How Obama Sparked the Dems’ Tax Revolt

December 9th, 2010 at 5:55 pm | 37 Comments |

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Obama, famously a former community organizer, cut a deal with the Republicans on tax cuts without exercising the basic tenets of organizing.  First, internally organize your own side — find out what issues most concern them and assure them that you will make the best effort you can to address those issues.  Then take them through a fight with the other side (don’t settle too easily, even if the other side is ready to sign off on a deal) so that your side feels a sense of ownership over the negotiating process and thus, in the course of the struggle, they bind to your leadership.  Then make the deal, not at that first available opportunity, but at the last available opportunity (in this case, around 10:15 pm on December 31st) such that you demonstrate to your troops that you pushed the other side to the maximum point and then took the best deal you could.  That way, you appear to be a fighter to your side (and they will do whatever they can to facilitate the deal you cut) and a man of reason to the general public.

Process is not content, but process deeply impacts content, and cannot be ignored in how strategic leverage is deployed.  Part of the “content” here might have involved the galvanizing of the Democratic base on behalf of the leadership and desires of the Democratic president.  Yes, a massive stimulus to the economy that will finally generate substantial growth and declining unemployment is Obama’s only chance to be re-elected, and the only chance for the Democrats in Congress not to suffer another large defeat.  So the inadequate and mostly inefficient stimulus in this bill is, on its face, still worth it for Obama to obtain.  Good policy is good politics, indeed, in this case, career-saving politics for him.  But it perhaps is the case that good policy (in this case a policy that will increase the GDP by 0.5 to 1% according to estimates — an OK boost, but not an enormous one) is not good enough when Obama has to subtract from it the respect and enthusiasm of his base for him.  A wildly excited base is worth a few votes in November 2012, too.

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37 Comments so far ↓

  • SkepticalIdealist

    I don’t get why he didn’t use budget reconciliation to pass another stimulus as soon as it seemed as if the first one was inadequate. The 700 billion dollar price tag on the tax cuts over 10 years would be better spent putting people to work.

    It’s deficit spending anyway, and that would be the correct policy, at least according to the world view that spending is needed in this economy. Maybe there’s some obscure rule i don’t know about, but it seems like if the economic situation is really what he’s worried about then that would’ve been the way to go. I actually don’t see why he still can’t do it during the lame duck. He could at least use it as a threat to bring the pubs to the table. Just like they used the government shut down in the same fashion.

  • balconesfault

    Rachael Maddow was arguing the other night that Obama has managed to take Ghandi’s famous quote, and stand it on it’s head.

    Ghandi: First they ignore you, then they ridicule you, then they fight you, then you win

    Is the Obama Presidency going to look like:
    First you win, then they fight you, then they ridicule you, then they ignore you?

    Pundits were already mocking Obama’s unilateral capitulation from the moment he made it, and the mockery redoubled after his speech Tuesday.

    If he can’t sell Progressives on why he’s blowing so much tax money on something that’s almost certainly not going to provide any stimulus, he’s going to need to fight just to get attention in the future.

  • armstp

    “A point that I keep coming back to over the past couple of days is something that Obama understands and lives out. Despite his own ideological bent, he knows he is the president of everyone and not just democrats. He seems to take that idea very seriously and I think it has and will continue to stand him in good stead.”

    “I agree – which makes him the polar opposite to the current GOP, epitomized by Palin. They govern and will govern solely for those who voted for them. Because they regard everyone else as fake Americans. Obama? An altogether more serious and responsible figure.”

    http://andrewsullivan.theatlantic.com/the_daily_dish/2010/12/email-1.html

  • Deep South Populist

    2012 can’t come soon enough.

  • Deep South Populist

    Side note:

    Given the intransigence of the liberal base on this matter, I can’t help but raise a question.

    Why is the FF peanut gallery so silent?

    Where are all the impassioned denunciations of the extremists, kooks, freaks, morons and so on on the far progressive left?

