Some issues to consider before throwing support behind the compromise.

The deal is out. Ezra Klein has details, and here is the New York Times' take. It strikes me as exactly what the administration was hoping to get. They had been pushing for this combination of a payroll tax cut and business credits since at least September, for an entirely tax-cut driven second stimulus package.

My initial thoughts on the deal:

1. No Raising of the Debt Ceiling. This should be a no-brainer and a deal-breaker for liberals considering supporting this bill. Repeat: no Democrat should support the compromise without this issue being addressed. The debt ceiling is going to be hit sometime early next year, between February and April. Alan Simpson is already bragging about how this vote will be a "bloodbath", forcing the austerity agenda into action. It would not surprise me if the new Congress moved to cut back on the stimulus program and force deep cuts at the moment when this new stimulus is just getting going, and we can no longer assume that Obama will show leadership in averting this crisis.

Since this is a noxious compromise, there should be no room for the GOP to turn around and slash aggregate demand a third of the way into 2010. This compromise gives cover for each side to extend deficits to benefit their core constituencies.  ]If the GOP hits those struggling to get back into productive work in this weak recovery by slashing the budget (and of course leaving the high-end tax cuts in place), we got taken. And Digby is already catching the pundits processing this deal by concluding that Obama needs to call for deficit cutting in the State of the Union, earlier than the debt ceiling issue arises. I could see 2011 being the year of a hundred little pay-freeze type moves, and raising the debt ceiling would be the focal point.

Since we are giving the Republicans exactly what they want, and they appear to seriously want it, let's get this deal without offering up any other pieces of flesh. Unless the administration wants to get cracking on Social Security, in which case a debt ceiling crisis is a perfect opportunity.

2. Repealing the Bush Tax Cuts: Gone, Goodbye. It is not very likely that the upper-income tax cuts will be pulled back in 2012. I simply don't see a way in which the situation is any better then -- unemployment is projected to be at 8%+, with a fragile recovery still in its infancy. The idea that Obama's team will be in any better position to trigger it then is weak. At that point, following the deficit commission, the idea will be to lower tax rates and broaden the base, which means that we'll probably be focused on lowering the high-end marginal tax rates even further while removing subsidies. Except that I also expect those subsidies to be gamed.

For the past 30 years, the real gains to the increased productivity of our country have been captured by the top 2%, and now they've managed to give themselves a major tax cut with Obama in the lead. Great run, you. Regardless, there is now much greater uncertainty than there was before, although the Financial Services Forum doesn't think so. Huh.

3. Are We Starting the Deficit Commission's Plan? Ever had a dinner that you thought was dinner, but the other person thought was a date? Does the deficit commission think we are on a date with this plan? I'm really worried that liberals will find that they've de facto signed up for the deficit commission's recommendations by taking their first recommendation on the Social Security tax cuts. Administration officials are already saying this is paid for out of general funds, no need to worry. But I am worried.

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4. Business Expensing. The business expensing credits are accelerated. My opinion on this, following JW Mason's reading of Goolsbee's early research, is that this mostly shifts rents around rather than generates new demand. Goolsbee replied to Mason's critique and the relevance of his early work in that link. I'll leave it to you to determine your own opinion.

5. Are Tax Cuts Extra Weak in This Recovery? Tax cuts are a weak form of stimulus. And what is extra interesting is that this paper, Does the Effectiveness of Fiscal Stimulus Depend on How it is Delivered?, based on some survey data, found that people were less likely to "mostly spend" the 2009 tax cut as opposed to the 2008 one. Twelve percent less likely, with 4% more likely to "mostly pay debt" and 8% more in the "mostly save" category. The new Social Security cuts will replace this behavioral tax cut.

There's debate as to why this is: some think that it involves the quirks of behavioral economics, in which people think Obama raised their taxes instead of instituting the largest middle-class tax cut ever because Obama never said so. I think it is more likely to be a result of the large debts Americans took on as a result of the credit bubble. If we had cramdown, with an impartial judge vetting out some of the bad mortgage debt that the bailouts should have taken care of, I'd be more comfortable with tax funds going straight to deleveraging. I'm less comfortable as it stands. (Felix Salmon: "But the middle- and upper-class tax cuts, paid for by extra borrowing by Treasury, will be used in large part to pay down personal debt. Essentially, we’re replacing private debt with public debt.")

Rather than straight fund deleveraging, I'd rather see infrastructure get built so that the new workers can pay down debt and the country can get a public good out of the chaos. Especially since Wall Street seems happy to take the proceeds, park them at the Fed, collect money and give themselves bonuses.

6. Extending unemployment benefits is a smart idea. The latest and greatest numbers show that the increase in employment from the demand side outweighs the decrease in employment from the supply side, and that's before you consider liquidity effects. If that is gibberish, here's plain English: extending unemployment benefits is a go in the economic sense, even before you consider that it is humane to not starve workers caught in the aftermath of a bubble consisting of Wall Street's toxic debt instruments.  This does nothing for the 99ers, though. And like the tax cuts, it doesn't so much create new demand as it maintains old demand; it's not stimulative, just anti-contractionary.

7.  No Benefit From The High-End Tax Cuts. Don't let anyone spin you. We'll see unemployment come down somewhere between 0 and 0.1% from extending the high-end tax cuts. We are being asked to take on a massive deficit while nobody is able to really confirm that the net effect on employment is indistinguishable from zero. That's compared to the 0.2% to 0.5% decrease with middle-class tax cuts.

I'm not sure what to think or do next.  Your thoughts?

Mike Konczal is a Fellow at the Roosevelt Institute.