The Deal

[ Posted Tuesday, December 7th, 2010 – 18:08 UTC ]

President Obama's recently announced deal with Congressional Republicans on the Bush tax cuts (which I will hence refer to as "The Deal," because it is way easier to type) certainly seems to be burning up the blogosphere. Being a denizen of this mythical realm, I suppose I'm expected to weigh in on things here.

As usual, though, I'm reluctant to do so right away because I have a profound distrust of knee-jerk reactions from anyone -- myself included. I prefer to take a few days, study the details as they emerge, and see how things play out before leaping into the fray myself.

Today, although it may not please everyone, I'm going to compromise somewhat on this anti-knee-jerk position. Feel free to regard that as some sort of cruel irony, if you wish (in other words: insert your own "compromise" insult here). But my initial reactions weren't so much to The Deal itself as to peripheral or microscopic aspects of it. So perhaps I'll be ready to write about The Deal itself (subtext: Was It "A Good Thing" Or "A Bad Thing?") tomorrow, but today I'm just going to dance around the edges of it, as it were. I've got two points to make from 30,000 feet (as they say), in terms of an overview of the politics of the situation, and two points to make that are quite targeted and specific. But, just to warn everyone, there will be no sweeping conclusions today. Instead, we'll start with the two Big Picture overview points, and then jump down to the microscopic level for the last two.


Congressional Democrats brought this upon themselves

I have to admit I've been a little surprised at the vehemence of some congressional Democrats for the past few days. Because while it is certainly lots of fun to fulminate on television, they really have no one but themselves to blame for the situation they now find themselves in. If the Democrats in Congress hadn't been such abject political cowards, we simply would not be where we are today. Many who are pointing fingers of shame and blame right now at the president should really take a good look in the mirror instead. Now, this is not to say that (should you be inclined to assess blame) there isn't plenty of blame to go around, but that works both ways. That's a pretty strong set of statements, so allow me to explain.

Democrats in Congress could have had this fight pretty much at any time this year. The January first deadline for action was no secret to anybody. Even with the heavy schedule of other important things Congress got accomplished this year, from roughly the beginning of the summer onwards this fight could have happened any time Harry Reid and Nancy Pelosi wanted it to. They could have used it as the centerpiece of the midterm election season. They could have had plenty of time to fully debate everything, allow the White House to get on board with a few veto threats, and taken their case to the American people.

They did not.

Let me just repeat that, in case you missed it -- Democrats in Congress did not have this debate. They punted. They decided that they'd take care of it after the election, rather than using the issue in the campaign. Largely, this was due to nervous Democrats (Blue Dogs, for the most part), who balked at "raising taxes" during an election. Most of the Blue Dogs wound up losing anyway, I should point out. But for whatever reason, Democrats caved into political cowardice rather than doing their job in a fashion that left plenty of time for haggling in full display of the voting public.

Which makes congressional Democrats' crocodile tears of rage now somewhat disingenuous. "Disingenuous" is a polite way of saying "laughably unbelievable." Because Congress -- by refusing to act -- backed the White House into an extremely tight corner, where they absolutely had to produce something within a few short weeks. This allowed the Republicans to (as Obama put it today) hold the entire issue "hostage." Which simply would not have happened -- at least not in the same way -- if Democrats on Capitol Hill had acted back in September. Or June.

So, while it is not accurate to say that the congressional Democrats are to blame for The Deal itself, it is entirely accurate to blame them for setting the current situation in up the way they did.


The White House gets engaged

No, that's not some sort of joke about the Washington Monument proposing marriage after all these years. Ahem.

That wasn't quite serious enough, allow me to start over.

What a lot of people seem to be entirely missing in this debate is that President Obama and his team at the White House tried an utterly new tactic (for them) -- getting involved in the process.

