the national interest

Obama Waking Up From Dream of Grand Bargain

US President Barack Obama speaks on the fiscal cliff on December 21, 2012 in the Brady Briefing Room of the White House in Washington, DC. Obama urged the US Congress to pass scaled-back package to avert tax increases and spending cuts that will take effect in the new year.
Photo: MANDEL NGAN/AFP/Getty Images

Call me a hopeless optimist,” said President Obama at his press conference tonight, in which he pleaded for Republicans to join him in averting the “fiscal cliff,” “but I still think we can get this done.”

Okay. You’re a hopeless optimist, President Obama.

It is of course difficult to separate the genuine strategic beliefs of this administration from its attempts to spin journalists and the public, but it seems that, in the last few weeks, Obama reverted at least a bit to his 2011 mentality, when he thought that the force of reason would compel House Republicans to compromise with him. After that failure, Obama rearranged his strategy around using the force of public opinion and the leverage of the fiscal cliff to pry out of Republicans what he seemed to realize they would never surrender.

In recent weeks, Obama seems to have concluded that Republicans have come around, and that it is time to sit down and hash out a deal like reasonable people. He moved his position more than halfway toward Boehner’s. Democrats in Congress are, incredibly, discussing the option of compromising even more.

But reasonable compromise to avert the fiscal cliff is impossible. Republicans, as a whole, don’t even seem capable of linear thinking about the budget. They don’t know what they actually want on spending. They don’t understand why Obama wants more revenue or what role this would play in the broader fiscal picture. They don’t even seem capable of politically organizing in a way that maximizes their fanatic principles. The House Republican caucus is simply a teeming pit of revanchist anger.

Obama’s remarks today indicate an apparent acceptance of the dynamic and a desire to at least steer the process toward minimizing the economic harm that would result if the contractionary policies scheduled for next year take effect. Obama is again demanding a tax cut for income under $250,000 a year, along with canceling out some of the more punitive spending cuts. He can get that if he holds absolutely firm on his income threshold. Unfortunately, his offer to Boehner confused the matter. Obama offered to lift the tax hike level to $400,000 a year. Now, he was proposing to make up the revenue through reducing tax exemptions, so he really changed only the delivery system for higher taxes rather than the end result, but this fact has gotten confused in the reporting, and Obama needs to re-solidify it. (In his press conference, he didn’t.)

Then you have the automatic spending cuts. The key to these cuts is that they disproportionately impact the defense industry and medical providers, two large segments that have a lot of sway with the GOP. Republicans will fold on these cuts if Obama maintains steady pressure. If they want to use these cuts to reduce the deficit in an agreed-upon way, then Obama can trade tax revenue — on top of the revenue from phasing out the high-end Bush tax cuts — for cuts Republicans can accept. I suspect Republicans don’t actually care very much about spending cuts, and certainly not enough to accept more revenue from the rich.

You can see in the Democratic side a persistent good-government impulse, one that finds the GOP’s inability to even advance its own interests rationally as a troublesome failure of government for which they themselves ultimately share responsibility. It’s true that a smarter, better organized Republican party would be easier to deal with. But the GOP remains dysfunctional and apparently bent on self-immolation. The only question for Obama is whether he wants to allow Republicans to turn this fact to their advantage, or whether he is willing to disengage and let them burn out on their own rage.

Obama Waking Up From Dream of Grand Bargain