Monday, December 6, 2010

Compromise or Blackmail?

President Obama reportedly is in the process of working out a deal with Republican House and Senate leaders to extend the Bush tax cuts for the highest income earners in exchange for an extension of unemployment benefits (see here). The Obama Administration sees this as necessary compromise to protect the middle class tax cuts and help those who have lost jobs in the depression, which is what Richard Posner insists (here) is the right word for the economic downturn from which we are trying to extricate ourselves.

Where the Obama Administration sees compromise, Paul Krugman, writing (here) in today's New York Times, sees capitulation to blackmail. Krugman says that it would be better - for both the country and the President's political future - to let all the tax cuts expire, rather than to give in to Republican demands that the tax cuts must be preserved for the wealthiest of the wealthy.

As I have noted in a previous posting (here), I'm not sure of the Republican's political calculus. But I must confess that it seems to be working (and that is, after all, the ultimate test of a political strategy). However, I'm  inclined to agree with Krugman and other critics that the President is too quick to compromise, and it will cost him down the road. After all, once you pay the blackmailer, he is likely to come back for more.

The broader problem, it seems to me, is that the President has failed to articulate and stick to a principled position on policies for (a) recovering from the depression and (b) reducing long-term structural deficits. He is not leading but reacting, seemingly from a weak position. Occasionally, he calls on Congress to enact some policy without providing either strong leadership or consistent support. Sometimes, he appoints powerless bipartisan commissions, led by ex-politicos, to make recommendations that no one likes or abides. He has yet to advance and consistently push a broad economic agenda (such as Joe Stiglitz recommended earlier today, here) for solving the large-scale problems the country faces. Perhaps he's so busy meeting with his various advisers, debating ad nauseum the academic intricacies of policy alternatives, that he cannot actually settle on and stick to a course of action.

My concern is that, for fear of his enemies, Obama is acting in ways that are likely to cost him the support of too many of his friends.

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