Compare what just took place with the healthcare reform debate, to see what I mean. The White House was criticized (by me, as well as others) during the endless healthcare reform negotiation, for not putting some skin in the game. Obama and the West Wing folks seemed content to sit back and let congressional Democrats have all the time in the world to (quite publicly) have a fight among themselves. The White House never took control of the process at all, instead remaining content to nudge Congress every so often with bland "Gosh, we'd sure like to see some progress" sorts of statements, or vague "goals" issued with no specifics attached. The process took forever, as Democrats haggled among themselves almost endlessly.

Now compare what just happened. At the start of the lame duck Congress, Republicans were presenting a unified front. Democrats, as usual, couldn't even agree on a single plan in their own caucus. Two competing plans emerged (actually more emerged, but two made it to the top of the heap). Nancy Pelosi got the House to pass one of these fairly quickly, and then (reportedly) the White House pushed hard on Harry Reid to hold a vote on the top two plans in the Senate, as a "test vote." Both of these only managed to get 53 votes -- they couldn't even get all the Senate Democrats to support either one of them.

After showing they didn't have nearly enough votes in the Senate, and facing an absolute brick wall from Republicans, the White House sat down and (fairly quickly) hashed out a final deal with the Republicans. Congressional Democrats didn't even enter in the equation, if truth be told.

Which is my point. This deal was worked out in almost exactly the opposite fashion that Obama has been operating for a long time. Instead of deferring to Democrats in Congress -- in the hopes that they will get their act together, in some period of time less than "forever" -- Obama led the negotiations. These negotiations were carried out with remarkably few leaks, and a deal was struck which is actually a lot better than was rumored just hours before it was announced. The conventional wisdom floating around inside the Beltway was that Obama was going to get a short extension of unemployment benefits, and not much more. But the plan announced was far more sweeping, meaning perhaps the White House negotiators are better than people generally think they are. Obama got a lot more than anyone was willing to give him credit for beforehand, and he did get some concessions from the Republicans in doing so -- which nobody really expected.

But I am getting dangerously close to the whole "Good Thing/Bad Thing" debate here, so I'll move on for now. My point here is that the White House aggressively got engaged in this debate, drove the Democratic position with a single voice, and by doing so sidestepped much of the Democratic squabbling that took place on previous debates on big issues. And, immediately afterwards, President Obama held a press conference -- explaining and defending his position to the American people.

A lot of us out here have been exhorting Obama to do precisely this, for a while now. Which is my main point. President Obama seems to have decided on a different playbook for this debate than the one he's been using up to this point, and it seems this is being largely overlooked by many. What it means for the future is anyone's guess; but it's worth noting, at the very least.


Obama goes "all in" on the tax cut issue

Having given an overview, I now draw your attention to two specific things contained in The Deal which bear mentioning, for political reasons alone. One of these is incredibly risky for Obama, and one of these could really help him out.

First, the bad news. It has been reported that the White House was the one to insist on a two-year extension of the Bush tax cuts for millionaires. I warned them not to do this, personally, because that puts the next giant tax cut fight right in the middle of the 2012 election season.

Obama, to put it in poker terms, has gone "all in" on this being a central fight during his re-election campaign. He didn't need to do so. He could have punted altogether by getting a three-year extension, which would have put the debate comfortably into the next presidential term. He could have forced the debate during the primary season, by getting a one-year extension. Obama did neither. The White House is calculating that this will be a great debate to have in 2012, when (assumably) the economy is doing better and people are feeling more positive about the future of the country. Obama is staking a lot on leading the Democratic side of this debate, right when American voters will be paying close attention.

This, to put it mildly, is a risky strategy.

In the first place, recent history shows that it is tough to run on a campaign of "I'm going to raise taxes" for Democrats (it is inconceivable for a Republican to run on such a campaign, I should point out). And if very recent history is any guide, congressional Democrats aren't exactly eager to run on the issue themselves. Look at what they just did in this year's election. They refused to even have the debate (as I already mentioned). So what makes anyone in the White House think Democrats will "have Obama's back" in two years on the issue? Does the White House really think Democrats in Congress are going to show that much spinal fortitude in 2012? One wonders on what, precisely, anyone could base such a conclusion.

