Report: WH,GOP Reach Tentative Deal on Two Year Extension

Jon Ward at the Daily Caller is reporting that President Obama has reached a tentative deal with Republicans that would extend all of the Bush tax cuts for all income levels for two years, while also extending unemployment insurance for 13 months.

Ward also notes that, “Other details include a temporary two percent reduction in payroll taxes to replace Obama’s “Making Work Pay” tax credit from the 2009 stimulus bill, and a compromise on the estate tax, which will be set for two years at 35 percent, with a $5 million exemption amount.”

I’d like to see more details, but at first blush, I’m happy to see the payroll tax relief come in the form of an actual rate cut, as opposed to sending out $400 checks to people, which is more like a welfare payment.

Earlier today, I wrote about why a two-year extension would be problematic for Obama politically, given that it would elevate the issue in the 2012 election.

Obama Faces the Worst of Both Worlds on Taxes

Jim is right that raising taxes is generally politically riskier than not raising them, but President Obama faces a unique problem on this front. Even if Obama signs a temporary extension of the Bush-era tax rates, he still will have raised taxes by hundreds of billions of dollars to finance the national health care law, and many of those tax hikes will hit those with incomes under $250,000. That will give the GOP plenty of ammo to portray him as a tax hiker. So in a sense, Obama is facing the worst of both worlds. Liberals will see him as violating his pledge to let the Bush tax cuts lapse on higher incomes, while Republicans will still be able to run against him for violating his pledge not to raise taxes on the middle class.

UPDATE: Also, I’d add that he can’t exactly run on the fact that he extended the Bush tax cuts while if he’s also going to be telling liberal audiences that he’ll really let them expire if they reelect him.

Noah Didn’t Need Government Help To Build His Ark

A new church vs. state controversy has emerged in Kentucky over the proposed building of a Noah’s Ark theme park, because the destination will benefit from generous tax incentives. While it’s hard to see how this would in any way represent the establishment of a state religion and violate the Constitution, it’s another reminder that government is inviting these sorts of battles whenever it meddles in the operation of a free economy. If a private company believes there’s enough demand for a biblical-themed tourist attraction, let it convince investors and build one. But there’s no reason why the state should have to offer special inducements.

According to the New York Times:

Under Kentucky’s Tourism Development Act, tourist attractions can get back up to 25 percent of their development costs over 10 years from sales tax generated at the facility. Ark Encounter stands to receive $37.5 million – a quarter of its investment.

The article also details how the park’s devolopers are going to great lengths to try and make the experience as authentic as possible. Yet I went back and read chapter 6 of Genesis and am having a hard time finding the part where God says, “Make thee an ark of gopher wood…but first apply for government tax incentives.”

The Politics of Extending the Bush Tax Cuts

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.

Harry Reid Loses Saturday’s Two Tax Votes

Senate Majority Leader Harry Reid lost a pair tax votes on Saturday, with all Republicans and a handful of Democrats voting against proposals to extend current tax rates on lower incomes while raising them on higher incomes. The votes were a largely symbolic effort to portray Republicans as holding tax cuts for the middle class hostage on behalf of the rich.

The first vote on Sen. Max Baucus’s proposal to extend current tax rates for those earning under $250,000 failed 53 to 36. Sen. Chuck Schumer’s plan to maintain current rates for those earning under $1 million, the so-called “millionaire’s tax,” failed 53 to 37. The Senate requires 60 votes to invoke cloture and cut off debate.

The Democrats voting against the under $250,000 extension were: Sens. Russ Feingold, Joe Manchin, Ben Nelson, Jim Webb, and “independent” Joe Lieberman. The Democrats voting against the under $1 million extension were: Sens. Dick Durbin, Jay Rockefeller, Tom Harkin, Feingold, and Lieberman.

Clearly, the Democratic opposition to the first vote came from moderates, where the liberals were the ones who defected on the second vote.

Roll call for the under $250,000 extension here, and the “millionaire’s tax” here.

Sen. Menendez Compares GOP to Terrorists in Tax Cut Battle

So much for President Obama’s call, in the wake of last month’s election, to have “an honest and civil debate about the choices that we face.”

Earlier this afternoon, Sen. Robert Menendez, discussing negotiations with Republicans on tax cuts, said:

“Do you allow yourself to be held hostage and get something done for the sake of getting something done, when in fact it might be perverse in its ultimate results? It’s almost like the question of do you negotiate with terrorists,” Menendez said when asked whether he and other Democrats would accept a compromise with Republicans.

