The Spectacle Blog

The Politics of Extending the Bush Tax Cuts

By on 12.6.10 | 10:15AM

With Democrats having failed to pass a partial extension of the Bush tax cuts on Saturday, the road is now paved for the White House and Republicans to strike a compromise to extend all of the Bush tax cuts while extending unemployment benefits at the same time. The only question now is whether that extension is going to be for one year, two years, or three years. Each of these possibilities has different political ramifications, which I speculate about below.

One Year -- This could be the potentially best option for President Obama politically. Liberals are already smarting about the prospect of Obama reneging on his campaign promise and caving into Republicans on the tax cuts, but a one-year extension is the easiest to explain away. At the same time, it would disappoint conservatives who were hoping not to merely punt on the issue for a year. Perhaps a year from now the economy will be better and maybe the public will have already grown tired of House Republicans, allowing Obama to re-fight the battle in a more favorable political climate. By this time next year, Republican presidential candidates will be at each other's throats in Iowa, New Hampshire and South Carolina. If Obama is able to hold his ground next year and allow the tax rates to expire, the left will largely forgive him by the time the 2012 general election rolls around. Of course, if he caves again, this could be potentially demoralizing to liberals who will start to assume that the Bush tax rates will have become immortal, and they'll lose faith in Obama's ability to stand up to Republicans. This issue could become the liberal equivalent of when Bush I angered conservatives by breaking his "no new taxes" pledge.

Two Years -- This would be the worst of all worlds for Obama. Not only would it mean that Obama capitulated to Republicans, but that he couldn't even limit the extension to one year. Also, this would mean that the tax cuts would be scheduled to expire at the end of 2012, making them a major issue in the election. It's tough to see what Obama's posture would be. If he reiterates that he wants to let the rates for top incomes expire, Republicans can still attack him for wanting to raise taxes, yet those who those who support the tax hikes won't believe he'd actually let them expire. It would become the symbol of all of Obama's broken promises to the left, of how he became a creature of the Washington establishment he passionately campaigned against, and how his presidency turned hope into cynicism rather than the other way around.

Three Years -- This would make the anger on the left even worse, but on the flip side, it would have the advantage of deferring the urgency of the issue until well after the 2012 general election. So this option would likely be less favorable to Obama than the one year option, but have its advantages over the two-year option.

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