Saturday, November 10, 2012

Govern Like It Is 1995


Not that anyone from The White House has called to ask for my opinion on how the President should negotiate over the so-called "fiscal cliff," but if they did, I would suggest Mr. Obama pick up the phone and call his new BFF Bill Clinton and ask for some pro tips. You see, once upon a time, specifically, April 1995, William Jefferson Clinton was a political piñata who had to ascend the podium at 1600 Pennsylvania Avenue to assert his "relevance" in the wake of a massive Republican tide that came in during the 1994 mid-term elections. Clinton had been put in that corner because Republicans bullied him mercilessly, demonized his signature attempt to reform health care and successfully convinced an off-year electorate that trended more conservative, that their "Contract With America" was the antidote to the wild-eyed liberalism of our nation's first Baby Boomer President. That fall, Clinton masterfully leveraged Republican overreach in budget negotiations to re-assert his authority, subsequently cruising to a second term in office. 

Sound familiar?

Republicans thought Clinton was a push over and assumed the threat of shutting down the federal government would get him to cave on deep cuts to "ME(2)" (Medicare, Medicaid, Education and the Environment), but Clinton had two things going for him that President Obama should take heed of - (1) people liked the programs that Republicans threatened to slash and (2) President Clinton marshaled the singular power of the bully pulpit to frame the debate as one between his reasonableness and protection of popular government policies and a slash and burn method of governing by intransigent Republicans (having Newt Gingrich as his foil certainly did not hurt). After two government shutdowns, Republicans caved and Clinton was triumphant. 

So what lessons can President Obama take from the Big Dog in dealing with Republicans now? Well, first and foremost, Republicans don't compromise until they have to. Gingrich and his allies finally came to the table when it was clear public opinion was against them. As important, Clinton did not back down, even when images of closed museums and historic sites aired on TV. By being willing to call the Republicans's bluff, and, as importantly, driving the narrative that the shutdown was their fault, not his, Clinton got what he wanted. Obama's hand is strong - all of the fiscal and policy impacts that the media is now wringing its hands over, happen if nothing happens. That is, if Congress fails to pass legislation, taxes go up and massive cuts to defense and non-"entitlement programs" occur. The President made an important point at his first public event after being re-elected - the Senate has already passed an extension of tax cuts for everyone making under $250,000 (something that people making more than that also get to enjoy as their tax rates up to that level also go down), and the House simply needs to pass that bill and he will sign it. Once done, he said he will discuss the other issues Republicans would like to negotiate over.  

He must be prepared for the fact that if we "go over the cliff," taxes will go up, people will be unhappy and the media will cover the story incessantly. But in this hyper focus is his opportunity to frame the debate as one between his view, ratified less than a week ago, that people want taxes to rise on the wealthy as part of broader national spirit of "shared sacrifice" while ensuring that needed funding is provided for things like research and development, education and protecting the less fortunate.  The President must put Republican intransigence in the proper light - that their primary concern is protecting the wealthy, who have experienced wealth distribution in their favor unseen since before the Great Depression, for nearly 30 years while his is ensuring that our economy continues to grow, that the tax system be more progressive and we get back to the business of employing workers, educating students and investing in our future. 

But the second lesson the President must learn is just as important. The Republican Congress of 1994 was quick to challenge Clinton because they had done it over and over and won. Similiarly, Obama's track record of negotiation with Republicans since he took office in 2009 is one of capitulation and compromise, largely on the other side's terms. They have no reason to believe he is serious about allowing the country to "go off the cliff" because ever other time Republicans have "taken hostages" they have extracted enormous concessions from him - whether it was extending all the Bush tax cuts at the of 2010 or getting the President to agree to long-term cuts to discretionary domestic spending as part of the agreement to raise the debt ceiling, the things he receives in return seem modest in comparison (for more on this topic, see my post, "How To Negotiate Like A Republican: http://scarylawyerguy.blogspot.com/2012/04/how-to-negotiate-like-republican.html). 

So, like New Jerseyans told to stock up on water and non-perishable food before Hurricane Sandy, what should the Obama team be doing? Putting my Axelrod mustache on, here is what I recommend:   

1.  Stand firm:  Be clear, in public and private, that the House must pass the permanent extension of the so-called "middle class" tax cuts (up to $250,000) and that nothing else moves until that happens. This tax cut has enormous public support and is a simple vote away from becoming law. If Republicans refuse, the President must be prepared to walk away. The idea of closing loopholes (which can simply be re-opened at a later date) or limiting deductions (which can be reinstated at a later date) is not enough. Locking in higher tax rates for the top 2% is hugely popular and also puts Republicans in the position of trying to justify protecting the wealthy when the CBO has already debunked their main talking point that raising taxes on the wealthy will harm economic growth. 

2.  Be prepared for the visuals:  If we "go over the cliff," every major news organization, blogger, online media outlet and talk radio program is going to be talking about the deleterious effects of this reality 24 hours a day.  The Obama team cannot allow itself to be swayed by the hyperbole; yes, paychecks will be smaller and yes, the stock market may go down, but this will not matter because … 

3.  Be prepared with the message:  The President must have a simple message - I wanted to compromise, they did not. They knew they had to do something before the end of the year and they (Republicans) refused to budge. I ran for re-election telling people that taxes were going to go up on the wealthy, they ran on a platform of protecting millionaires and billionaires. He must be prepared to litigate his case, over and over, in front of the cameras, and utilize the army of supporters that just re-elected him to drive this narrative. 

4.  Find An Achilles Heel: The business community is a slumbering giant and high profile CEOs like Jamie Dimon (JPMorgan) and Howard Schultz (Starbucks) have both talked supportively of the idea that the wealthy should pay a little more.  Moreover, cuts to defense will hit major GOP supporters at corporations like General Dynamics and Lockheed-Martin. They have no interest in losing valuable federal dollars and the swollen profit it provides.  Finally, businesses will suffer if taxes go up, spending gets cut and Americans are suddenly insecure about their economic future. The pressure business leaders can put on Republicans should not be understated. 

5.  Have an out strategy: Whether it's a comprehensive "grand bargain" or a smaller deal, the President and his team must emphasize their ideas and have a deal sheet ready when the time comes. My own view is that this is his opportunity to litigate everything, to fold in a debt ceiling increase, tax rates, the 2013 federal budget, the whole ball of wax, so that we are not subject to constant government by crisis that seemed to define his first term in office. 

As a final note, it is important to remember that nothing that happens on January 1st can't be undone. In 1995, when the government reopened, workers got lost pay, the story quickly dropped from the front page and life pretty much went back to normal.  The President must remember that "this too shall pass." The pressure on Republicans to cut a deal, and one that is favorable to the President, will be there if he exerts his will, marshals his resources and communicates with the American people. The upshot will be that legislation will eventually be passed that will lock in lower tax rates for middle class families, longer term debt and deficit reduction and, not inconsequentially, the Republican bullies will have been vanquished. 

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