The main task before President Obama now is to yank the debate over taxes and spending back from the far right, where it has lingered for the last two years, and toward the center. He has to demonstrate that the dynamic that held in 2011, when Republicans could wrench concessions out of him by holding the economy hostage, has been replaced by a new one in which the Republicans’ gun is aimed at themselves.
So far it’s working. One indication of his success comes from the slow sense of dread enveloping the Wall Street Journal editorial page.
The Journal editorial page invented supply-side economics more than 30 years ago, and it remains the ideological headquarters of I’d-rather-cut-off-my-testicles-than-raise-taxes-on-the-rich conservatism. Today’s Journal editorial complains that Obama is demanding more revenue than he was asking from Boehner in last summer’s debt-ceiling hostage negotiation. Why is Obama taking such a tough line? The Journal speculates:
He really doesn't care if there's a budget deal this year that avoids the tax cliff.
By taking an absolutist line, he's basically gambling that Republicans will be more reasonable than he is and will blink. But if they don't blink and we go over the cliff, from his point of view so what? Mr. Obama then has an excuse to blame Republicans if there's another recession. Meanwhile, he pockets the higher tax rates that take effect on January 1 anyway, and he can then negotiate a budget deal next year without having to make any tax concessions.
Well — pretty much, yeah. Now, Obama is demanding less revenue than the Simpson-Bowles commission came up with, so while he’s upping his demands, it’s hardly “absolutist.” And the Journal is likely wrong about its prediction that going into January will create a “recession.” (Neil Irwin makes a worst case scenario argument that going into January will panic the markets, but market panics can be reversed and don’t usually trigger recessions.) But the Journal’s basic grasp of the negotiating dynamic here is pretty sound. If January arrives, Obama is going to be demanding that Congress pass a middle-class tax cut, which is popular, and Republicans will be refusing because they insist on appending it to an upper-class tax cut, which is unpopular, while the markets melt down. That is probably not going to end well for the GOP.
Compare the Journal’s current supplicatory tone with the overbearing confidence it has previously displayed. When House Republicans in 2011 really started to play chicken by demanding massive spending cuts or else the debt ceiling would get it, the Journal cheered them on. Later that summer, when Obama offered Boehner a deal with just $800 billion in higher revenue, along with lower tax rates, the Journal urged Boehner to turn it down.
But the revenue Obama asked for in that deal was not just a trade for the spending cuts he offered up. It was also an insurance policy for the GOP. The Bush tax cuts were scheduled to expire at the end of the next year, and if Obama won reelection, he would have an awful lot of leverage over the Republicans when that happened. Republicans could have made a small deposit to insure against that risk, but making that deal would have meant accepting slightly higher taxes, and also would (as Paul Ryan and other conservatives calculated) help Obama win reelection by defusing the deficit as an issue and handing him a bipartisan accomplishment. So they decided not to buy that insurance policy.
Now Republicans are like the man who didn’t pay his voluntary fee to the local fire department and then, when his house went up in flames, frantically offered to pay it. Too late! And also a bit late to start complaining that Obama is being unreasonable.