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Indiana University

IU SPEA dean: Obama-GOP fiscal package a good compromise

December 15, 2010
Bloomington, Indiana -- In order to extend unemployment benefits for the next 13 months, President Obama reached a deal with Republican leaders to continue the Bush tax cuts while providing a $5 million exemption on estate taxes over the next two years. A one-year payroll tax reduction has also been proposed to boost the struggling economic recovery.

According to former Bush White House insider John D. Graham, dean of the Indiana University School of Public and Environmental Affairs, the deal is "remarkably creative and practical," especially given the polarized state of the two-party politics. "Compromises are not necessarily bad, even though they annoy the purists," he said. "In fact, some compromises are necessary in a healthy democratic system."

John D. GrahamAccording to Graham, the timing is quite fortuitous since fuel prices are rising rapidly above $3 per gallon. "Consumers are about to feel an OPEC-induced 'tax' hike," he said.

Author of Bush on the Home Front, a book examining the legislative successes and failures of Bush's often-overlooked domestic policies, Graham, who served as administrator of the Office of Information and Regulatory Affairs in the U.S. Office of Management and Budget from 2001-2006, said some of the best legislative successes of the former president included his extensive tax cuts of 2001, 2003, and 2008.

"Since World War II, Bush instigated nearly a quarter of the most significant federal tax cuts passed by Congress," he said. "He could go down as one of the most accomplished tax cutters in modern American politics."

According to Graham, the 2003 tax cuts were a mystery to some balanced-budget advocates. "Although there was not public support for it, and the budget surpluses from the Clinton years had vanished with future budget deficits predicted, Bush believed the cuts were necessary because we were in a jobless recovery, similar to what we face today."

According to Graham, Bush's tax cuts would have been more affordable barring two major obstacles -- an extended war on two fronts and a looming recession. In Bush on the Home Front, Graham wrote, "With a more restrained spending policy, Bush could have retained his tax cuts -- which appear to have boosted economic performance in the years prior to the financial meltdown—without creating significant federal deficits."

Graham believes that Obama will benefit politically from the deal. "This is good for Obama. It underscores that he knows how to get things done, despite his party's setback at the polls," he said. "This deal will likely pass. Democrats know that it will only get worse if they wait for the new Congress to take office."

Graham can be reached at 812-855-1432 or by e-mail at grahamjd@indiana.edu.


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