paid for with unspent stimulus money, but don't make that a deal killer. It's more important to take some of the uncertainty out of the economy with the tax rate extension than it is to worry about the incremental spending from the unemployment benefits.

And then when the bill is signed make sure it's known widely that there won't be any further extensions of unemployment. Adding three months would raise unemployment benefits to more than 114 weeks total, and that's going to have to do unless Obama wants to start dealing away Obamacare.