    Where are the denunciations of Pelosi for standing in the way of good government?

    After spending a year denouncing the Tea Party movement for alleged extremism and inflexibility, the FF peanut gallery is strangely silent.

  • Nanotek

    “Where are the denunciations of Pelosi for standing in the way of good government? ”

    What are you talking about? Pelosi is great!

  • Derek

    This will be good practice for the Republicans, to learn what it is going to feel like to have everything they try to do, blocked.

  • armstp

    Nanotek,

    I agree Pelosi is a great leader. She has been doing a heck of a job for this country. She really fights for her principals and get major legislation passed. We need another 100 Nancy Pelosies.

    .
    .
    .

    Deep South,

    Tax cuts for the rich with the current deficit and debt is not good government. What’s the hurry for 2012? So Obama can get re-elected and the Dems can take back the House.

  • Deep South Populist

    armstp: Tax cuts for the rich with the current deficit and debt is not good government.

    True, but Obama has not done much on this front either. He signed a lot of new spending, a big new entitlement, and has not cut spending by ending either war.

  • politicalfan

    “Why is the FF peanut gallery so silent?”

    We are sitting here eating macadamia nuts, would you like some? (Thinking about how we are going to spend our tax cuts this year.)

    Deep South Populist- what new spending are we talking about (President Obama)?

  • balconesfault

    He signed a lot of new spending, a big new entitlement, and has not cut spending by ending either war.

    We needed a lot of new spending to keep the economy from going over the edge, which would have hammered tax revenues even worse while driving up the number of people receiving welfare/medicaid/unemployment. It’s very likely that the stimulus spending, especially given the way it’s been stretched out (a lot of it still hasn’t been spent), has been better than deficit neutral already.

    The big new entitlement was paired with cuts to inefficient portions of Medicare, assuming that the GOP won’t just continue to block those cuts being made.

    We’ve significantly cut back on our spending in Iraq. Some keep trying to make the argument that Obama’s just following Bush’s plan – but does anyone really believe that McCain wouldn’t have taken the first available excuse to ignore the Status of Forces Agreement and find reasons to keep more troops (including combat troops) in Iraq?

    Obama has, faithful to his campaign pledge, seriously ramped up military spending on Afghanistan. This may well have been a bad idea, but the main GOP complaint has been that he wouldn’t pledge to making our committment there completely open-ended.

  • Deep South Populist

    If Obama is so fiscally responsible, why didn’t he sign a huge tax increase? He had a big majority for two years with most of his partisans arguing the GOP was fiscally irresponsible yet never raised taxes. Why not? The reason, of course, is politics. He wanted to give away the goods without taking heat just like George W.

  • politicalfan

    Deep South Populist-

    “If Obama is so fiscally responsible, why didn’t he sign a huge tax increase?”

    Have you missed all the action?
    Socialist and Communism crowd,
    birthers,
    Sarah Palin and Death Panels,
    polarizing immigration,
    natural disasters and more, etc. ect.
    http://whattheheckhasobamadonesofar.com/?q=36

    http://www.whitehouse.gov/blog

  • armstp

    Deep South,

    The only spending that Obama has done is emergency spending (something he would not have had to do if it was not for the Bush recession) and it has more than paid for itself, given that he got the economy growing again, created 1.0 million private sector jobs in 2010 plus 2.0 to 3.0 million jobs saved and stabilized the private sector. In fact, if you look at government spending, excluding the emergency spending, it has actually gone down under Obama.

    Not sure what you mean by a big new entitlement. If you are refering to the healthcare bill, first off people will still have to pay for the insurance from private insurance companies themselves, although subsidized by the govt, so hardly and entitlement, and second according to the CBO the healthcare bill is more than paid for and will actually improve the deficit situation in this country.

    As for the wars, Obama has kept to the Iraq timeline and taken nearly 100,000 troops out of Iraq and is whining down that war. Afghanistan is clearly still a war and we are paying for it, but at least there is a July 2011 date where they will start drawing down troops. I suspect we will be almost entirely out of Afghanistan by the end of 2012.

