Obama risks overplaying his hand
So far the post-election politics in Washington are looking a lot like the pre-election politics, and at this point President Obama shares the bulk of the blame.
The fiscal cliff, a kick-the-can-down-the-road construction caused by a past impasse between the White House and the Republicans who control the House, is an opportunity. Both sides should be motivated to avoid the across-the-board tax increases and large budget cuts that will result at year's end if the two sides cannot reach a compromise on fiscal policy. And while going over the cliff would mean a big reduction in deficit projections, tax increases that size combined with such a sharp and sudden decrease in federal spending could trigger another recession.
President Obama is correct to point out that tax policy was a central theme in the presidential campaign. He pledged to work towards letting the Bush-era tax cuts expire for those making $250,000 or more. His opponent wanted to double-down with more tax cuts, and offered vague promises of making up for the revenue loss by eliminating some tax deductions. President Obama won, and exit polling showed an even greater majority than elected him agreed with his tax policy.
With that victory, the president concludes he has the upper hand and is insisting that House Republicans endorse his policy by voting to extend the Bush-era tax cuts for those making $250,000 or less, while letting the tax break expire on the wealthy.
But he is in danger of overplaying his hand.
If he wants to help Republican House Speaker John Boehner peel off enough Republican votes to approve this tax increase on the wealthy, the president has to offer something in return. Most of the House Republicans will return when the new Congress begins its terms in January. And most won re-election by promising voters to hold the line on taxes and cut spending. For many their greatest political fear is facing a future Republican primary foe who takes them down for being too soft on tax policy and spending.
Some may be ready to support a tax increase if they can return to their districts and say it was part of a compromise reducing spending and improving the deficit outlook. But none, we suspect, will be willing to go back to their districts and say they caved on taxes, which is seemingly what the president is asking.
On Thursday, Treasury Secretary Tim Geithner met with Speaker Boehner and other Republican leaders to discuss the president's proposal. It reportedly contained $1 trillion in new tax revenues by raising taxes on the wealthy, $600 billion in additional revenue through tax reforms next year, $50 billion in spending for a quick public works stimulus program and extension, again, of unemployment benefits, with a $30 billion annual price tag.
Budget cuts? Those would be $400 billion in entitlement savings to come, details to be worked out later; hardly a concrete assurance or a major deficit reducer.
We agree with Speaker Boehner's assessment: "Despite claims that the president supports a balanced approach, Democrats have yet to get serious about real spending cuts."
Rather than staying in Washington and negotiating, the president headed out to essentially campaign, appearing in Pennsylvania to chide Republicans for their unwillingness to tax the wealthy. That theatrical "going to the people" approach didn't work before and it won't work now.
Perhaps this is only an opening gambit by the White House. Put down a hard line, show political confidence, and negotiate from a position of strength. But unless President Obama can get his own party to back some genuine entitlement reform, or other serious budget cutting measures, we cannot see how Speaker Boehner can play ball.
Alternatively, the president may be ready to go over the cliff and blame recalcitrant Republicans. Politically, it may work in the short term. But if President Obama wants to get his second term off to a good start, if he wants to boost business and consumer confidence and get the economy growing, he needs a deal.
Yes the Republicans have to bend because they lost; but breaking them? That goes too far.