Inside Obama’s Tax Cut Gamble
Liberals are furious over the White House decision to extend all the Bush tax cuts. But behind the scenes, Obama pushed Democrats for a better way. Howard Kurtz on the president’s frustrations.
As he inched his way toward a compromise that would infuriate his most liberal supporters, President Obama challenged leading Democrats in Congress to find a better alternative.
“What’s your plan?” he asked at one meeting.
In a series of Oval Office and Roosevelt Room gatherings with such key Democrats as Nancy Pelosi and Harry Reid—joined at various times by Vice President Biden, Treasury Secretary Timothy Geithner and Budget Director Jack Lew—Obama repeatedly steered the discussion toward economics and the dangers of delay.
Unemployment was close to 10 percent, not 6 percent, Obama would say in his serious and sober style. Are we going to get a better deal from John Boehner’s House? Can we get it done by January or February? How do you know the maneuvering won’t drag on until spring? What is your strategy? “Can I really take the gamble?” he asked.
Whatever the substantive case for the compromise, Obama’s decision—and his exasperated defense of the art of the possible at Tuesday’s news conference—made clear that he is steamed at elements in his own party as well as the press. The move signaled that whatever the level of vitriol, he is not going to change his measured, let-us-reason-together approach to the presidency, not even when a partisan brawl would make his supporters feel immeasurably better.
Knowledgeable sources—who described how Obama became convinced that the Democrats couldn’t deliver something better—obviously want to portray a president motivated by principle. But the financial team was truly concerned about allowing an average tax hike of $3,000 in an anemic economy.
“There is no desire to triangulate or distance ourselves from Democrats,” a senior administration official said. “We’d prefer to get 100 percent of their support. The president’s just trying to do the best possible for the economy under divided government.”
“There is no desire to triangulate or distance ourselves from Democrats,” a senior administration official said. “The president’s just trying to do the best possible for the economy under divided government.”
Privately, Obama has expressed frustration that the liberal side— his side—has spent so much time sniping at him over the past year. The president, who reads several newspapers a day, believes the press has not adequately credited his accomplishments because it is obsessed with the day-to-day spin cycle.
These normally suppressed feelings burst into view when Wall Street Journal reporter Jonathan Weisman asked the president about his “core values” and what he would “go to the mat on.”
Obama pushed back hard, saying he had passed a health-care measure “that Democrats have been fighting for for a hundred years,” but because it didn’t contain a public option that would have benefited perhaps 2 million people, his liberal detractors considered that “a sign of weakness and compromise.” It was all well and good for Democrats to dig in and feel “sanctimonious about how pure our intentions are,” but without some kind of dealmaking, they “will have the satisfaction of having a purist position and no victories for the American people.”
• Kirsten Powers: Obama’s Morality Problem• Randall Lane: Obama’s Poker Club Tells All Administration officials concede that their deal with the GOP leadership—which some congressional Democrats are loudly assailing—is a hold-your-nose proposition. They especially detest the lower estate-tax rate they had to swallow, which they expect will funnel an additional $12 billion a year to the richest of rich families. But they fervently believe they extracted important concessions beyond another 13 months of jobless benefits: a payroll-tax reduction and a continuation of the Earned Income Tax Credit, which provides refunds to the working poor and which most Republicans view as thinly disguised welfare.
On balance, Obama told his aides, it would be irresponsible to play chicken with the economy and treat millions of Americans as collateral damage. The problem, of course, is that the tax deal was a “ read my lips” moment in reverse for Obama. He campaigned on ending the Bush tax breaks for families earning more than $250,000, and repeated that vow throughout his tenure—only to trade it away this week. He declined to follow the Chuck Schumer approach of refusing to extend the tax breaks for millionaires and taking the fight into the new Congress, daring the Republicans to defend that position and pressuring them to reverse the automatic tax hike that would take effect on New Year’s Day.
The White House view is that congressional Democrats would have ultimately caved, leaving Obama with an embarrassing loss after he had raised the stakes. David Axelrod said Wednesday that the administration decided not to “play Russian roulette with people’s lives” for the sake of—switching metaphors here—staging “a kind of kabuki dance for a while longer in order to exact some political advantage that might risk having people’s taxes go up January 1st.” Left unspoken was the suggestion that while other Democrats preferred political games, Obama was acting as the centrist defender of the middle class.
Economic adviser Larry Summers provided the scary music, telling reporters that failure to reach an agreement “would materially increase the risk that the economy would stall out and we would have a double-dip,” as in a second recession.
But how did things reach this desperate moment? Some administration officials acknowledge they allowed the opposition to box them in by failing to push something through before the election; others say they simply lacked the requisite 60 votes in the Senate. Whatever the cause, they knew they would pay a price with a liberal base that already views Obama as an indifferent leader who refuses to stand up to Republican obstructionists.
MSNBC’s Keith Olbermann, for one, did not disappoint. “Mr. President, for these meager crumbs, you have given up costly, insulting, divisive, destructive tax cuts for the rich, and you have given in to Republican blackmail, which will be followed by more Republican blackmail… It is not disloyalty to the Democratic Party to tell a Democratic president he is wrong,” he declared. “It is not disloyalty to tell him he is goddamned wrong.”
Obama, who has criticized the Beltway media as an “echo chamber” and likened cable news to “WWF wrestling,” sees himself as operating on a higher plane.
“Not everybody agrees with us,” he reminded his side Tuesday. “I know that shocks people. The New York Times editorial page does not permeate across all of America. Neither does The Wall Street Journal editorial page.”
But it seems fair to say they permeate his thinking, and past slights have not been forgotten. When Obama was struggling to negotiate a South Korean free-trade agreement, “I remember a story above the fold.” When he got the deal, “the story was sort of below the fold.” This is a president who worries about front-page placement.
By one measure, Obama’s aides feel vindicated: The major forecasting firms have upped their economic-growth estimates by as much as a full percentage point.
But leadership is more than an assemblage of intellectually correct positions. Abolishing costly tax breaks for the affluent—remember all that high-minded talk about cutting the deficit?—has been a fundamental Obama theme from the day he declared his candidacy. He has a troubling tendency to let debates spin out of control before stepping in at the eleventh hour to offer a reasonable-sounding compromise, angering the liberals who were fighting for what they thought was his bedrock position. And in this case, Obama folded on an issue where polls show a majority of Americans already agree with him.
The gamble might succeed; if the economy improves, most voters aren’t likely to be terribly ticked off that their taxes didn’t go up. But Obama’s liberal loyalists are left wondering whether their man can truly draw any lines in the sand that aren’t eventually eroded by the dusty swirl of compromise.
Howard Kurtz is The Daily Beast's Washington bureau chief. He also hosts CNN's weekly media program Reliable Sources on Sundays at 11 a.m. ET. The longtime media reporter and columnist for The Washington Post, Kurtz is the author of five books.