Shortly after 5 p.m. yesterday, Time's Michael Scherer laid out his reasons why he believed Democrats would eventually come around to President Obama's compromise with congressional Republicans on tax policy.
In "Why Democrats Will Probably Swallow The Tax Cut Compromise," Scherer noted that, according to one economic analysis, the Obama-GOP compromise would result in both stronger economic growth and lower unemployment than under a plan liberal Democrats were more likely to favor:
Moody's Mark Zandi has done a macroeconomic analysis (subscription required) comparing a baseline scenario for 2011 with the Obama-McConnell tax compromise scenario to figure out the impact of the compromise on unemployment and the GDP.
For the baseline, Zandi tried to describe a consensus approach: Bush-era tax cuts extended under $250,000, AMT patched, Estate Tax restored, as well as popular business and R&D tax cuts. He also assumed a one-year extension of tax cuts for the wealthy. Under this scenario, he projects average 2011 unemployment of 9.9 percent and a GDP that grows 2.8 percent.
For the compromise proposal, he adds in all of the stimulative tax cuts and benefits that Obama advocated: An extension of unemployment insurance, the payroll tax cut, the accelerated depreciation, and an extension of the refundable tax credits. Under this scenario, Zandi estimates that 2011 average unemployment will drop to 8.7 percent and GDP will grow 3.9 percent.
Now these are just projections. Lots could change, including an economic collapse in China, more credit trouble in Europe, a terrorist attack, or any other of a number of things.
But my question is this: Which Democrats would rather enter the 2012 election season with unemployment still at 9.9 percent, but the comfort of knowing that they held the line on tax cuts for the rich? Which Democrats would rather enter the 2012 election season with unemployment falling to 8.7 percent, knowing that they gave up the fight over tax cuts for the rich? I thought so.
Perhaps Scherer thought wrong and blogged too soon. This morning, after all, the House Democratic Caucus voted against signing on to the Obama tax compromise:
Angry House Democrats on Thursday voted to reject the tax-cut extension package negotiated by President Obama with Republicans.
In an emotional voice vote in their caucus, Democrats, who have repeatedly attacked the agreement as too generous to the rich, said the package should not come to the floor in its current form. The next step is up to the leadership.
“In the caucus Thursday, House Democrats supported a resolution to reject the Senate Republican tax provisions as currently written,” Speaker Nancy Pelosi said in a statement. “We will continue discussions with the president and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote.”
Of course, that doesn't mean the deal is dead. The House leadership can bring the compromise to a vote and House Dems by-and-large may still vote for it.
But such a strong sign of displeasure with Obama shows the liberal majority of the House Democratic membership is more concerned with venting their spleens over ideology than supporting their president out of a concern for the health of the economy and/or Obama's 2012 reelection chances.