Obama Defends Tax Compromise to Skeptical Democrats, As Some on Both Sides See ‘Second Stimulus’

By Fred Lucas | December 8, 2010 | 9:41 AM EST

President Barack Obama defends his tax compromise with Republicans t a news conference in the White House briefing room on Tuesday, Dec. 7, 2010. (AP Photo/J. Scott Applewhite)

Washington (CNSNews.com) – President Barack Obama on Tuesday scolded his fellow Democrats for criticizing his compromise on taxes, and he accused Republicans of holding middle-class tax cuts "hostage."

Some conservatives, however, say President Obama has managed to get Republicans to agree to a second stimulus package, to the tune of $900 billion.

“This is the kind of stimulus a president would dream of in a weak economy, in which he needs a strong economy if he’s going to win re-election,” political analyst Charles Krauthammer told Fox News Tuesday evening.

On Monday, Obama and Democratic leaders in Congress reached a tentative agreement with the Republican leadership to extend the Bush-era tax rates for two more years. (Democrats call it a tax cut, but extending the Bush tax rates will not cut anyone’s taxes below where they are now.)

As part of the deal, Democrats will get what they’ve been demanding -- an extension of federal unemployment benefits for another 13 months.

The estate tax also returned as part of the deal, but only for estates valued at more than $5 million. (That is a sticking point for many angry Democrats. House Speaker Nancy Pelosi was quoted as describing the estate-tax deal as “a bridge too far.”)

The compromise also includes a patch to prevent the alternative minimum tax from ensnaring most middle-class Americans; a reduction in the payroll tax; extension of the earned-income tax credit, child tax credit, college tuition credit; and certain tax and expense breaks for businesses.

Both Democrats and Republicans agreed on extending the Bush-era tax rates for middle-class Americans. But President Obama and most Democrats wanted to raise taxes for Americans earning more than $250,000. Republicans – noting that many small businesses fall in the over-$250,000 range -- insisted on making Bush-era tax rates permanent for all Americans.

“I completely disagree with this,” Obama said on Tuesday. But he noted that he has not allowed a “permanent extension" of the tax rates. And he said the estate tax deal – which he doesn’t like – isn’t permanent, either.

"I've said before -- I felt the middle-class tax cuts were being held hostage," Obama said. "I think it's tempting not to negotiate with hostage-takers -- unless the hostage gets harmed." In this case, he indicated, the American people were the hostages.

In trying to appease angry liberals, Obama got in another dig at Republicans:  “Let me say that on the Republican side, this is their holy grail, these tax cuts for the wealthy. It seems to be their central economic doctrine.”

Lines in the sand

In a strong defense of his compromise, Obama said he has drawn a line in the sand on a number of issues. His insistence that the Bush-era “tax cuts” not be permanent is a line in the sand, he said.

“This notion that somehow we are willing to compromise too much reminds me of the debate we had during healthcare. This is the public option debate all over again."

Obama said he passed a “signature piece of legislation” that Democrats had been clamoring for – but because they didn’t get the public option provision they wanted – “that somehow was a sign of weakness, of compromise.”

He continued: “If that is the standard for measuring success on our core principles, then let’s face it, we will never get anything done. People will have the satisfaction of having a purist position and no victory for the American people and we will be able to feel good about ourselves and sanctimonious about how pure our intentions are and how tough we are. In the meantime, the American people are still seeing themselves not being able to get health insurance because of a pre-existing condition and not able to pay their bills because unemployment insurance went out.

“That can’t be the measure of how we think about public service,” Obama continued. “That can’t be the measure of what it means to be a Democrat.”

Obama reminded reporters that during the health care debate, he frequently was criticized for being too stubborn, but he said he makes his decisions on what’s best for America and what is practical.

Obama mentioned other large federal programs that required compromise when initially passed.

“FDR, when he started Social Security, it only affected widows and orphans. We wouldn’t qualify,” Obama said. “When Medicare was founded, it was a small program. Under the criteria you just set out, each of those were betrayals.”

Obama said during the news conference that the tax compromise package would be good for the economy.

“What I can say with confidence is this package will help strengthen the economy and strengthen recovery,” Obama said.

‘Second stimulus’

Some conservatives say liberals should view the tax deal as a win for Obama. “This is a guy who could have been irrelevant, and now here he is, in a very weak time in his presidency after he loses the House – he pulls a rabbit out of a hat,” Charles Krauthammer told Fox News on Tuesday.

“He just actually got the Republicans to agree to a huge second stimulus. If he had asked for a stimulus, he would have been laughed out of town…If  you add up all the debt added on – none of it will be paid for – essentially, we’re going to now have $900 billion less of revenues over the next two years.. which is a huge fiscal stimulus infused into the economy in the year 2011 and [2012], which are exactly two years in the run-up to the presidential election."

This second stimulus package leaves “almost a trillion dollars in the hands of Americans who will spend it,” Krauthammer said – and that is what Republicans advocate, he added – leaving money in the hands of the people.

“It's a Republican argument and I think it's going to work,” he concluded.

Even the liberal New York Times on Wednesday carried a front page article headlined, “For Obama, Tax Deal Is a Back-Door Stimulus Plan.”

According to the article, “Mr. Obama effectively traded tax cuts for the affluent, which Republicans were demanding, for a second stimulus bill that seemed improbable a few weeks ago.”