death and taxes

Heilemann: Why the Tax Fight Is Obama’s Pivotal Moment

We in the media are admittedly given to hyperbole, but it’s no exaggeration to say that this week — and especially the past 24 hours — is shaping up to be a pivotal moment in the arc of the Obama presidency.

For more than a month since the “shellacking” administered by the Republicans to the Democrats in the midterms, the White House has seemed adrift, with no clear strategy, no effective tactics, and no evident answer to the central question facing the administration: What now?

For better or worse, that period of lassitude is over. In terms of both policy and politics, the White House has embarked on a dramatically new path. Much of the left is furious. Democrats in Congress are no less so. And some conservative Republicans are threatening to revolt, alongside their liberal foes, against what Senator Mary Landrieu yesterday decried as the “Obama-McConnell plan” on taxes. At this hour, whether the deal will survive or not is an open question — though I suspect it will, in something close to its current form.

The conservative objections to the plan, voiced by the Club for Growth and ultra-con Republican senator Jim DeMint, are that it (a) fails to extend the Bush tax cuts forever and (b) “blow[s] a hole in the deficit,” as the Club president, Chris Chocola, put it. The inherent contradiction between these complaints is so obvious that it renders them too absurd to merit further comment.

The liberal objections to the plan are mainly political, but on substance they are focused on the cost of extending the tax cuts to Americans making more than $250,000 a year and the estate tax: $125 billion combined. Even by the fiscally debased and debauched standards of Washington, that’s not chump change, especially at a time of dangerously mounting deficits. But it’s small beer compared to the parts of the package that Democrats favor: $360 billion in income-tax cuts for those earning under $250K, $56 billion in unemployment insurance, and more than $350 billion in tax goodies that Obama championed — from payroll-tax cuts, the Child Tax Credit, the Earned Income Tax Credit, education tax credits, and business-investment tax incentives.

As David Leonhardt wrote in this morning’s Times, the deal amounts to a trade: Republicans get tax cuts for the rich, and the broader economy gets what amounts to a second stimulus worth hundreds of billions of dollars more — the kind of stimulus that Republicans resisted for the past year and that seemed inconceivable even two weeks ago. This is why left-leaning policy wonks such as Robert Greenstein of the Center on Budget and Policy Priorities and Larry Mishel of the Economic Policy Institute support the deal, despite objecting (rightly) to the high-bracket tax cuts. And it’s one reason that congressional Democrats should shut up and support it, too.

But it’s not the only reason. An equally substantial one is that they are primarily to blame for putting Obama in the position where he had to make the trade he did. Although the White House didn’t push the matter hard, the president is correct when he says that he preferred to see Congress deal with the tax-cut extension issue in the fall, before the midterms, in which all but certain Republican gains might rob him of his negotiating leverage (as they did). Congressional Democrats, however, were fearful of taking a controversial tax vote in the heat of an election season. Out of sheer cowardice, they postponed that vote until the lame-duck session — and now they are whining about an unpalatable situation of their own creation. So again, I say, shut up.

What makes the moaning of congressional liberals more intolerable is they proffer no plausible alternative endgame. To the extent that they proffer one at all, it seems to rest on the idea that if Congress were to simply let all the Bush tax cuts expire, the president, having now drawn “a line in the sand,” could then sit down after the new year with Republicans — now holding a majority in the House — and negotiate a better deal.

This argument is not only hair-curlingly ludicrous on its face, but it contains within it a deep internal contradiction. One consistent strain of contention on the left has been that Republicans are so intent on making Obama a one-term president that they’re willing to crash the economy to do it, and so callous that they don’t give a shit about allowing unemployment benefits to expire. But if that’s the case, what on earth would bring them back to the table early next year in a mood to give Obama the stimulus he wants (and the economy he needs) without demanding the same things (and almost certainly more) that they are demanding now?

The final reason that congressional Democrats should shut up is this: For nearly two years, a great many of them have complained that Obama has been focused on grand (too grand) attempts to reshape the foundations of the economy, as with health-care reform, while neglecting the short-term imperatives of a fragile economic recovery.

Well, it’s now clear that the administration is focused like a laser beam on the short term — on stimulus, on jobs, on the needs of the unemployed. And yet suddenly liberals in the House are fired up about deficit reduction? Please.

This short-term economic focus is the major substantive shift signaled by the White House this week. But even more dramatic is the political about-face that Obama is now apparently undertaking — and it’s this element of his course correction, not the tax-cut deal itself, that is the real reason why so many Democrats are up in arms.

In essence, what Obama’s news conference yesterday amounted to was a declaration that he is divorcing himself politically from the congressional wing of his party. On background, White House aides were thrilled with the performance, believing that it began the process of establishing their preferred leitmotif for the months ahead: that in a town full of petulant and posturing adolescents, the president will stand as the presiding adult.

That Obama’s putative allies in the House and Senate Democratic caucuses would object to being, in effect, cast as snotty children — as much or more so than Republicans! — is in no way surprising. But they should not be surprised either. For all the talk in recent weeks about how Obama should take a page from Bill Clinton’s post-1994 playbook — working with the GOP where possible, confronting the opposition where necessary — what’s often forgotten is the approach that WJC took toward congressional Democrats in 1995 and 1996. On budget balancing, on welfare reform, on civil liberties post–Oklahoma City, 42 flagrantly disregarded the views of congressional Democrats and progressive activists at every turn.

But Clinton’s tenor in doing so was rather more benign than the manner adopted by Obama at his presser. In the New York Post this morning, the conservative columnist John Podhoretz described his lecturing of the left and his likening of Republicans to “hostage-takers” as a “near-tantrum.” And though I wouldn’t go quite that far, the presidential peevishness on display was faintly breathtaking. (Whenever Obama lunges into media-critic mode — complaining about the relative play that the breakdown and then resolution of his South Korean trade talks received in the papers, knocking the editorial pages at both the Times and Wall Street Journal — you know he’s in a pissy mood.) The message he sought to convey, that compromise is not just a necessary element of governance but a virtue in its own right, is at once salutary, politically wise, and true to his essential character. But the aggravated tone was so distracting that the message was nearly lost.

It’s been clear for a while now that one of Obama’s greatest errors in the first two years of his term was tying himself too closely to the congressional Democratic leadership. Freeing himself from those shackles is necessary, but it’s insufficient to lead to his revival.

If he is going to position himself as Washington’s last adult standing, he will need to be bigger, showing more equanimity and less irritation than he did yesterday. And if he is going to climb up on top of Casa Blanca and urinate all over congressional Democrats, he will need to learn the trick that Bill Clinton mastered: doing it with such big bright smile that they mistake his piss for Champagne.

Heilemann: Why the Tax Fight Is Obama’s Pivotal Moment