Baseball Crank
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December 9, 2010
POLITICS: The Lamest Duck?

What will happen to Barack Obama's presidency if his tax compromise is shot down with the help of his own party? The House Democratic caucus just voted against it, which puts the deal on life support, at best. Can Obama recover from that?

One of the great questions of the past two years, ever since it became obvious that Democrats would suffer significant setbacks in the 2010 elections, was how President Obama would respond to life with a Republican Congress (or, as it turns out, a Republican House and a weakened Democratic majority in the Senate). On the one hand, you have the fact that Bill Clinton managed to use the "triangulation" strategy to win re-election in 1996, and surely Obama is capable of being equally cold-bloodedly dismissive of his now-depleted Congressional troops. On the other hand, Obama is naturally much more ideological than Clinton and doesn't have Clinton's deft political touch, his decade-long track record as an executive or his experience winning multiple elections outside deep-blue territory, all of which suggests that even if the spirit is willing, Obama may not be competent at executing the same strategy.

Bowing to the results of the 2010 election, Obama has taken at least some tentative, temporary steps towards accomodation with the center. The first of these, which already irritated his base, was the announcement of a "pay freeze" for federal workers (actually just a freeze on annual cost-of-living salary adjustments). Now, he's struck a deal that gives GOP leadership nearly everything it had asked for on taxes - a two-year extension of all the Bush income tax rate cuts, a payroll tax cut, and a lower estate tax than what would return under current law after the 2010 moratorium in the tax, all in exchange for extending unemployment benefits as far out as three years for some recipients.

Now, both liberals and conservatives are up in arms against the deal, and it's hard to see how it passes even the House when the Democratic caucus is against it. What happens if the deal falls through?

The merits of the deal, from the GOP side, are debatable. What's really needed to kick-start the economy is to improve the long-term returns on investment, and more temporary tax cuts aren't going to help that any more than the "stimulus" did, because you can't plan long-term investments around two years of tax policy. On the other hand, tax hikes right now would be a very bad thing, so while the tax cut extension isn't going to help, failing to extend the cuts would only make things worse. As for extending unemployment benefits, anyone with basic knowledge of human nature knows that many people will work harder to find new work if their benefits are ending, so you're laying out a bunch more cash for a net economic negative. I'm in the camp that accepts that lengthy unemployment benefits can certainly be justified, and conservatives have better and more politically feasible targets to take on government spending, but you have to start by acknowledging the costs of the extension. Anyway, from a conservative perspective, the deal may not be great but it's hard to see how the GOP could get a better deal right now, while still not in control of any House of Congress, and while a better deal might be doable in January, that's a risky play.

From the liberal perspective, the deal stinks - opposition to the Bush tax cuts has been an article of faith on the Left for a decade, and more broadly speaking, reductions in the top marginal tax rates has been anathema to liberals since Reagan. The case in its favor is that the deal breaks the legislative logjam (the GOP is holding up the entire lame duck session over taxes) at only temporary cost, and like the pay freeze does nothing to obstruct the long-term growth of government at the expense of the private sector.

At any rate, the incensed reaction from quarters like Keith Olbermann and Rachel Maddow has liberal/progressive activists aflame, and with the House vote there appears now a real chance that Obama - who is furiously trying to sell the deal, with his whole White House communications operation touting it - won't be able to deliver enough votes from his own party to pass both Houses, putting him at the mercy of conservative hardliners like Jim DeMint who argue that the deal should be scuttled in favor of a new round of negotiations in January after the GOP assumes control of the House.

Obama has assumed thus far that getting the deal passed over outraged opposition from the Left will only help him, in the way that welfare reform did for Clinton, but without having to swallow any policy changes that last past 2012 - it will make him look more moderate, he's counting on liberals hating the next GOP nominee too much to stay home in 2012, and he knows that he faces no real risk of a primary challenge because African-American voters will remain a loyal firewall in the primaries no matter what he does.

But as I wrote of George W. Bush in the aftermath of the somewhat similar collapse of the Harriet Miers nomination, it's always foolhardy to pick a fight in politics without considering whether it's a fight worth losing, and ultimately harder to win if everybody knows you can't afford to lose. Obama has already incurred all the costs of winning this battle - he showed a new willingness to cave in to the GOP, and enraged his base. Both of those things will be true whether the compromise package passes or not. But if the deal is tanked by the likes of Bernie Sanders and Barney Frank, where does that leave Obama? I'm sure I'm forgetting someone, but I can't recall another President who cut a major bipartisan deal on a major legislative priority in his first term and had it collapse; the two major first-term failures that come to mind (Clinton's healthcare plan and BTU tax) had no significant GOP support. Bush, you'll recall, went to great lengths to get No Child Left Behind and Medicare Part D passed, and his legislative disasters - Miers, Dubai Ports, Social Security, immigration - were all in his second term.

The obvious lesson, if the deal collapses, will be that Obama can't deliver anything - he can be pushed into compromise with GOP priorities, as he wouldn't before the election, but he can't bring along his own caucus, which has suffered so many losses for following his lead. Liberals will learn that they are better off striking their own distance from an unpopular and increasingly impotent leader. And heavy liberal opposition to the deal will make it impossible to blame DeMint or Republicans for the collapse, and will encourage conservatives to push for even fewer compromises with Obama in 2011. That calculus of legislative forces will make it hard for Obama to plan for the other leg of the Clinton strategy, a budget battle in which the GOP blinks. Obama can try to use the whole mess to argue that "Washington is broken" and all that, but it's a hard argument to make from the Rose Garden.