Granted, Democrats as a whole will be a much less centrist group in two years (due to the loss of all those Blue Dogs). But they will have one hand tied behind their back entering into this fight, because they will be completely irrelevant in the House, where Republicans will be in control.

Time will tell whether settling on two years was a good idea for President Obama. From this distance, though, it looks like a very risky bet on a very weak Democratic hand. Of course, the public is actually on the side of Democrats when it comes to hiking taxes on the rich, but they don't always cast their vote in elections based on this issue. Which is where the risk comes in.


Obama gives every worker a two percent raise for a year

The best idea in The Deal is kind of a subtle one. It also carries risks, but could wind up being a good thing politically for Obama.

Because starting next year, every working American is going to get a two percent raise in take-home pay. The idea of a temporary "payroll tax holiday" has been around for a while (and has been supported by various Republicans and Democrats recently), and it was one of those surprises which nobody expected in The Deal.

Obama switched gears on this, and it may wind up being a very smart thing for him to have done. What he initially was bargaining for was an extension of the "Making Work Pay" tax credit, which gave every working American $400 last year (and will give them the same among this tax year as well). The problem with this credit is the White House pretty much forgot to tell anyone about it, after it was passed as part of the initial stimulus bill. Meaning Obama didn't get much political credit for it. It was a welcome surprise for many Americans when they filled their taxes out last year (myself included -- I was as surprised as anyone, and I watch politics fairly closely), but, again, Obama didn't get much credit for this tax break for everyone.

But seeing your paycheck two percent higher is a little more tangible for most Americans, I would guess. This seems to be what the White House is betting on, as well. Starting in January, everyone gets a little raise in pay. And they'll continue to see it on every single paycheck they get over the next year. This could be much more effective, politically, while achieving basically the same result (a break on your taxes).

There is a risk, though. Americans don't like to give up tax breaks, once they are given. The entire debate we've just been through should be proof enough of this. So one wonders what is going to happen next year, when Social Security taxes go back to their normal percentage. Some pundits are saying this is the beginning of the end for Social Security, but I seriously doubt that. But I could see how such "temporary" payroll tax breaks could be renewed over and over again in the future, which could turn into its own sort of problem.

But, while it does carry a certain amount of political risk when the program ends, getting a two percent break every paycheck is likely going to be a lot better politically for Obama than a tax credit almost nobody's heard about.


-- Chris Weigant

Follow Chris on Twitter: @ChrisWeigant


12 Comments on “The Deal”

  1. [1] 
    Chris Weigant wrote:

    No comments yet?

    Allow me to break the ice...

    I think:

    I'm reluctant to do so right away because I have a profound distrust of knee-jerk reactions from anyone -- myself included.

    was actually a rather profound statement in and of itself. I'm not one for false modesty, so allow me to say that that sums up a lot, for me.

    In slightly-less-egotistical news, we've broken through halfway on the holiday pledge drive! Woo hoo!

    I will be posting these sorts of updates regularly from now until the end of the year, both in the comment section for the most-recent article, as well as on the "Holiday Pledge Drive Kickoff" article comment page, just to let everyone know. Check back frequently to see updates!



  2. [2] 
    Michale wrote:

    You really have to hand it to the Republicans..

    They did an end-run around Democrats, worked with Obama and came out with a deal that addresses practically every concern that the American people have..

    The unemployed continue to get their free money, no one's taxes gets raised and working families actually get a little bonus..

    From reports, it's the DEMOCRATS who are considering punting this deal and letting everything expire..

    Yea... THAT's a good plan for Democrats...

    Sometimes I really wonder if the Democratic Party leadership are really Democrats or Republican are "Manchurian" plants....

    I also agree that putting the Tax Cuts expiration right smack in the middle of the 2012 elections is about as a bonehead move as it could possibly be.

