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Tax Deal Doesn't Make Sense for Obama

Tax Deal Doesn't Make Sense for Obama

By Sean Trende - December 9, 2010

I've followed Barack Obama's presidency pretty closely for the past two years. I will say that, while I might not always agree with his decisions, I can usually see the logic behind them.

Not so with the recent compromise on extending the Bush tax cuts. To recap, the president, along with most Democrats, badly wanted to let the Bush tax cuts for high earners expire. Republicans wanted to extend all of the Bush tax rates. Failure to reach some type of accord meant that all of the Bush tax cuts expired, and everyone's taxes would go up January 1. In addition, unemployment benefits were set to expire for several million Americans without prompt congressional action. Republicans opposed extending these benefits without finding spending offsets.

On Monday, the White House announced that it had struck a deal with Republicans. In pertinent part, it (1) extends all of the Bush tax rates for two years; (2) extends unemployment insurance for 13 months; (3) cuts the payroll tax; and (4) includes a number of other minor tax items. The president then held a press conference where he blasted Republicans as "hostage takers," derided liberals as "sanctimonious," and reiterated his opposition to extending the Bush tax rates for higher earners as something the country couldn't afford.

I can honestly think of no good reason for this behavior. To the extent that there might be some rationale for the deal, it was upended by the subsequent press conference. Here are four rationales I can think of, and why I don't think any of them work.

(1) He thinks it is good policy -- This is obviously not the case, given how heavily he blasted the deal at his press conference. A variant of this theory is a little more plausible, which is that he thinks that the extension in unemployment benefits and middle class tax rates is so important, that he was willing to cave on the issue of upper class tax rates.

If the latter theory is the correct one, I still think it is problematic. First, he should have done a much better job selling the policy at his press conference. More importantly, as I discuss in (4), I think that ultimately he would be able to get his preferred policy options for a much cheaper price by digging in his heels. At the very least, he could have inflicted real political pain on his opposition.

(2) He wants to look bipartisan -- One of the criticisms leveled against the president, especially by the right, is that while he talked a good game about bringing people together, he actually offered up little of substance. This deal could potentially go toward repairing his image as a uniter.

That was what I thought was his reasoning when the deal was offered up. But then . . . the press conference. Simply put, if you are hoping to look bipartisan and mend fences with the other side, you do not turn around and blast them as "hostage takers," and deride their goals. Any bipartisan goodwill the president hoped to gain from this deal was gone within 24 hours of its announcement.

(3) He wants to keep the issue alive for 2012 -- Now I think we are moving into the realm of possibility. Maybe the president wants to run for re-election on the issue of the Bush tax cuts.

There are certainly agenda items where this type of maneuvering makes sense (immigration reform, DADT repeal), but this is not one of them. Of all of the issues from the 2008 campaign, I think that this is probably the most important one to his base. By ultimately accepting all of the Bush tax cuts for another two years, it makes it very difficult for the president to turn around and deride them on the 2012 campaign trail. Perhaps most importantly, it becomes well-nigh impossible to use the issue to excite his base, which won't trust him on the issue anymore.

(4) He is trying to triangulate -- I think this is probably the most likely scenario, and it is certainly the angle most analysts have focused on. But if the president is trying to triangulate, he is doing so poorly. Bill Clinton famously "triangulated" against the GOP in 1995 and 1996 by fusing the most popular elements of the Republican agenda - like middle class tax cuts, welfare reform, and crime control - with popular elements of the Democratic agenda - protecting Medicare, Medicaid, Education and the Environment (the famous "M2E2" strategy).

In other words, Clinton didn't compromise. His position was a defined point on the triangle, separate and distinct from the Republican and Democratic positions. He was in essence a third party, placed between the major parties, and he fought for his platform vigorously. He acquiesced to a shutdown in the government, gambling that because his position was the more popular one, that the Republicans would bear the brunt of the public's ire. And he was right.

Obama has, in essence, capitulated on the eve of the government shutdown. What makes this so flummoxing is that he actually held a pretty strong hand. He easily could have waited for all of the tax cuts to expire, for the unemployment insurance benefits to run out (right before Christmas!!!), and pointed the fingers at the Republicans and their insistence on preserving tax cuts for Paris Hilton. Bill Clinton would have won that argument walking away. Instead of staking out a strong position, the president looks to have caved in to Republican demands, causing him to appear weak and diminishing his political standing.

I think the president may have made one more grave miscalculation. The left grumbled about Clinton's triangulation, and sometimes broke with him (remember, the 1997 balanced budget agreement had about 70 nay votes in the House, most of which were Democrats). But they largely tolerated him, because they thought that he was the only thing standing between the programs that they held most sacred and the Republican Visigoths at the gate. Remember, in 1995, Clinton's 1992 win looked very much like a fluke brought about by the economy and the Ross Perot win, and the conservative Republican wins of 1980-88 and 1994 looked more like the natural trajectory of the country.

I don't think that's the case today. The left is still feeling its oats, and believes that there is still an emerging Democratic majority, and a liberal one at that. I don't think it has the same tolerance for triangulation that it did in 1996. Indeed, that tolerance had largely run out by 2000, when Ralph Nader forced Al Gore leftward and still cost him the election.

And so, Obama today faces a revolt within his party. He will have to bring at least 18 Democratic senators on board with his plan, something I'm not sure he can do (it will probably have to be more, since at least one Republican has announced his opposition to the plan). Even if he does get the bill through, the odds of a primary challenge have increased dramatically. Remember, a challenge doesn't have to be successful to harm the president (it is nearly impossible to defeat him, given the primary calendar). It only has to exceed very low expectations.

Even if he avoids a primary challenge, he will go into the 2012 elections with a much weaker hand. Remember, President Bush didn't fall below 40 percent until his base began to desert him over immigration reform. This agreement could have a similar effect for Obama. He badly needs to recreate the 2008 electorate in order to have any chance of winning, and that is predicated upon an unenthusiastic GOP base and an amped-up Democratic base. This deal makes both much less likely. It makes no sense for Obama.

Sean Trende is senior elections analyst for RealClearPolitics. He is a co-author of the 2014 Almanac of American Politics and author of The Lost Majority. He can be reached at strende@realclearpolitics.com. Follow him on Twitter @SeanTrende.

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