Wednesday, December 19, 2012

Et Tu, Obama?

As details emerge over the compromises the President appears ready to make to resolve the "fiscal cliff," cynics know what it is to be Charlie Brown having the football pulled away by Lucy at the last minute. As Obama roared to victory last month, some of that old "hope and change" magic came back with him. He was resolute in his stance that tax rates on income above $250,000 would go to their Clinton-era level, that he would not be held hostage to another debt ceiling increase and that he would not touch Social Security benefits. Even better, when it came to these bedrock principles, he had the support not just of those who voted for him, but people who did not.   

Obama's opening gambit in the fiscal cliff negotiation was muscular, calling for $1.6 trillion in new taxes over 10 years and unilateral power to raise the debt ceiling. Republicans seemed flummoxed, at first falling back on Mitt Romney's old "deductions and loopholes" idea before finally coming around to an offer to raise taxes on income above $1 million while calling for $600 billion in Medicare savings and a switch in the calculation of inflation for Social Security beneficiaries that would result in a cut in those benefits of roughly 5-10% (reports vary). Republicans also proposed raising the Medicare eligibility age and wanted more cuts in discretionary spending. 

From these two negotiating positions, the media narrative gelled around the idea that both sides had to give and that an agreement halfway between the two parties' positions was the appropriate outcome. While we might be naturally inclined to think that is the way a compromise works, we had an election last month where the President was easily re-elected, Democrats gained seats in the House and Senate and, but for the gerrymandering in many states, would have won back the House. In the balance, Democrats won more votes for President, Senate and the House and polling shows clear support for higher taxes and the protection of social safety net programs. In short, the parties' respective principles were put to a vote and the American people strongly supported one vision (Democratic) over the other (Republican).

So why are we now learning that Obama is willing to move the threshold for tax increases to $400,000, accept a debt ceiling increase of between 1-2 years, the adoption of a less generous formula for calculating Social Security benefits (the so-called "chained CPI"), additional cuts to Medicare (as yet undefined) and has shelved the payroll tax cut that will result in a tax increase for middle class workers. In short, why is Obama giving in to GOP demands? His concessions should not surprise anyone who has followed or read about his Administration. For whatever reason, as steel spined as Obama is when it comes to drone strikes and killing terrorists, he shrinks from the battle in Washington. This pattern started even before he was sworn in, as his economic advisers trimmed their sails when it came to estimating the amount of stimulus they should ask for in Congress, continued as he made concessions to Republicans in the weeks after his election to get their votes for the Recovery Act by larding it with tax cuts (it didn't work, only 3 GOP Senators voted for it, and 1 of those Senators, Arlen Specter, switched sides shortly thereafter) and allowed for the insufferably lengthy debate over health care to consume much of the rest of his first two years in office to no avail as the Affordable Care Act received exactly ONE Republican vote in Congress even though the bill was based on a Heritage Foundation idea. 

Once Republicans took over Congress, they boxed Obama into bad deals to extend tax cuts and perversely, were handed gifts they didn't even ask for, such as Obama's agreement to raise the threshold for estates subject to the estate tax and at a lower rate. In addition, they locked in concessions on tax cuts (2 years) while giving back shorter extensions on unemployment insurance and the payroll tax cut (13 and 12 months respectively). While Obama ultimately got both of those stretched for that 2d year, that he even had to go back to the well would have been unnecessary had he been a savvier negotiator. This "second stimulus," which was overwhelmingly tilted toward the rich and almost exclusively made up of tax cuts, was less stimulative than many other public policies that economists identify as being most pro-growth (take a look at this CBO analysis: Less than a year later, Obama agreed to a process that would result in $1 trillion in domestic spending cuts in exchange for authorization to raise the debt ceiling, a tactic that no Congress had ever used against a President before, never mind the fact that the debt being paid off was largely accrued while the very same Republican party was spending like drunken sailors on everything from foreign wars to prescription drug benefits. 

And while these bad deals were justified for various reasons (the 2010 tax cut deal based on a wobbly economy; the 2011 debt ceiling deal based on fear of default) the supposed big selling point, the three-dimensional chess we were spun, was that Obama was playing a "long game" by creating a deadline (December 31, 2012) not only for the Bush tax cuts, but also the Congressionally passed sequestration that would lop off massive sums of money from the Department of Defense. Taken together, the reasoning went, fear of huge tax increases simultaneous to painful cuts in defense spending would result in compromise by the GOP (presumably after an Obama re-election).

