Obama and the GOP can work together

Inside the still-wonky White House, senior aides are starting to process the midterms by thinking about Venn diagrams, those logical exercises favored by economists in which you calculate where the interests of circle A (representing Obama) and circle B (representing Republicans) might overlap. Ratifying Obama’s free-trade deals, for instance, just got much easier. Education reform is a passionate cause for both Boehner (who worked with Ted Kennedy on No Child Left Behind) and Obama, who is bucking the teachers’ unions to achieve more accountability. There may also be room for compromise on renewable energy…

Before scuffling over infrastructure, the lame-duck Congress will have to decide whether the 2001 Bush tax cuts should be extended beyond Dec. 31, when they automatically expire. At the insistence of vulnerable Democrats (including Russ Feingold), Obama didn’t try to resolve this before the election. Now the most likely outcome, according to sources on Capitol Hill, is a bill that makes the middle-class tax cuts permanent and extends those for families making more than $250,000 for two years, giving everyone something else to argue about just before the next election. Many Democrats, while offended by the rich getting so much richer (not to mention the $700 billion hit to the deficit), also recognize that raising taxes of any kind amid a weak economy isn’t such a good idea. Why tamp down the “animal spirits” of entrepreneurs just when we need them most?

Once the three amigos (plus Harry Reid and Nancy Pelosi if she becomes House minority leader) start talking about tax policy, they might as well go all the way to a one-year payroll-tax holiday, an idea that’s finally getting the attention it deserves. Right now, employers and employees each cough up 7.65 percent, the highest tax most middle-class Americans pay. Reducing it temporarily to, say, 4 percent (at a cost of about $150 billion a year) would free up more money for hiring and boost demand by putting cash in the pockets of workers.

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