Congressional Democrats looking for better deal in tax cut plan want an ethanol tax credit?

Incidentally, Krugman's partner in sharing space on the op-ed page today, David Brooks, loves what Obama's done.

The realities are that three weeks from today, while you might be getting ready for a night on the town for New Years Eve, Barack Obama's promise to never raise taxes for those making less than $250,000 could be in jeopardy without a deal coming together.  It's also a reality that Republican a few weeks ago, in a move that has prompted Democrats to call them terrorists holding the nation hostage, said they wouldn't vote on anything else in the lame-duck session (START, DADT, DREAM Act) until the tax cut issues was resolved.

That's the reality that Obama was dealing with.  But even when put to a vote, the (still) large Democratic Congress voted with Obama and against the Republicans in allowing the tax cuts to continue for everyone but the richest 2%.  But in the world of the U.S. Senate, 57 votes don't count somehow.  Only 60 does.  And the White House couldn't get the 60.

I've heard some progressives say that the Dems can put the pressure on the Republicans by allowing the tax cuts to expire in January, because they can then send the Republicans created a tax raise for everyone.

But seriously - with their mantra, their "Holy Grail" of pounding home the theme that that's all they care about, do you think the public will buy that and penalize them, vs. the President, who can't wait to pounce on him for any perceived misstep?  You wanna bet who will be blamed for raising taxes?

No, Obama sees what's ahead, and acted in the best way he thought he could do.  So while the Senate gets ludicrous add-ons like tax credits for ethanol, what do the House Democrats want in exchange for their support?  Well, we know they loath the lowered rates for the estate tax, and would like to get that pumped up.  "Nothing doing," says Arizona's Jon Kyl (and by the way, since when did he become the ersatz Senate Minority Leader?)  Perhaps that's an issue that the House Dems can draw their proverbial "line in the sand."

But they've got three weeks (and really maybe only one) to sell the public and the President on that.

House Democrats committed a mini rebellion against the White House yesterday, mocking Barack Obama with chants of "Just say no," as they committed to trying to work for a better deal than the tax cut plan proposed on Monday night between the President and Senate Minority Leader Mitch McConnell.

Reports are a bit different on the Senate's side, where, thanks to some "sweeteners," the Democratic led chamber apparently is leaning towards passing the bill, perhaps as early as Monday night.

But this is where we have to look at what those "sweeteners" consist of:  a program that provides cash grants for wind and solar projects, and a one-year extension of a 45-cent-a-gallon tax credit for fuel made from ethanol, a provision, the Wall Street Journal's Janet Hook reports, that was sought by many farm-state lawmakers.

Among those farm-state lawmakers is Nebraska's Ben Nelson.  You remember Nelson and his demands from exactly a year ago, as the White House and Harry Reid were loading all types of pork on to the federal health care reform bill to persuade demanding centrists like Nelson and Louisiana's Mary Landrieu (who could forget the "Cornhusker kickback" or the "Louisiana Purchase") to come aboard.

Now obviously there's a lot  in the package that is unsavory to everybody, regardless of your political persuasion.  But wasn't one of the loudest chants we heard from critics of the health care law was the process as much as the content?

Corn based ethanol, to say the least, is a questionable fuel.  Currently, the subsidies on it are scheduled to expire on December 31, just as all of the Bush-era tax cuts.

17 Senators have said they should die out.  If they are extended, they will (according to the NY Times) cost taxpayers $31 billion over the next five years.

This is what's going to bring the Great Compromise over the finish line?

House Democrats are seething of course at what they call the capitulation by President Obama.  However, the fact of the matter is, there will be 63 less of them walking the halls of Congress in the next few weeks.  President Obama is keenly aware of this, as he tries to pivot forward and start winning back independents behind his presidency.

Arguments can and have been made all week about how good or bad the deal is.  In this morning's New York Times, columnist Paul Krugman says there's actually a lot in the bill that he does like - however, he accurately reports that the "not-so-bad stuff" that Obama insisted upon putting in the legislation expires a year from now, while extending the more odious tax cuts for the wealthy goes for two more years - not really a great deal.

This has big political implications. Political scientists tell us that voting is much more strongly affected by the economy’s direction in the year or less preceding an election than by how well the nation is doing in some absolute sense.

When Ronald Reagan ran for re-election in 1984, the unemployment rate was almost exactly the same as it had been just before the 1980 election — but because the economic trend in 1980 was down while the trend in 1984 was up, an unemployment rate that spelled defeat for Jimmy Carter translated into landslide victory for Reagan.

This political reality makes the tax deal a bad bargain for Democrats. Think of it this way: The deal essentially sets up 2011-2012 to be a repeat of 2009-2010. Once again, there would be initial benefits from the stimulus, and decent growth a year before the election. But as the stimulus faded, growth would tend to stall — and this stall would, once again, come in the months leading up to the election, with seriously negative consequences for Mr. Obama and his party.

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