    Once again, it's a win-win for the GOP.. If the economy DOES recover, the GOP can claim it was because of the tax-cuts that the DP fought against tooth-nail... If the economy doesn't recover, then the GOP can point to the Democrats in the Senate and the White House and say these guys are simply incapable of governing...

    And Joe SixPack will believe it...

    Really, the only way for Democrats to win in 2012 is to become Republicans. :D

    On a happier note! :D

    Glad ta see the Fund Drive went past the halfway point!! Woooot!!!! :D


  3. [3] 
    akadjian wrote:

    Past the halfway point on the fundraiser! That's great to hear.

    As for the "deal", I'm going to take a deep breath and try not to have a knee-jerk reaction to this one.

    Similar to health care, I think the larger damage comes from this very simple premise:

    I don't see what the principles are driving this compromise. Other than possibly pragmatics.

    When Democrats passed health care, I felt that they'd abandoned their principles to reach a compromise. And I think this is what hurt them in the election.

    Here, it's the same thing. I can't figure out what Obama stands for. Other than compromise. This is what I feel the Obama administration lacks.

    Ask anyone to identify what principle Obama is acting on and I think you'll get a lot of confused looks. At this point in his tenure, I have no idea.

    This is not exactly a good characteristic for a leader. It makes it hard to support him and hurts the Democratic party overall when they're always forced to compromise their principles.

    I'm a big proponent of compromise, but there are ways to do this while still standing on principle.

    In 2008, he stood for something. Now, who knows?


  4. [4] 
    Americulchie wrote:

    What will be interesting is to see if the rabid right wing will queer this deal.There are too many loose cannons in the de facto right wing coalition not to screw it up.Personally speaking i would have happily gone in with Obama if he had chosen to let the taxes expire.I am just hoping that Jerry Brown will be available for a 2012 draft.I await further developments.

  5. [5] 
    Michale wrote:

    What will be interesting is to see if the rabid right wing will queer this deal.

    What about the rabid Left Wing?? :D

    Personally speaking i would have happily gone in with Obama if he had chosen to let the taxes expire.

    Which would have all but guaranteed a Republican President and Congress in 2012.. :D


  6. [6] 
    Michale wrote:

    Interesting question for ya'all...

    If the election were held today, would you vote for Obama or Romney for President??

    Just curious...


  7. [7] 
    akadjian wrote:

    It's an interesting coalition that seems to be against the deal. Jim DeMint, Bernie Sanders, and George Voinovich from the Senate. DeMint has threatened to filibuster - though I'm not sure if this is anything more than idle.

    What's interesting about it is that I think you're right that the Republicans risk the wrath of a lot of Tea Party folks if they pass this deal. Though I think they're banking on being able to control the Tea Party.

    Sometimes thinking about the politics of it boggles my mind. Why are we even talking about tax cuts for the rich during this recession?

    If the election were held today, would you vote for Obama or Romney for President?

    I personally would rather have Sarah Palin in there myself ... ;)

  8. [8] 
    Michale wrote:

    I personally would rather have Sarah Palin in there myself ... ;)

    Now yer just teasing me... :D


  9. [9] 
    Michale wrote:

    Funniest to date... :D

    The average insurgency, the foreign policy experts say, lasts about ten years. The average liberal rebellion against Obama appears to last about a day. The crumbling began early in the day Wednesday, when Sen. Jim Webb (D-Va.) issued a statement calling the tax deal "the ultimate stimulus plan."


  10. [10] 
    Michale wrote:

    What a difference an election makes... :D

    Now it's the DEMOCRATS who are the "Party Of No".. :D

    House Democrats Reject Tax Plan Unless Changed


  11. [11] 
    Michale wrote:

    "Fuck the President!!!"
    -Unknown Democrat CongressCritter


    Just... WOW..


  12. [12] 
    Michale wrote:

    Interesting article from Noonan..

    Hard to argue the logic.. I don't think the Democratic Party has a snowball's chance in hell of being relevant in 2012


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