President Obama clearly won the fiscal cliff skirmish on Tuesday as he faced down the Republicans, forcing them despite years of fervent promises to raise tax rates on the wealthy. But he also made concessions over New Year’s weekend that could weaken his hand in future battles.
Beating back a conservative revolt in his party, Speaker John Boehner brought to the House floor the compromise bill passed in a predawn session in the Senate. The bill passed late Tuesday night, with Nancy Pelosi’s Democrats providing 172 votes, enough to offset substantial Republican defections. Eighty-five Republicans voted for the bill.
The measure will restore the Bush tax cuts for individuals making less than $400,000 and families under $450,000 a year, while also extending unemployment insurance for a year and reviving an inheritance tax exemption for estates under $5 million.
During several tense hours, with Majority Leader Eric Cantor opposing his own speaker, it appeared the House would amend the bill to include $300 billion in spending cuts—which, if it had passed, would have required further negotiations with the Senate that probably would have run out the clock. But the leadership decided to stick with the “clean” version, knowing full well that Democrats would get the ball across the finish line.
At the same time, Obama has left some in his party disaffected as well. By raising the income threshold at which higher taxes kick in from $250,000 to $400,000, the president did more than back off his constantly repeated campaign vow. He gave away a huge amount of future revenue that will make it more difficult to fund the entitlement and social programs dear to Democratic hearts.
Obama also signaled that when push comes to shove, when the final deadline is at hand, he will retreat from his line-in-the-sand position, although the White House would call it reasonable compromise that spared most people a nasty tax hike.
Still, this was his moment of greatest political leverage. And now that the messy and embarrassing slog over the tax issue has been resolved, the playing field will be more favorable to Republicans in 2013. The administration has little left to trade now that the debate will focus on the $110 billion in automatic spending cuts that Tuesday’s voting delayed for two months.
Even more troublesome, from the White House point of view, is that Republicans can again play the debt ceiling card, as they did in the summer of 2011. The threat of a government default in late February will bring enormous pressure on the president to reach an accommodation on spending cuts, just as the fiscal cliff essentially forced the Republicans to sacrifice wealthier taxpayers to avoid blame for higher levies on 98 percent of Americans.
After the House vote, Obama served notice that he does not want to be drawn into another game of fiscal chicken over the debt ceiling. "While I will negotiate over many things," he said, "I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed."
That, at least, is his stated position. But it is hard to imagine the Democrats sticking to that stance if the government’s ability to borrow is on the line. The political approach of blaming the GOP for a default might be tempting, but Obama would share responsibility for a credit downgrade that could rattle the markets and likely push the country into recession.
The threat of a government default in late February will bring enormous pressure on the president to reach an accommodation on spending cuts.
Of course, many Republicans aren’t going to want to jump over that cliff—a real one, as opposed to the artificial crisis that Congress created this time—but the party is in such disarray at the moment that anything is possible.
The White House wasn’t shy about declaring victory after the Senate’s 2 a.m. vote, saying “the president achieved a bipartisan solution that keeps income taxes low for the middle class and grows the economy,” while also providing “significant new revenue”—about $60 billion for this year.
But since the coming weeks and perhaps months will now be devoted to the next round of the budget battle, another problem for the president is that this could encroach on his second-term agenda.
In the afterglow of his reelection victory, Obama talked about making a serious push for immigration reform just as some Republicans were softening their opposition to a path toward citizenship for illegal immigrants. He also spoke of mounting an effort on climate change. And in the wake of the Newtown school massacre, the president promised to lead a legislative effort on gun control.
Yet he will need Republican support if any of those initiatives are to become reality. And a constant state of warfare over budget battles will make it hard to enlist Boehner’s cooperation—without which Obama could be left without a signature second-term achievement.
One White House figure who emerges with enhanced stature from the budget mess is Joe Biden. Called off the bench when the action shifted to the Senate, the vice president showed a deft hand—and the experience of growing up in that institution—in quickly hammering out a deal with Minority Leader Mitch McConnell.
If Biden, who is 70, decides to run for Obama’s job in 2016, such performances could more than offset his reputation for shooting from the lip.
It was also striking that the eight senators who voted against the fiscal cliff legislation included Marco Rubio and Rand Paul, both of whom have 2016 ambitions. They can now campaign as ardent opponents of tax hikes even as their fellow Republicans helped avert a tax boost on the vast majority of Americans.
For Obama—who couldn’t help observing the other day that he’ll be president for four more years—the best outcome would be a more businesslike relationship with Republicans without the down-to-the-wire histrionics. But when it comes to dealing with the opposition, nothing seems to come easy for this president.