The New Stimulus

It seems to me that Obama views this deal with the Republicans as his new stimulus package, a way to inject more money directly into the economy, even though it increases the deficit by almost a trillion dollars over the next two years. It's his ticket to reelection, in his mind, by lowering the unemployment rate. He probably figures that if the economy improves, the progressives will come back.

The package would cost about $900 billion over the next two years, to be financed entirely by adding to the national debt, at a time when both parties are professing a desire to begin addressing long-term fiscal imbalances.

It would reduce the 6.2 percent Social Security payroll tax on all wage earners by two percentage points for one year, putting more money in the paychecks of workers. For a family earning $50,000 a year, it would amount to a savings of $1,000.

For a worker slated to pay the maximum tax, $6,621.60 on income of $106,800 or more in 2011, the cut would mean a savings of $2,136. That would replace the central tax break for middle- and low-income Americans in last year’s economic stimulus measure, White House officials said.

The deal would also continue a college-tuition tax credit for some families, expand the earned-income tax credit and allow businesses to write off the cost of certain equipment purchases. The top rate of 15 percent on capital gains and dividends would remain in place for two years, and the alternative minimum tax would be adjusted so that as many as 21 million households would not be hit by it.

In addition, the agreement provides for a 13-month extension of jobless aid for the long-term unemployed. Benefits have already started to run out for some people, and as many as seven million people would potentially lose assistance within the next year, officials said.

Obama has left the progressive Democrat bloc behind him, and actually he did this a long time ago. He no longer cares what they think of him. And just like Bill Clinton, he is triangulating to beat the band, moving toward the Republicans, wheeling and dealing to try and get some things done, but also--and more strategically--he is trying to co-opt them into working with him and thus tacitly supporting a lot of his agenda, as well as forcing them to take more responsibility for whatever economic situation is going to be in place in 2012.

His goal: re-election. In this sense, his goal is a mirror-image of the Republican's goal, which is to defeat him. In both cases, one wonders how the larger national interest is playing into any of this.

In many ways, this is politics as usual, and the larger problems are not being addressed by anyone.  All the more reason why a third-party candidate, someone like Bloomberg, might be able to gain some traction in 2012.