    So I am not sure exactly what you are complaining about? Same old unsubstantiated right-wing talking point bullshit I suppose.

  • greg_barton

    There’s one thing everyone seems to have missed because the focus is entirely on congressional democrats and their reaction: why did republicans flipflop on deficits after months of tea party rhetoric about fiscal responsibility? I think the answer is fairly simple: they know that the government needs to spend to stimulate the economy, but tax cuts are the only way they can do it politically.

    I’ve been mulling over the current compromise and think there’s only one part of it I’d like to see removed: the payroll tax cut. Yes, it’s the most stimulative cut of the bunch, and I personally will benefit from it to the tune of $2120, but it weakens social security too much. And I won’t put that money to stimulative use anyway. It’ll go straight into my mortgage.

  • Nanotek

    “How Obama Sparked the Dems’ Tax Revolt”

    the revolt is much deeper than tax …

  • balconesfault

    I’ve been mulling over the current compromise and think there’s only one part of it I’d like to see removed: the payroll tax cut. Yes, it’s the most stimulative cut of the bunch

    Actually, the unemployment extension scores out far and away as the most stimulative spending in the package. A payroll tax holiday only scores out at 1.09 $ stimulus/$ spent. For unemployment extension, this scores out at 1.60.

    http://www.economy.com/dismal/article_free.asp?cid=195470&src=nytimes

    Meanwhile, the following chart shows the average tax savings per taxpayer by income class:

    http://www.balloon-juice.com/wp-content/uploads/2010/12/GR2010120808056_thumb_454x432_30750.gif

  • Nanotek

    balconesfault — so what is your read on this?

  • balconesfault

    Nano – do you mean what I think should happen, or what I think will happen?

    On the latter … I’m just not sure. I’ll take credit for immediately predicting that Pelosi and the House Dems weren’t going to immediately sign onto this and might even block it. Whether they’ll hold that resolve through the end of the session is another matter, and I’m finding it hard to guess. The fact that Steny joined her in fighting this showed that the Blue Dog Dems might not be as quick to jump aboard and vote for tax cuts as people are assuming … this is a deficit expander, and Steny and the Blue Dogs are probably the most legitimate voices in the anti-deficit chorus. They’ve been voting to keep spending from increasing not to just screw over Obama, but because they really feel a responsibility to control the growth of the debt.

    I haven’t been the biggest supporters of the Blue Dogs all along – I think we have needed more stimulus, and more public commitment to benefits, and more public investment in infrastructure, than they’ve been willing to support. But at least they’re honest about their desire to reduce the deficit. For the GOP, it’s just a talking point en route to their primary goal, rewarding wealthy GOP benefactors.

  • Deep South Populist

    armstp,

    Obama and his partisans never once proposed raising taxes by a significant amount even though they had the majorities to do so. It shows they are not fiscally serious and that they let political calculations influence their decisions as much as the GOP does.

  • balconesfault

    dsp: Obama and his partisans never once proposed raising taxes by a significant amount even though they had the majorities to do so.

    That’s because the political fight to raise taxes would have been silly, given that the taxes were scheduled to increase anyhow next year based on the GOP 2001 tax bill. What could they have accomplished – at best, pushing the Bush tax increase up one year, had they abandoned everything else on their agenda and focused on that from the beginning.

    Bush and the GOP in 2001 were wise in one way … they scheduled these tax cuts to expire. We should acknowledge that wisdom.

  • Slide

    balconesfault // Dec 9, 2010 at 6:41 pm

    Pundits were already mocking Obama’s unilateral capitulation from the moment he made it, and the mockery redoubled after his speech Tuesday.

    That narrative is already changing. Many more are coming out thinking that Obama got a great deal (under the circumstances), that it was brilliant politically and that it will help him win re-election.

