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Romney and Rove divided over tax cut deal

Republicans are increasingly divided on the deal to extend the Bush tax cuts that was hammered out by the Obama administration and the Republican Congressional leadership. Potential 2012 Republican presidential candidate Mitt Romney urged Congress to vote against the bill in an op-ed published Tuesday in USA Today.

The temporary nature of the deal is Romney’s main objection, he writes. He acknowledges the traditional Republican argument that all tax cuts are good because they spur economic growth, but he repeats the frequent talking point that with the tax cuts set to expire in a few years their benefit will be minimal due to ‘uncertainty’ about future rates.

Because the extension is only temporary, a large portion of the investment and job growth that characteristically accompanies low taxes will be lost. When entrepreneurs and employers make decisions to start or expand an enterprise, uncertainty about tax rates translates directly into a reduced propensity to invest and to hire. With only a two-year extension, investors know that before their returns are realized, tax rates may be jacked up to the levels favored by President Obama. So while the tax deal will succeed in temporarily putting more money in the hands of consumers, it will fail to deliver its full potential for creating lasting growth.

Romney also attacks the inclusion of a 13-month extension of unemployment benefits in the deal. He attempts to humanize his concern for the unemployed by referencing his interactions with the jobless while he served as lay pastor, but then turns his ire against providing benefits to those struggling individuals.

“The vital necessity of providing for those without work should not be used as an excuse to ignore the very real problems of our unemployment system,” he writes. Romney suggests some form of “individual unemployment savings accounts” or programs to induce employers to hire the long-term unemployed but does not provide many details about how those programs would operate. Romney does acknowledge “we cannot rebuild our flawed system overnight.”

Romney is using the tax cut compromise to position himself to the right among 2012 aspirants. He is usually lumped among the moderate, old-school wing of the GOP. But the tax cut compromise has angered many in the base of the conservative movement, with Tea Party Nation comparing a vote in favor of the tax cuts as equivalent to supporting TARP in 2008. As Dave Weigel at Slate notes, the majority of potential 2012ers have either supported the agreement to extend the tax rates or have not made public comments. Sarah Palin is the only other possible candidate who has come out against the compromise, and the former Alaska governor only tweeted her opposition. By writing this editorial, Romney has positioned himself as one of the leading voices resisting the deal with the Obama administration, something that could win him favor among the conservative grassroots.

At the end of his op-ed, Romney reveals another reason why it is personally beneficial for him to resist the tax cut deal. “President Obama has reason to celebrate. The deal delivers short-term economic stimulus, and it does so at the very time he wants it most, before the 2012 elections,” Romney writes. The president’s reelection hopes will largely revolve around the state of the economy in November 2012. The tax cut compromise injects significant stimulus into the economy over the next two years, so it is logical for for a candidate angling to remove Obama from the White House to oppose a policy that could improve the economy before 2012.

While Romney shifts to the right, the Republican establishment is is pushing forward on the tax cut deal with full force. The bill passed the cloture vote in the U.S. Senate Monday by a 83-15 vote that included support from a host of Republicans.

Now the group associated with the ultimate of Republican party insiders is scheduled to begin airing radio ads to pressure House Democrats to pass the tax deal. Politico reports that Crossroads GPS plans to spend $400,000 targeting 12 House Democrats.

Crossroads GPS is a spinoff of Karl Rove associated American Crossroads, and the two organizations invested heavily in ad buys supporting Republicans during the midterm elections, combining for $70 million. Crossroads GPS spent around $17 million, but because the organization is a 501(c)(4) with undisclosed donors, the group cannot spend more than half of their expenditures on electioneering. The new commercials supporting the tax cut compromise represent Crossroad GPS’ first push to fulfill its “sustained advocacy effort” since the election.

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