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Tax deal a defeat for Obama and the public

Once again, the president gives away a lot for a little.

By Leonard Boasberg

President Obama seems never to lose an opportunity to lose an opportunity.

When he recently announced a two-year pay freeze for all civilian federal workers, he didn't ask Republicans for anything in return, except maybe their cooperation. Senate Republicans responded by declaring that they would take no action on anything - extending unemployment benefits, approving an arms-control treaty with Russia, ending "don't ask, don't tell" - unless the Democrats agreed to extend the Bush tax cuts for millionaires and billionaires.

Obama could have made the freeze a bargaining chip to get an extension of the Bush tax cuts to only those earning no more than $250,000 a year. But that's not the way he operates.

Just as he gave up the so-called public option without a real fight during the health-care debate, Obama gave up the tax cuts for those who need them least, adding to the federal deficit that the Republicans bemoan. He also threw in the bonus of a substantial reduction in the estate tax. In return, the Republicans offered an extension of unemployment benefits, but only for 13 months - and on the condition that their $56 billion cost would be offset by spending cuts.

In addition, the agreement includes a one-year, 2-percentage-point reduction of the 6.2 percent Social Security payroll tax. That will give people more spending money - a good thing - but it will also shortchange the Social Security fund.

Mr. Obama calls this a "compromise." I call it a cave-in.

"I'm not willing to let working families across this country become collateral damage for political warfare here in Washington," Obama declared.

But the Republicans were willing to let that happen. They were willing to let unemployed Americans lose benefits just before Christmas. They were willing to insist that nobody get tax cuts unless hedge-fund operators got theirs. Why didn't Obama tell that to the American people emphatically? Harry Truman sure would have.

As for that wage freeze, which was approved by the House last week, some are saying Obama had to ask federal employees to share the sacrifices necessary to get the deficit under control. They say federal workers are overpaid compared with their private-sector counterparts.

Not according to the Bureau of Labor Statistics. It reports that the salaries of federal workers are an average of 22 percent behind those in the private sector. Higher-level government workers make less than their counterparts in the private sector, while lower-level government workers make more.

One reason for the latter is that more than half of rank-and-file federal workers belong to unions, compared with only 7 percent of private-sector workers. Some might say that's a good argument against unions. It seems to me it's a good argument for unions.

The real problem is not that government workers are overpaid. It's that middle- and working-class workers in the private sector are underpaid. And, of course, unemployed.

Between 1993 and 2008, real annual income growth among the top 1 percent of American earners was 3.94 percent. For the bottom 99 percent, it was 0.75 percent. In the 1970s, the richest 1 percent took in about 8 or 9 percent of America's total income; today, they take in 23.5 percent of income, a proportion last seen in 1928. The average income of average Americans has hardly budged since 1980, while the affluent have been raking it in.

So if we're asking Americans to make sacrifices to get the country out of a fiscal hole, whom should we ask first - those whose incomes have stagnated over the last three decades, or those who have profited the most?

Republicans are chortling over having won the game in Washington. It's the American people who have lost.