As a candidate for president in 2008 (and on many occasions since), Barack Obama assured Americans that he was committed to letting George W. Bush's tax cuts for the wealthiest Americans expire as scheduled at the end of 2010. And yet, there he was this past Tuesday announcing that he'd cut a deal with Republican leaders to extend the rates for another two years -- and telling outraged liberals that they were being unrealistic in their demand that he fight on instead of compromising.
Classic case of a president turning his back the people who elected him (not to mention a central campaign pledge), right? Well, it depends how you look at it. Senior writer Andrew Leonard, who believes Obama folded far too soon, and politics editor Steve Kornacki, who thinks the deal is actually pretty reasonable, discuss their conflicting interpretations in an instant messenger conversation:
Steve Kornacki: I guess I should start by warning you: I've already received several dozen e-mails this week calling me an Obama apologist (well, that's the printable version). So if you want to call me names for saying this is a reasonable compromise, you'll have to do better than that.
Andrew Leonard: Well I guess my first question would be how do we know that this is a "reasonable" compromise. I think the biggest problem that progressives have with Obama is that they don't think he's getting the best deal possible because he starts by conceding too much. Why not threaten to veto any legislation that has a tax hike for the rich in it and see if you can get a better deal? For my own part, I spent the better part of the last two years defending Obama's reasonable compromises, but the pattern has gotten too obvious to ignore. Obama starts in the middle and then gets pushed to the right. He hasn't established himself as someone who can draw a line in the sand, and that really seems to be contributing to Republican momentum on just about every issue.
SK: But I don't think he had much leverage on this one -- at least not at this point. Sure, he could say on January 1 that Republicans had just caused taxes to go up on everyone because of their insistence on helping millionaires. But the GOP would be able to say that it was Obama's fault for being blindly dedicated to raising taxes during a time of recession (and on small business owners too!). I know the idea of taxing the wealthy, in the abstract, polls well. But in a climate like this, with unemployment stalled near 10 percent, swing voters are looking for reasons to blame the president. So they'd side with the GOP's version, and Obama would then be forced to extend the tax cuts anyway -- without the extra goodies he was able to extract now. Or, if he somehow forced the GOP to budge a little, he still wouldn't get the extra stimulus he managed to get with this one. I think getting an unexpected stimulus is the most important part of this, by far.
AL: I think you're right on that point -- the interpretation of this deal as the best economic stimulus package that could be extricated out of the current political status quo is the strongest argument that can be made for it. And it is true, Obama was always faced with the tough rhetorical challenge of explaining why it would be OK to raise some taxes in a really bad economy. But there are some big problems with your argument. First, tax cuts for the rich make for terrible stimulus -- the rich tend to save their money instead of spend it. Second, the "small business" scare tactic is basically bogus. Only a fraction of the small business owners in the U.S. would be affected by rising taxes, and it is not at all clear that small business owners make their hiring decisions based on tax policy -- they hire people to meet rising demand. Swing voters may be looking to blame someone for high unemployment, but how hard is it to make the case that: hey, we are going to raise taxes on the rich back to where they were during the Clinton years, when the economy boomed, and use that cash to pay for unemployment benefits and a payroll tax cut that puts cash directly in the hands of people who need it and will spend it. That is a compelling argument that the polling consistently supports. We should have heard more of it. And sure, I understand the idea that the swing vote makes or breaks elections. But you also need to give your a base a reason to come out and vote.
SK: Don't get me wrong -- I'm not actually saying the GOP line about small business is valid. And I willingly concede that, as best I can tell, there's absolutely no stimulative value in maintaining the Bush era rates for the wealthy. My only point is that those arguments will, nonetheless, carry the day in this climate. Remember when the Clinton rates were put in place back in '93? The wealthiest 1.8 percent of Americans saw their income taxes rise -- but that's not how swing voters saw it. Overwhelmingly, they believed their taxes had been raised. Why? Because the climate made them receptive to GOP rhetoric. The way I see it, Obama made two promises on the Bush tax cuts in his '08 campaign: (1) To end them for the wealthiest Americans; and (2) to keep them going for the middle class. Once things got to this point, he was going to have to break at least one of those pledges, no matter what. So he chose the option that kept them going for the middle class and that gave him a chance to improve the economy enough to the point where he could actually win a message war with the GOP -- over taxes or anything else.