    The initial reactions were predictable. The liberal base feels betrayed (yet again) but they’ll get over it when Obama is running against Palin or Huckabee or someother right wing wacko in 2012.

    The real concern has been losing independents and quite frankly a battle with progressives and liberals doesn’t really hurt him on this front.

    Its not all theory guys, there is a real country out here that either benefits or loses by policies enacted. This will help the economy in the short run without a doubt. No, not the tax cuts for the wealthy but that was the price to pay to get everything else which is quite stimulative to the economy.

    Now I agree that Obama should have used the bully pullpit to argue his case and make the Republicans pay for their positions but at the end of the day they weren’t going to be moved and he certainly wasn’t going to have an easier time with the new Congress coming into power in January.

    Bottom line, I think this will be seen in a very positive light down the line once all the huffing and puffing by liberals is done with. They HAVE to do it to show where THEY stand on tax cuts for the rich but it is more dog and pony show than anything else. Don’t get distracted by the smoke and mirrors, this was a brilliant play by Obama.

  • Xunzi Washington

    Slide –

    Going to battle with liberals doesn’t hurt him with independents, you’re right. But you make it seem as if the liberals will have no choice but to vote for him. Well, no – they can stay home. That’s the problem. I understand not wanting to be a prisoner to your base, but you have to keep them wanting to get up and go vote for you. Turnout matters.

  • Slide

    Xunzi, yes I agree with what you say and there is also the issue of fund raising which might take a hit. Both very important and troublesome for Obama. But what was his choice? To fight the good fight that will make all liberals (of which I consider myself one) feel all warm and fuzzy and then lose the battle? There is no way the Republicans would have let him win. Period. In this Congress nor in the next. So in the end, if he didn’t compromise, the tax cuts would have expired. For EVERYONE. That would have meant raising taxes on the middle class…. the end of unemployment insurance for millions… and further evidence of his weakness. That would have been helpful to his re-election chances?

    So what do we have instead with this deal? Unemployment benefits (which are very stimulative) continue. The tax cuts for the middle class continue PLUS they get an additional 2% tax cut (again very stimulative) plus we have some real incentives in the proposal to free up business investment. Oh, yeah and the tax cuts for the rich will continue for another two years.

    Again, once the real ramifications of what Obama is proposing is compared to what could have happened if he waged some ideological battle and ended up losing, I think it will be realized that did himself more help than harm.

    Once again us political junkies see one thing while the vast swath of this country view things quite differently. Most people are not in the slightest concerned with these partisan battles. They want results. This is a win for Obama because the economy will be better off in 2012 as a result. Will the economy be good enough ? Who knows, but most economists agree that this proposal will definitively help the economy in the short term and that is a whole lot more important than the fact that the Daily Kos base is upset that Obama is not the ideological warrior that they had hoped him to be.

  • Deep South Populist

    We don’t even know if Obama is going to be the nominee much less reelected. 2012 is looking more and more like 1968 and 1980. The liberal base and the Democrats are not going to stand by for another bloodbath. If Daily Kos represents the pulse of Obama’s base, that faction is not happy.

  • Deep South Populist

    balconesfault: That’s because the political fight to raise taxes would have been silly, given that the taxes were scheduled to increase anyhow next year based on the GOP 2001 tax bill.

    True, except letting the Bush tax cuts expire was not Obama’s only option for raising taxes. I mean think about it: if Obama and the Democrats are so fiscally responsible, why didn’t they push for a VAT, carbon taxes, or other forms of non-traditional taxes? The answer has to be that they’re not any more fiscally responsible than the GOP. There is no other reasonable explanation.

  • sinz54

    balconesfault: Rachel Maddow: Is the Obama Presidency going to look like:
    First you win, then they fight you, then they ridicule you, then they ignore you?
    That’s a brilliant observation on Maddow’s part.

    And why might it be true?

