I thought these officials were insane. Sometimes I suggested as much. In response they simply expressed spooky, disconcerting confidence that it would happen because, well, it had to happen. Obama and his chief advisers genuinely seemed not to grasp that the Republican Party had been organized for two decades as a fundamentalist anti-tax party—in particular, against taxes paid disproportionately by the affluent—which no appeal to reason, the national interest, or the sake of fiscal conservatism could possibly dislodge.
The administration pursued this credulous path for the first half of 2011, falling back to the limits of what the president could accept in good conscience, and then retreating further still. In private negotiations with House Speaker John Boehner, Obama offered a long-term debt-reduction deal that would have increased tax revenue by only $800 billion—just one fifth of the total deficit reduction needed. It was a remarkably, even stupidly generous offer. Two other bipartisan debt agreements, one by the debt commission chaired by Erskine Bowles and Alan Simpson, the other negotiated by two parties in the Senate, had settled on the neighborhood of $2 trillion in higher revenue. To Obama’s astonishment, Boehner turned down his deal anyway.
It was the nadir of Obama’s term. The spectacle of the United States government approaching the brink of debt default for no reason other than destructive partisanship shook business confidence and provoked S&P to downgrade American debt. Obama’s approval ratings sagged into the thirties, the lowest point of his presidency. His attempts to placate the right had disgusted liberals without any corresponding benefit in the center or on the right. For the first time in his presidency, it appeared plausible that Obama might fulfill Republican predictions that he would be another Jimmy Carter. Charles Krauthammer suggested he might suffer not only defeat but a “landslide.”
The effect of this episode seems somewhat akin to the punch to the jaw Michael Corleone took from the corrupt police officer Captain McCluskey. Obama stopped constructing his strategy around the premise that he could win Republican support—which is to say, he stopped trying to pass laws through Congress. In September, he unveiled his classically Keynesian jobs plan of public investment and middle-class tax cuts, knowing full well Republicans would reject it. In December, he delivered an address in Osawatomie, Kansas, laying out his vision of government, which was largely an argument against the Republican anti-tax jihad. Low taxes for the rich, he argued, had made the country less equal without making it more prosperous and starved the public sector of investments needed to help spread economic opportunity.
In one form or another, Obama has repeated the themes from his Osawatomie speech throughout the campaign. The campaign itself is essentially an extension of his failed negotiations with the House GOP. Obama wanted to strike a deal with Republicans but, having failed, he took his case to the public, calculating that the uncompromising stance Republicans had clung to behind closed doors would prove politically fatal to them if defended in the open.
Obama may have abandoned his attempts at progress through compromise, but he is pursuing progress through other means. Administration officials no longer say that they can cajole Republicans into agreeing to raise tax revenue through negotiation. Instead, they understand something important, something that has not quite sunk in with wary liberals, obstinate conservatives, or split-the-difference deficit scolds: They no longer have to.
The odd thing about the debt-ceiling debacle is that the deal Obama tried to cut with Republicans may have been absurdly generous, but the deal he actually got was pretty favorable. It required the establishment of a bipartisan commission that had to agree to $1.5 trillion worth of reductions—which, of course, it could not, for the same reason every other bipartisan deficit negotiation failed—or else automatic cuts would take place in 2013. Because Republicans refused to allow higher revenue to make up any part of those cuts, and insisted all the automatic deficit reduction consist of lower spending, Obama made his own demand: that he have a greater say in what kind of spending would suffer cuts. Social Security and Medicare benefits were exempted, though cuts to Medicare providers were not. Programs that benefit the poor were likewise spared, but defense absorbed a huge proportion of the automatic cuts.
The idea was to turn the Republican coalition against itself. As the clock ticked toward January, doctors, hospitals, and—most especially—defense contractors would be confronted with terrifyingly large reductions in their income stream. Voiding those cuts would require convincing Obama to sign a law undoing them, which he would not do unless the replacement plan met his definition of fairness, which meant including higher tax revenue from the rich. This has had precisely its intended effect. Executives and lobbyists have begun to beseech Republicans to accept a budget deal that includes higher revenue along with lower spending. Republican defense hawks like John McCain and Lindsey Graham have signed a letter calling for a “balanced bipartisan deficit reduction package,” which is Beltway code for a deal mixing taxes and spending.