The so-called “fiscal cliff” has been temporarily averted, and the GOP has finally agreed to raise taxes on the very wealthy. But let us be clear; compared to the deal President Obama could have nabbed, this was no liberal victory.
Instead of the $250,000 tax-cut threshold that Obama campaigned on, we instead saw the threshhold fall somewhere between $250,000 and a disappointing $450,000, depending on the specific rate or benefit in question. We saw the dividend tax rate get largely spared as well, and saw the estate tax only start at a whopping $5 million. The finishing kick to the already limp body of Main Street was a refusal to extend payroll tax cuts for workers – the cut that perhaps most directly boosts consumer spending and economic growth.
A little fact that the media did mention (kudos to them), but probably not frequently enough, was that the Senate had already passed a bill before the election to raise taxes for incomes over $250,000. Congress already had a bill in consideration that would have raised more revenue than the final proposal.
So what happened? It appears that Mr. Obama lost sight of the bigger picture of fiscal cliff negotiations. As Paul Krugman noted in his blog (calling Obama “wimpy” in the process), the cuts and tax hikes consolidated in the cliff will not take effect immediately. The deadline, therefore, was artificial; Obama could have matched the Republicans in their game of brinksmanship, driven America over the cliff, and forced the House to accept the Senate-passed, voter-supported $250,000 bill.
The breakdown of the votes in the House on the watered-down compromise show that the $250,000 bill could have passed. Eighty-five Republicans voted for the measure, with 151 against. Those 85 GOP members knew perfectly well they were voting for tax increases on the wealthy. So either a) they weren’t afraid of a primary challenge, b) they were fed up with Grover Norquist, or c) they didn’t consider a post-New Year’s vote a genuine tax increase. Meanwhile, the GOP leadership knew perfectly well that they were violating the sacred tradition of securing a majority within themselves before voting on legislation (and angering conservatives by ditching spending cuts in the process). This, combined with the Democrats’ overwhelming support for the bill they shouldn’t have been happy with, showed that the votes and political will were there to pass the $250,000 bill in an emergency. If, that is, Obama had had the courage to force the matter.
A side action that Obama should have been taking (and still has time to do) was to continually use the bully pulpit. Instead of framing the negotiations as the beginnings of a bipartisan agreement, he could have continually spun the situation as lame-duck Republicans trying to dictate their politics to a populace that had already voted down their policies. His willingness to compromise gave legitimacy to the Republicans’ def ense of the One Percent and reduced his potential political gain from the scenario.
The Wall Street Journal reported that Obama threatened to attack the Republicans in his inaugural speech, and later in the State of the Union. Using that potential publicity storm as a bargaining chip was a smart idea. But if Obama truly wanted to play hardball, he would never have considered NOT using those stages. Ideally, Obama won’t sit back and celebrate this “compromise,” but call it out as blatant obstructionism by the GOP in order to fortify for the upcoming debt ceiling battle.
Deliberately throwing America over the fiscal cliff and using the prestige of traditional presidential speeches to advance a partisan agenda aren’t very honorable actions. They probably wouldn’t give any observant bystander a warm, fuzzy, patriotic feeling. But there’s the issue of the election that keeps coming back: Obama campaigned on the $250,000 threshhold, and he won. A lot of Americans want that policy, and championed him to stand up for it. Even if a lesser compromise is still an ethically correct step forward, he still has the most to gain on the political stage by sticking to the original number. That gain could potentially give Obama far more leverage in upcoming battles to raise the debt ceiling and protect the social safety net from the GOP axe.
And there’s another moral rational for extreme options available to Obama, one perhaps not very American but very simple: if a Tea Partier had been in Obama’s place, he would have used the harshest tactics available to him. In fact, the GOP has already been using such conflict-seeking strategies to undermine the Democratic agenda of the past four years. Republicans in Congress are so dialed in to how Obama operates that they can counter him and pull him rightward at every turn. The only way for Mr. Obama to fight back with his renewed mandate is to play the same partisan, all-in game as his opponents. In order to advance a Democratic agenda, Obama must, for all intents and purposes, become a Republican.
Sources: CNN Money, New York Times, Wall Street Journal, Business Insider