By failing to ensure ahead of time the support of his own caucus, President Obama may have shot himself in the foot in dealing with the Republican-controlled House even before the new majority is sworn in.

Posted by Baseball Crank at 11:40 AM | Politics 2010 | Comments (5) | TrackBack (0)
Comments

From the liberal camp, it's a heinous "optics" issue.
Yes, freezing government wages isn't the end of the world, but he justified it by saying "we all have to make sacrifices".
A week later he let it be known the richest 1% aren't part of "we all".
Sure, we already knew the richest 1% are way better than the rest of us (if we've listened to AM talk radio or the cable "news" networks), but now it's an act of faith from the leaders in both factions of the one-party (business) political system we have in the US.

Posted by: Berto at December 9, 2010 12:30 PM

It's a bit surprising how riled up the Left has become over the top marginal tax rate not increasing 4.5%. This betrayal is nothing compared to the other Bush 3 continuation policies Obama has engaged in. This might just be frustration with Obama over the 2010 drubbing finally finding a crack to blow through without the fear of being labelled a racist. This feels more like pent up hostility than true policy anger.

A white primary challenger could beat Obama in 2012, and if not beat him mortally wound him like Ford in 76 and Carter in 80. Obama barely got by Hillary in 08 and she won 57% of the white vote in the primaries vs. 2008 Obama. I assume a white challenger in 2012 would get 66%+ vs. 2012 Obama while still only getting 10% of the black vote as Hillary did, which would overcome the black vote which is 25%+/- of primary Dem voters. Plus turnout might not favor him in 2012 with the youth or black vote in primaries not beign revved up. It would be difficult, but it could happen.

Posted by: son of brock landers at December 9, 2010 2:35 PM

I don't love the deal, since it provides tax breaks to the wealthy in amounts out of proportion to the size of the deficit (you remember "deficit" don't you, it was all the rage for the Teabaggers?) and it provides too great an exemption in the estate tax. Still, unlike the GOP which cares only about politics and not a whit for the national interest, the extension of unemployment benefits and retention of lower rates for the lower 99% of taxpayers is worth it.

Still, Crank, I found a couple fo your comments interesting.

First, "[a]s for extending unemployment benefits, anyone with basic knowledge of human nature knows that many people will work harder to find new work if their benefits are ending, so you're laying out a bunch more cash for a net economic negative."

C'MON, GIVEN THE ECONOMIC SITUATION (REMEMBER, LARGELY THE RESULT OF GOP POLICIES) TRYING HARDER TO FIND WORK MAY HELP SOME, BUT YOU ARE DELUSIONAL IF YOU THINK MORE THAN A FRACTION OF THE PEOPLE GETTING BENEFITS CONTINUE TO DO SO ONLY BECAUSE THEY DON'T "HAVE" TO WORK. IT'S TIME TO REETIRE THIS CONSERVATIVER CANARD.

Second, "I'm in the camp that accepts that lengthy unemployment benefits can certainly be justified, and conservatives have better and more politically feasible targets to take on government spending, but you have to start by acknowledging the costs of the extension."

I LOOKED BUT SOMEHOW COULDN'T FIND YOUR ACKNOWLEDGEMENT OF THE "COSTS OF THE [TAX CUTS.]" IN YOUR COMMITMENT TO LOGICAL CONSISTENCY, I'M SURE IT'S THERE. PLEASE DIRECT ME TO IT.

Finally, as for the political effect on the President, we'll see. The right wing crazies leave him acres of room to move and to point out, correctly, the inteelctual and moral bankruptcy of the GOP. It could turn out to be his "Sistah Souljah" moment.

Posted by: Magrooder at December 9, 2010 4:35 PM

1. Deficits are only a symptom. Spending is the problem.

2. I don't argue that every single person on unemployment would find work if they lost their benefits. I do think - and if you've known anybody on unemployment, you know this - that there will always be some people who are not that motivated or are holding out for the best possible job. It's a marginal tradeoff.

3. Tax cuts do not "cost" anything because they do not increase the share of GDP spent by the government, they simply shift financing of that spending from current taxation to debt. While I agree that we have too much debt, the only workable long-term solution to that is to reduce the ratio of public spending to private sector growth, so that over the long term you're producing more and spending less. Raising marginal tax rates is taking the denominator of that equation in the wrong direction.

Posted by: Crank at December 9, 2010 4:41 PM

Frankly, it was probably very good for Obama to distance himself from the Congressional Dems on this one. Make a deal, then let Congress decide whether or not they want to play politics on it. He's banking that Congress - not him - will take the blame for any failure to reach an agreement on taxes, and I think that's exactly what would happen.

The rub for Obama is that many of those Congressional members up for reelection would be democrats, and if they get chucked out, he would have a harder time governing with republican majorities.

For what it's worth, I would have had no problem with raising the rates only on those over $250k, and calling this a "tax on the job creators" and characterizing this as a small business tax is good politics, but lousy economics. This article pretty much nails the politics of it:

http://www.economist.com/blogs/democracyinamerica/2010/12/partisan_anti-progressivity_tales?page=1

On the other hand, democrats would have done better to package the higher marginal rates with some meaningful spending cuts in entitlement programs. Maybe they were counting on the deficit commission for that, but it would have been better packaged with the tax bill.

Posted by: MVH at December 9, 2010 9:07 PM
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