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Has Obama won the tax cut staredown of 2010?

Both the left and right are mad about the tax-cut bill. Does that mean President Obama will benefit from appearing to stand at the center of American politics?

By Staff writer / December 13, 2010

President Obama speaks at a White House news conference in Washington on Dec. 7.

J. Scott Applewhite/AP

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The tax-cut bill agreed to by President Obama and congressional Republicans should start to move through Congress this week. Many D.C. vote-counters think it’s likely the legislation will eventually pass, but liberals still don’t like it. Many Democrats remain unhappy over its continuation of tax breaks for the wealthy.

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There has been “much consternation” among Democratic House members about parts of the bill, said House majority leader Steny Hoyer (D) of Maryland on Monday at the National Press Club.

That said, there is grumbling about the effort on the right as well. Some in the GOP think Republican leaders gave away too much to get an across-the-board Bush tax cut extension.

Hmm. Both the left and right are mad. Does that mean Mr. Obama will benefit from appearing to stand at the center of American politics?

The usually conservative columnist Charles Krauthammer thinks so. “Barack Obama won the great tax-cut showdown of 2010 – and House Democrats don’t have a clue that he did,” he wrote in a recent column.

True, Republicans got an extension of the Bush tax cuts. But two-thirds of the cost of the tax compromise stems from other provisions, Mr. Krauthammer points out, such as the extension of long-term unemployment benefits, cuts in payroll taxes for the middle class, and specialized tax breaks.

The legislation is actually a stimulus bill, he writes – a $990 billion mishmash of expenditures that adds to the federal debt and makes “a mockery” of GOP promises about fiscal austerity.

All this spending in the short term will pump up gross domestic product by one percentage point or so and cut the unemployment rate – all good things for a president facing an upcoming reelection fight. Thus, Obama may have gotten the GOP to boost his own chances of winning a second term, according to Krauthammer.

Wow – did Obama really win this whole thing?

Well, he does get to look like he’s stiffing the left wing of his party in the name of responsible governance. That’s just the sort of positioning that let Bill Clinton rebuild his centrist image as he readied for his reelection campaign.

But Krauthammer’s argument assumes that the whole stimulus aspect of this bill will work. And that’s not writ in stone, as the experience with Obama’s first stimulus package shows.

The bill could be the equivalent of giving candy to a teenager. You’ll get a quick burst of activity, followed by sullenness and a nap.

That means the legislation might not boost job creation. And it is joblessness, not the GDP in general, that might be the most crucial economic indicator at the moment.

“The unemployment rate is going to unfortunately only come down very slightly, even with this package,” said Peter Orszag, Obama’s former budget chief, in a CNBC broadcast interview Sunday.

Plus, Republicans can still campaign against aspects of this bill, even if they support its passage. That’s what some House Democrats say they’re worried about.

Within a year, the GOP will come back and start complaining about an “Obama deficit,” even though they would be partly responsible for adding to that deficit with the tax-cut bill, said Rep. Elijah Cummings (D) of Maryland in a CNN interview Monday.

“And then the next thing they’re going to say is, 'We’ve got to now begin to cut programs,' ” said Representative Cummings.

Cummings indicated he won’t vote for the tax-bill compromise. But as to its legislative future, he said, “I think it will pass.”

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