So why is it not working that way? Why has Obama's initial request for $1.6 trillion in tax revenue been trimmed to $1.2 trillion with the threshold for higher rates now at $400,000 and not $250,000 (which means the ill defined removal of loopholes and deductions will have to make up more of the total - something that will be left to Congress to work out). And why has Obama signed off on swapping the "CPI" for the less robust "Chained CPI" for Social Security when the program is on sturdy footing until past 2030? And why has the payroll tax cut been stripped away entirely? What is Obama getting for these concessions? Not much, as it turns out. He might get a 2 year extension on the debt ceiling (something that he should not even have to negotiate over as no Congress has ever allowed our bills to go unpaid), he has now defined "middle class" upward to $400,000 (there will be no second bite at the apple to raise rates on people below that threshold), he's agreed to a tangible (and immediate) cut to one of the foundational social programs of the Democratic party for no particular reason other than the Republicans wanted him to (even though it's bad policy and addresses a problem that does not exist) and will leave it to Congress to pass "tax reform" - something that begins being undone almost as soon as the ink is dry on the bill signing. And oh yeah, on top of the $716 billion in Medicare cuts to providers and private insurers under Medicare Advantage, Obama's signed on to an additional (at least) $350 billion in savings. 

Meanwhile, the defense budget, which has increased more than 100% since 9/11, is barely touched while ever bit of muscle, sinew and cartilage has been stripped away from many "discretionary" domestic spending programs, leaving raw bone even as people fulminate over the need for things like background checks for gun purchases and greater mental health treatment options. Even concessions Obama appears to have gained, like an extension of unemployment benefits and a still unknown amount of infrastructure spending, are temporary while the trade offs he has made are permanent (e.g., extension of the Bush tax cuts on the first $400,000 of income and linking Social Security benefits to chained CPI). In other words, a guy who just won a 332 electoral vote majority is bargaining away things that will never change for smaller things that will end (and quickly) to a party that just got its ass handed to it six weeks ago. 

That a Republican minority has succeeded in getting a Democratic president to first, extend all Bush tax cuts for 2 years and then extend them permanently for the first $400,000 in income a family makes is remarkable. In addition, massive cuts to domestic spending are taking place even as the budget for our military is largely unscathed, corporations continue to reap record profits and most of the impact of cuts are felt by the poor, elderly and infirm. If anything, Republicans have gotten more concessions toward "low taxes and small government" from President Obama than they did from George W. Bush.

What is most disheartening about this turn of events is its familiarity and speaks to the paradox that is Barack Obama. As a candidate, his rhetoric is soaring, his ability to inspire unmatched and data-driven approach to turning out the vote also places a finger firmly on the pulse of the American electorate. Yet, Obama, just re-elected, and convincingly, is turning away from the one point he drove home over and over - that he was going to raise taxes on income above $250,000. Now, it's a Roseanne Rosanna-Dana moment "never mind." Meanwhile, by scuttling the payroll tax cut, middle class earners will see their taxes raised and the chained CPI formula will result in the elderly seeing smaller Social Security checks - two outcomes that no Democrat who voted for the President could have envisioned six weeks ago. Not only are these policies unpopular, but the light hand applied to the wealthy and multi-national corporations that have looted our Treasury for most of the past 30 years stands in stark contrast to the comparatively heavy hand being applied to the middle class, elderly and poor. Tucked within that $1 trillion plus of cuts that Obama has agreed to is flat funding (or cuts) to critical programs that many Americans rely on at a time when wealth inequality is at its highest point since before the Great Depression. For a man who campaigned on "fairness" this is a cruel joke. 

Since the economy imploded in 2008, Republicans have done little governing and a lot of obstructing. Democrats provided the overwhelming majority of votes in the House for TARP and cast the "aye" votes on health care and financial services reform, stimulus to drag our economy out of the ditch and more, while Republicans have squeezed massive concessions on budgetary matters by simply saying "no." As I've written before, Obama is really a closet conservative ( and has governed far closer to George H.W. Bush than Franklin D. Roosevelt. His willingness to make concessions never wins him credit with Republicans and the media will always think he could have done more, but regrettably, he is happy to jettison his own supporters in the service of an agreement that many do not like. Some might call this leadership, I call it selling out. 


  1. I couldn't agree more. Makes me so sad he keeps selling out unnecessarily.

  2. So sad! I hope that Barack Obama,would read this kind of issue about him.

  3. This comment has been removed by a blog administrator.