Did Obama capitulate — or is this a cagey move?
By Peter Wallsten and David Nakamura,
It was President Obama’s bottom line, a position he repeated in every recent public utterance on his debt-ceiling talks with Congress: Any deal must be “balanced” with spending cuts and tax increases.
But in his eleventh-hour stare-down with tea party-infused Republicans, with a possible government default on the line, Obama blinked.
The deal to trim the federal deficit by more than $2 trillion and increase the government’s borrowing limit contains no guarantee that tax increases will be part of the equation.
After weeks of presidential demands for sacrifice by corporate jet owners and hedge-fund managers, those taxpayers and others can rest easy — at least for now.
Liberals were furious as the terms of the agreement came into focus Sunday, and yet another capitulation by Obama on economic policy threatened to further dampen enthusiasm among the core Democratic voters he will need to win reelection next year.
But for a White House eager to improve its standing with centrist independents who have been fleeing Obama, even a losing deal can be a winning strategy.
Most important for the president, the agreement struck Sunday averted a government default — an outcome that probably would have hurt the U.S. economy and added to voters’ frustrations with Obama’s leadership.
The deal also allows the president to avoid another politically painful fight over lifting the debt ceiling before the 2012 election, with Republicans giving up their insistence on a second vote before then.
And Obama, branded a socialist by many Republicans for his big-spending stimulus program and his health-care overhaul, can declare himself a deficit hawk as he courts the political middle.
As he put it in remarks late Sunday praising the agreement, the result of his negotiations would be “the lowest level of annual domestic spending since Dwight Eisenhower was president.”
An administration official told reporters later that “it’s important to show the American people we are serious about deficit reduction.”
Even an apparent capitulation by Obama helps present him to voters as a reasonable compromiser doing battle against rigid ideologues, his aides say.
“In the short term, everyone suffers politically,” Obama campaign strategist David Axelrod said in a recent interview. “In the long term, I think the Republicans have done terrible damage to their brand. Because now they’re thoroughly defined by their most strident voices.”
Obama and his aides insisted Sunday that the president has not given up his fight on taxes.
The creation in the agreement of a bipartisan committee that will recommend the bulk of the deficit reduction later this year gives the president more chances to apply public pressure for tax increases on the wealthy.
Obama will take his case to the public, perhaps even harnessing his reelection campaign apparatus to target lawmakers, as he began doing this past week via Twitter. A July Washington Post-ABC News poll found that most Americans, including most Republicans, support some tax increases to reduce the deficit and oppose cutting programs such as Medicaid and Medicare.
“Over the next few months, I’ll continue to make a detailed case to these lawmakers about why I believe a balanced approach is necessary to finish the job,” the president said Sunday.
Obama’s big compromise on the debt-ceiling deal was agreeing to a “trigger” forcing across-the-board spending cuts — including to Medicare and defense — should the committee process not work.
Many Democrats will be relieved to learn that the automatic cuts would not apply to Medicaid, Social Security and certain programs for low-income families. But liberals had hoped the trigger would include taxes. Instead, by late Sunday, House Speaker John A. Boehner (R-Ohio) declared a total victory on that front — telling his colleagues, “The White House bid to raise taxes has been shut down.”
A White House official argued Sunday that the president had another trump card to play: the scheduled expiration of the George W. Bush tax cuts at the end of 2012.
Obama would block extension of the reductions, either as a final act in office after losing the November 2012 election or after winning a second term. At a minimum, the issue gives him leverage for this year’s deficit battle.
The trouble for Obama is that presidents generally do not want to turn their reelection campaigns into crusades for higher taxes. Polling data may show voters siding with Obama on the details, but in general Democrats lose when Republicans paint them as tax-and-spend liberals — which explains why the White House was so eager to avoid another debt-ceiling vote.
Democratic pollster Mark Mellman said the ongoing debate over taxes and spending would take Democrats, and the president, away from addressing voters’ larger concerns about how to create jobs and stimulate the economy.
“Everyday Democrats aren’t talking jobs is a less-than-optimal day for us,” Mellman said.
Grover Norquist, president of Americans for Tax Reform and the creator of the no-new-taxes pledge signed by most Republicans, was ebullient Sunday at the substance and political implications for the deal.
Obama may declare victory, he said, but after relenting on taxes, “he’s playing hurt.” Norquist said Republicans next year can make a case that the 2011 deal would have been far bigger had the GOP controlled the Senate and the White House. And they will argue that when it came to spending cuts, “Obama fought us every step of the way.”
Norquist added that he was “pleasantly shocked” that Obama had not sought a debt-ceiling increase last year, when the president struck another deal with the GOP extending the Bush tax cuts — given that the president had far more leverage at that point.
Some Democrats, too, turned Sunday to questioning Obama’s negotiating skills — asking if he could have avoided the current crisis altogether and maintained a stronger political position.
Obama, after all, could have accepted earlier GOP plans that included additional tax revenue — including one that he was negotiating with Boehner. The speaker, who seemed willing to allow $800 billion in additional revenue, walked out of the talks when Obama asked for more.
Now, according to Democratic critics, the poor and the middle class are at greater risk from cuts.
One senior Senate Democratic aide said that averting a default was a victory of sorts for Obama, “but when you look at the emerging details, spending cuts and triggers with no revenue, the president got rolled.”
Asked if the deal was balanced, as the president had required, former Obama White House economic adviser Jared Bernstein said, “Not by any stretch of the imagination.”