A bitter fight has broken out between President Obama and Congressional liberals over the White House’s decision to extend tax cuts for upper-income brackets.
But Mr. Obama may have underestimated the potential damage of his about-face on extending the tax cuts. The 2008 campaign featured three Democratic front-runners — Mr. Obama, Hillary Clinton and John Edwards — and all solemnly pledged to end the Bush tax cuts for the richest Americans. Mr. Obama repeated his pledge after he won the nomination. “We are going to roll back the Bush tax cuts on the wealthiest Americans, those making more than $250,000 a year,” he told an audience in Lake Worth, Fla., just two weeks before the election.
“Obama has no historical perspective and forgets what breaking a basic tenet of one’s party can do to a president,” one prominent liberal said. “Breaking his ‘no new taxes’ pledge in the 1990s cost George H.W. Bush the affection of his party, encouraged a right-wing primary challenge from Pat Buchanan and damaged Bush in the general election.” He said the White House should fear that similar reactions may now damage Mr. Obama.
So far the White House hasn’t inspired confidence. Mr. Obama’s Tuesday press conference, in which he compared Republicans to “hostage-takers” and accused liberal Democrats of being “sanctimonious,” offended everyone. He has a huge amount riding on this compromise, so he has to do better.
Mr. Obama’s advisers are reportedly warning Democrats that allowing taxes to rise may cause a double-dip recession. The president can also warn them that it’ll be worse to settle this issue after Republicans take over the House in January.
If he fails, taxes will go up for every American on Jan. 1. If that happens, the new Congress would likely rectify the situation within days after being sworn in. The political damage to Mr. Obama would not be undone nearly as quickly. Failure to pass the tax compromise would make the president appear impotent. Confidence among Democrats would collapse. And there would be more challenges to Mr. Obama’s leadership from within his own party, perhaps even in the 2012 primaries.
Compared to ideal policy, the deal announced last night between congressional Republicans and President Obama is terrible.
Compared to what I expected to happen, the deal announced last night is pretty good.
To conclude, I’m not sure if this is good, bad, or ugly, but we get to do this all over again in 2012.
2012 is an election year in the US – depending on how that works out, we might be looking at a lame duck Senate and lame duck President hammering out a tax deal.