Scott Brown Backs DADT Repeal

Sen. Scott Brown has announced his support for repealing the “Don’t Ask Don’t Tell” policy and allowing gays to openly serve in the military:

“I have been in the military for 31 years and counting, and have served as a subordinate and as an officer. As a legislator, I have spent a significant amount of time on military issues. During my time of service, I have visited our injured troops at Walter Reed and have attended funerals of our fallen heroes. When a soldier answers the call to serve, and risks life or limb, it has never mattered to me whether they are gay or straight. My only concern has been whether their service and sacrifice is with pride and honor.

“I pledged to keep an open mind about the present policy on Don’t Ask Don’t Tell. Having reviewed the Pentagon report, having spoken to active and retired military service members, and having discussed the matter privately with Defense Secretary Gates and others, I accept the findings of the report and support repeal based on the Secretary’s recommendations that repeal will be implemented only when the battle effectiveness of the forces is assured and proper preparations have been completed.”

Debt Panel Gets More Votes Than Expected, Still Short of What Was Needed

The proposal of President Obama’s fiscal commission gained the approval of 11 of the panels’ 18 members — or more than 60 percent — but it fell short of the 14 votes needed to bring the plan to a vote in Congress.

However, the better than expected showing could put pressure on President Obama to come out in favor of some sort of deficit reduction plan, especially given that the Simpson-Bowles proposal drew support from both Republicans and Democrats — including those with such ideological differences as Sens. Dick Durbin and Tom Coburn. (A full breakdown of how the members voted, here.)

Obama, on a surprise trip to Afghanistan, said he would “study closely” the deficit commisison’s proposals.

California Rail Board Approves $4.15 billion “Train to Nowhere”

On Thursday, the California High Speed Rail Authority board unanimously approved the 65-mile “train to nowhere” that would link two tiny towns at a cost of $4.15 billion, all because the state didn’t want to lose $2 billion in federal stimulus funds.

The rail line would connect two central California towns, Borden and Corcoran, with a combined population of 25,000. But that’s merely an estimate from Democratic Rep. Dennis Cardoza, an opponent of the plan. In reality, the San Jose Mercury News notes, Borden “is an unincorporated community for which the U.S. Census Bureau doesn’t even keep official population estimates.”

The line is supposed to be the first part of an ambitious $43 billion project aimed at linking San Francisco and Anaheim, but the decision to start in such a low population density area even had members of the rail authority scratching their heads earlier this week.

A Mercury News story originally posted Tuesday, reported:

Even rail authority member Rod Diridon, of San Jose, said he spent four hours on the phone with authority staffers trying to make sense of it.

“I’m still struggling to understand why the originating system wouldn’t interconnect to major communities,” Diridon said.

But he noted that federal officials have threatened to yank funds if the authority hasn’t chosen a starting point by the end of the month, so Diridon has proposed what he calls a compromise: Build the Corcoran to Borden section, with the promise that the rails would extend to Merced and other large cities next.

That was Tuesday, and on Thursday the board voted 7-0 to approve the project, according to the Los Angeles Times.

Last month, Rep. Jerry Lewis introduced a bill to rescind $12 billion in unspent stimulus money, which would include $2 billion for the high-speed rail project. (The original award was $2.25 billion, but California already spent $200 million on “planning,” reports the Mercury News.) The Obama administration responded by telling Lewis that rescinding the funds would “negatively impact our economic strength both now and in the future.”

What’s more, California is hoping to get $15 billion more in federal funding for the project over the next decade.

So to sum up, a state that’s broke is spending billions of dollars on a project that benefits a tiny percentage of people, so that it doesn’t lose billions of dollars in payments from a country that’s broke. For all the lofty promises made by President Obama about remaking the foundations of the American economy, this is the reality of big government.

Nov. Jobs Report Far Worse Than Expected; Unemployment Rate Up to 9.8%

The economy added merely 39,000 jobs in November, according to the Bureau of Labor Statistics, far worse than expectations of around 140,000. The unemployment rate edged up to 9.8 percent.

The economy had 1.3 million discouraged workers in November who gave up looking for work because they don’t think there are jobs available to them and are thus not included in the headline number. The broader measure of unemployment held steady at 17 percent.

While there have been encouraging signs here and there (incidently, October’s number was upgraded to 172,000 job gains), the labor market has just not been able to build any momentum, or string together several months of strong job growth.