With the president’s election victory still fresh in their minds, Democrats are assuming that Tuesday’s results mean that Congressional Republicans are bound to bow to their demands for tax increases. Such sentiments are understandable given the Democrats’ clear victory in the presidential contest as well as their gains in Congress. Having campaigned on a platform of raising taxes on the wealthy, there may be little reason to assume President Obama is going to back down on his demands and, as many liberals have already pointed out, he’s going to be bitterly criticized if he does compromise on his soak-the-rich approach. Yet though Republicans may still be shell shocked by the election returns, there is no reason for them to cave in on their principles just because the president and his media cheering section expect them to.
House Speaker John Boehner sounded an appropriate note, albeit one that was pure political boilerplate, when he said yesterday, “Mr. President, this is your moment. We’re ready to be led — not as Democrats or Republicans, but as Americans. We want you to lead, not as a liberal or a conservative, but as president of the United States of America.” But his airy rhetoric contains a kernel of truth. If the country is to avoid going over the fiscal cliff in the next month, and avoid the terrible consequences that would result from a failure to reach a budget deal, it is going to require the kind of presidential leadership and ability to compromise that Obama has never been willing to provide in his first four years in office. The question before the country is not so much the one that liberals have been asking about Republicans simply waving the white flag as it is whether the president can actually bargain in good faith and get a deal.
Ever since last year’s debt ceiling crisis that set in motion the events that could lead to an automatic tax increase and sequestration of funds that would require massive across-the-board budget cuts for vital services and national defense, both the president and his antagonists have acted as if they had nothing to lose by going to the brink. In particular, the president’s strategy has seemed to revolve around an effort to drive the GOP leaders in the House away from a deal so as to be able to use their refusal to bow to his dictates as a political talking point. Obama’s model was the 1995 government shutdown in which President Clinton managed to outmaneuver then House Speaker Newt Gingrich into a corner and make him take the blame for the problem.
Boehner and Majority Leader Eric Cantor managed to avoid being fitted for the Gingrich clown suits but no deal was ever struck that they — or their caucus — could live with. But most observers seem to think that after the president’s re-election they have no choice but to give in on the extension of the Bush tax cuts. Congress’s reputation is in tatters and it stands to reason that the GOP would prefer to avoid not only the catastrophic cuts and taxes that a failure to make a deal would entail but the blame for the economic distress that would ensue.
However, the House Republicans aren’t the only ones feeling some pressure.
Most Democrats may be strutting this week and engaging in triumphalist rhetoric about their ability to dominate the country’s politics for the foreseeable future. But the president understands that a budget standoff could trigger an economic downturn that could cripple the start of his second term and set in motion a train of events that will make the next four years a nightmare for the country and for him. Though Republicans don’t want to be the scapegoats for a budget meltdown, the president needs a deal far more than they do.
But in order to get one, the president is going to have to eschew the sort of high-handed approach to Congress that has been the pattern for his first term. While that worked politically for him, it also served to give Boehner less room to negotiate since the president infuriated the GOP caucus and helped make it easier for them to dig in their heels and oppose a compromise. If the president wants Boehner to give him a deal, that will mean sitting down and asking for more revenue in ways that the GOP can live with–such as closing loopholes and deductions, but not confiscatory tax policies that will cripple economic growth.
For two years, President Obama has refused to take this deal, since it was in his political interest to portray Boehner and the GOP Congress as extremists. But though his supporters don’t seem to realize it, his political interests now lie in a policy that requires him to avoid the class warfare rhetoric and tactics designed to demonize Republicans he has employed in past negotiations.
The president needs to negotiate and take the deal Boehner is offering him with modifications that will allow him to save face. Doing so is good for the country and for his prospects for a second term that isn’t as awful as those of most of his predecessors.
And there’s that pesky constitution that says all revenue bills have to originate in the House. Or can you get around that one by executive order?
nI don't think the Dems made much gains in the house. If anything the status quo is that Americans want gridlock or they would have given the house to the Dems too.
The republicans should just sit back and wait and do nothing. The country wants a leftist regime. Fine. Deal with it. When are we going to get some republicans with a bad character ready to deal with Chicago styled thugs. Resistance through passivity!
Jonathan S. Tobin’s article includes the following:
“For two years, President Obama has refused to take this deal [with speaker Boehner et. al. to compromise on tax increases and spending cuts], since it was in his political interest to portray Boehner and the GOP Congress as extremists. But though his supporters don’t seem to realize it, his political interests now lie in a policy that requires him to avoid the class warfare rhetoric and tactics designed to demonize Republicans he has employed in past negotiations.”
But I fear that President Obama now has no political interests. His entire presidency has been about him, and his ego. (Recall that after the 2010 elections, he said that HE — instead of the departed House Representatives and maybe a few senators — got a shellacking.) My expectations are that he will continue to never compromise, because he thinks he’s the writer AND the star of a TV show called “President Knows Best.”
Also, he has no understanding of elementary economics, so he sees no reason for accepting any version of lower tax rates or a simpler tax structure or less burdensome government regulations. He doesn’t understand how — or simply doesn’t care that — higher business tax rates and uncertainty about the next ton of regulations discourage economic growth. He doesn’t know that “economic growth” means higher per capita income increases not only for high income people but also for middle and lower income people. And he doesn’t understand that compared to government regulations that ignore benefit-cost analyses and obvious unintended consequences, competitive markets are a much more efficient and effective constraint on mis-allocations of natural resources, physical capital (buildings and equipment), financial capital (aka money), and human effort.
And despite his own apparently happy marriage, he doesn’t understand that current federal income tax rates are an enormous penalty on two-income married families. I know of two-income couples in California’s Silicon Valley who are in love and definitely committed to each other and even have children together, who are secular and don’t get married “because after we pay the rent, we could never save enough to send our children to college.” And I suspect that there are religious couples who marry but somehow skip getting a marriage license, for the same reason. Yet President Obama’s proposed tax increases on single people earning more than $200,000, and on married two-income families earning more than $250,000, would make the anti-marriage penalty much higher than it is now.
The Romney campaign made some serious strategic and tactical errors, well documented in a front page article in today’s Wall Street Journal (Thursday 08 November). Obama’s win is a real tragedy, from which the U.S. (as a free society) may never recover.
Well put Mr Folsom. The assumption that Obama has either the capacity, let alone the inclination, to compromise now cannot be supported by any behaviors evident in the first term. Another erroneous assumption, complementing your correctly citing his lack of familiarity with fundamental economics, is that this has anything to do with math at all. It's much simpler than that. He is simply seizing the moment to implement his ideas about fairness. And as we all know economics and fairness have little to do with each other in the real world.
Heartland Murmers:
Thanks for the kind words. I hope I turn out to be wrong and that Mr. Tobin turns out to be right.
In case you come back to this thread, I would like an explantion of your last sentence: “And as we all know economics and fairness have little to do with each other in the real world.”
Personally, my perspective is that free market economies, including government actions dealing with externalities such as air and water pollution and national defense, are “fair” in the sense that they benefit the majority of people at all income (or wealth) levels — often the vast majority.
I strongly recommend a book by William J. Baumol, Robert E. Litan, and Carl J. Schramm: “Good Capitalism, Bad Capitalism, And The Economics of Growth and Prosperity.” Yale University Press, © 2007, although it’s possible that there has since been a second edition.