AL: You write: "Once things got to this point." And right there you open up another can of worms, because I think people can rightfully ask, how in the world did it get to this point? Why is a lame-duck legislative session dealing with this when the point at which Democrats clearly would have enjoyed their greatest leverage was before the election? I just can't imagine a Bill Clinton or a Lyndon Johnson ever bungling the political process like that. I'm not saying it would have turned the election around -- and maybe Republican party discipline is so strong that it wouldn't have made a practical difference -- but it sure seems like if you're going to try the gambit of painting Republicans as wedded, beyond anything else, to handing out millions to the wealthiest Americans, that you do it at a point where you can actually campaign on it, rather than waiting until after the election, where no one has anything left to lose. Now, I won't be mean and call you an Obama apologist, because I know exactly how that stings, but I will say that the argument that says essentially, this is the best we can do in this climate, that even though Republican rhetoric is fundamentally false, it will still win, feels a little defeatist. We can't win on the merits, so we'll settle for what scraps we can dig up. It's kind of unfathomable that a party with significant majorities in both the House and the Senate and ownership of the White House has been reduced to that sad state.
SK: But I wouldn't call this scraps. If you had said at any point of 2010 -- especially after the midterms -- that Obama would by the end of the year get $300 billion of stimulus through Congress with Republican support, you would have been laughed at.
AL: Maybe. But who gets the last laugh? We have a bunch of new tax cuts -- some of which are supposedly "temporary." But we've just seen all too clearly how permanent "temporary" tax cuts become. So what happens when the payroll tax, which funds Social Security, keeps getting extended. How do we pay for Social Security. The tax cut for the rich will cost $700 billion over 10 years. How do we pay for that. We've got a big fight coming up over extending the debt ceiling, and a lot of people expect the Republicans default position to be -- if you want us to extend the debt ceiling, you are going to have to slash entitlement spending. This is the trap you get into when tax cuts are your stimulus. Of course Republicans will support additional tax cuts -- it plays right into the the old starve-the-beast argument. I will grant you, tax cuts as stimulus in the current economy is probably better than no tax cuts at all, and it was a true victory to get the unemployment benefit extension, but the true reckoning on all this has been postponed. And there doesn't seem to be much confidence on the Democratic side of the aisle that when that next fight comes along, this White House will be ready. I don't disagree with you that in many ways Obama simply recognized reality and got a better deal than a lot of people expected. But the cumulative effect of how the health care negotiations and bank reform -- not to mention the original stimulus bill played out is that, as I said at the beginning, Obama started out conceding too much. Where will the battle lines be drawn a few months from now when the debt ceiling war is in full effect?
SK: Yeah, I keep hearing the Social Security argument. In fact, we ran a piece on it on Friday, from Julian Zelizer. My read is that the concern is understandable but overstated. I mean, yes, we've been funding Social Security through the payroll tax, but ... so what? If we move away from that and start using general fund revenue, I still think it will be protected because it's a popular program. There may be Republicans who want to do away with it -- like Paul Ryan. But what's most striking about Ryan and his plan is how few of his fellow Republicans have signed on. Remember when the GOP went after Medicare in 1995? They thought the public was on their side, because they did it in the name of cutting the deficit and balancing the budget, both of which were polling well back then. But the public sided with the Democrats because the public liked Medicare. If the GOP were to force a fight over Social Security in the near future, I say the same thing happens. And anyway, the payroll tax is regressive. It's good to be cutting it.
AL: Uh oh. I don't think I can argue with your last paragraph. So let me switch tacks completely. As we've been chatting, Sen. Bernie Sanders is into his eighth hour of an amazing filibuster on the Senate floor. He's not reading phone books either. He is delivering an extraordinary critique of U.S. economic policy, and it has become an instant social media phenomenon. Twitter and Facebook are blowing up. And a lot of people are excited because they feel like someone is speaking truth to power with great passion. And back in 2008, a lot of people got similarly excited at Obama's rhetoric -- and need I remind you that his pledge to end tax hikes for the rich was a big part of his platform. The people who voted for Obama have been missing that sense of excitement, and a lot of them just don't feel that he is fighting for their interests as hard as one might have expected him too. I'm prepared to admit that, practically speaking, Obama did the best thing the could do for the economy with this deal, and since getting the economy going is critical for his own and every other Democrat's prospects in 2012, that is clearly a defensible move. But it's not inspiring. And if you want to lead, if you want to prevail in the battles of the future, part of your job has to be inspire. When FDR was running for reelection, he made that famous quote about welcoming the enmity of Wall Street and the banks. He made clear whose side he was on. Obama has got to do more of that.
SK: Well, in the spirit of the week, I think we have some common ground here: I completely agree that there's wasn't much inspiring about this deal. I just think it was the best deal he could get, and because of that, he was right to take it.
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