- The Washington Times - Sunday, December 12, 2010

Republicans wanted more tax cuts. Democrats wanted more spending. They got both in the tax-cut deal President Obama struck with the GOP, and it’s the federal budget that will take the hit.

Just 10 days after Mr. Obama’s deficit commission sounded an alarm over the long-term health of the government’s finances, the Senate is slated to vote Monday on a tax cut and spending package that will add $857 billion to the federal deficit in the upcoming years, likely setting a new records for red ink.

It’s an increasingly common outcome when the two parties find themselves in disagreement and racing to meet an end-of-year deadline, when it’s easier to give both sides the tax cuts and spending they want and save the tough budget decisions for later, said deficit watchers.

“Nobody wants short-term pain for long-term gain,” said Sen. George V. Voinovich, Ohio Republican, who said he will vote against the deal because of the red ink it will splash across future budgets.

An early test vote in the Senate to clear the way for the package passed Thursday overwhelmingly, 65-11, getting strong support from both sides of the aisle. And that’s expected to carry through to Monday’s key vote to head off a filibuster and clear the way for final passage later this week.

The bigger test will come in the House, where congressional Democrats, meeting in a party caucus last week, approved a resolution urging their leaders not to bring the president’s proposal to the floor for a vote.

Without any action by Congress, the 2001 and 2003 tax cuts would expire at the end of this month, meaning all Americans would face historic tax increases come January.

Republicans and Democrats who support the deal point out that the country’s short-term economic problems are paramount, and argue that without economic growth, the long-term budget picture would look gloomier still.

Democrats assert that the extended unemployment benefits are among the best ways to inject government cash into the economy.

Seeking to convince his left flank the deal is worthwhile, Mr. Obama told NPR News last week he thinks Democrats will realize the consequences of inaction.

“People are going to conclude we don’t want 2 million people suddenly without unemployment insurance and not able to pay their rent, not able to pay their mortgage, not able to pay their house note,” he said.

The GOP, meanwhile, says continuing the tax cuts will encourage businesses to invest and spur growth.

“We don’t regard keeping tax rates where they are as adding to the debt. Second, one way to reduce the debt is to increase revenues by growing the economy and by keeping taxes low and giving expensing to businesses and reducing the payroll tax — all these steps are likely to improve the economy,” said Sen. Lamar Alexander, Tennessee Republican. “Finally, we have a debt commission recommendation, which gives all of us a chance to take a solid whack at reducing the national debt.”

But Sen. Bernard Sanders, the Vermont independent who on Friday held the Senate floor for more than eight hours to protest the deal as a giveaway to the rich, said if Republicans insist on extending tax cuts for upper-income families without finding offsetting budget cuts, they have lost the right to chide Democrats on more spending.

“Please, no more lectures here on the floor of the Senate. Your hypocrisy will be known to everybody,” he said.

While liberal critics have been louder in their denunciations of the deal, Mr. Obama may actually have won more of the package, when calculated in dollars.

The Center on Budget and Policy Priorities said the high-income and high-level estate-tax cuts total $129 billion, while the tax credits, payroll-tax cut and 13-month extension of unemployment benefits Mr. Obama sought total $213 billion in new spending and lower taxes.

Lawmakers’ rush to add more spending and tax breaks stands in contrast with much of the rhetoric of lawmakers over the past year, when each party accused the other of being profligate.

And it struck budget watchdogs as an unseemly way to solve a political dispute.

“While some compromise is appropriate and some stimulus is necessary, this ‘deal’ is not reasonable from an economic, fiscal and social equity perspective,” said David M. Walker, the former U.S. comptroller general. “The compromise evidently was ‘you give me my tax-cut extensions and more tax cuts, and I’ll give you your spending increases.’ The result is a bigger bill for our kids, grandkids and future generations of Americans. It’s time for Washington to wake up and start dealing with our structural deficits, too.”

The deficit commission, which Mr. Obama chartered by executive order earlier this year and charged with suggesting ways to reduce the government’s long-term structural deficit and reduce the debt burden, voted 11-7 in favor of major changes. But because it didn’t achieve the 14-vote threshold Mr. Obama set, the commission wasn’t able to forward a report to Congress.

Still, the commission’s proposals — eliminating popular tax breaks such as the mortgage-interest deduction, reducing income-tax rates and controlling entitlement-spending growth — are likely to be the basis for congressional discussion next year.

The commission set a target for long-term government taxes and spending to reach 21 percent of gross domestic product. The post-World War II average of taxes has been about 18 percent, and postwar spending has averaged about 20 percent, so the government would be bigger under that scenario.

Still, it represents a major change from the past two years, when taxes have been about 15 percent of GDP and spending has topped our near 25 percent of GDP, leaving a giant deficit and mounting debt. The public debt stood at $13.847 trillion on Thursday, the most recent figure from the government.

Commission members are pressing both parties to make the recommendations a priority.

“Neither party can fix this problem on its own, and both parties have a responsibility to do their part,” said the commission’s co-chairmen, former Clinton Chief of Staff Erskine B. Bowles and former Republican Sen. Alan K. Simpson, after meeting with top administration officials last week.

Sean Lengell and Seth McLaughlin contributed to this report.

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