    Because Obama doesn’t seem to have grasped the reins of power. Power involves the use of force–not necessarily physical force, but even soft power. He seems genuinely uncomfortable with the need to knock heads together sometimes. If I could, I would say to Obama:

    “Two years ago, you WON the most powerful job in the world. Act the part! Go watch ‘The West Wing’ reruns for inspiration!”

    Yesterday was symbolic: You’ve got Wikileaks revealing the most sensitive American secrets, the House Democratic Caucus in revolt against the tax deal, DADT in trouble on the Hill–and Obama goes to light the Christmas tree on the White House lawn.

    That model of “leadership” is more like the way Queen Elizabeth “leads” Britain, than what Americans became accustomed to since Teddy Roosevelt.

  • Nanotek

    “Nano – do you mean what I think should happen, or what I think will happen?”

    thanks, balconesfault

  • sdspringy

    OH the irony, Dems sooo worried about the economy, villifying the Bush tax cuts for not just the last 2 years but the last 10 are now having to EAT a large plate of Crow. And who is the Head Chef, Obama. Smiles and laughter.

    How long can you Libs hold your nose over Obama?

    Lets start with some basic inconsistencies. Libs want a larger stimulus but allowing Americans to keep their earnings is not considered appropriate means to that end. As well documented by the Libs here and the Lib-Figure-Head Pelosi, unemployment checks are more stimulative. So we are to understand toilet paper and Ramen noodles will lift the economy. Not actually leaving money in the hands of individuals who create jobs, no the Libs want to dole in out in small weekly checks because subsistence living is where the Dems get the most bang from OUR buck.
    Subsistance living, paycheck to paycheck, is how big Progressive governments operate. Thats the direction of the Democrat Party’s Hope and Change.

    I say let them expire, 10% of Americans pay 70% of the income tax. 90% of Americans have no skin in the game thanks to the Bush tax cuts. Time to let everyone back into paying for the legislative nonsense that the Libs/ and Compassionate Conservative come up with.

  • balconesfault

    DSP: I mean think about it: if Obama and the Democrats are so fiscally responsible, why didn’t they push for a VAT, carbon taxes, or other forms of non-traditional taxes?

    A VAT would be harmful to demand at a time when we need to stimulate demand.

    The House did pass a carbon tax, in the form of Cap and Trade Legislation that had been proposed by the President. Had it not been for the GOP filibuster supported by a small number of Dems, it would have been passed by the Senate long long ago, probably by a 52-48 or 53-47 majority.

  • balconesfault

    Sinz: He seems genuinely uncomfortable with the need to knock heads together sometimes.

    Yep. Pretty strange for a thug, don’t you think?

    Springy: Libs want a larger stimulus but allowing Americans to keep their earnings is not considered appropriate means to that end.

    Your language here shows that you don’t really understand the liberal/progressive position.

    It would be wonderful if just giving people tax cuts provided the kind of economic stimulus we need. But we’ve run that experiment a few times now … and it keeps failing. The last failure was kind of spectacular.

    It’s not that tax cuts are an inappropriate means to that end … it’s that tax cuts, particularly in the taxation range we’re at right now, upper class tax cuts … are an INEFFECTIVE means to that end.

  • sdspringy

    Balcone I disagree. Tax cuts are never the issue, spending is. No matter what the tax level, no matter the political party, spending is the problem. Taking more money from Americans will not solve the problem. The problem is the politican, their need to spend our money to buy their way back into office.

    Allowing Americans to keep their money, using it the best way possible to create jobs and invest far exceeds anything the politicans can accomplish. Currently tax revenue provides a fiscal drug fix to the politican and withdrawl from our pocket books is required.

  • armstp

    Deep South Populist,

    Of course Obama never stressed any tax increases, but I am sure Obama and those in his adminstration were not automatically going to renew the Bush tax cuts either, particularly if the economy did not nose dive. Obama never campaigned on extending the tax cuts. Obama also certainly never said “no new taxes”.

    I think the Dems/Obama have always been more realistic and will always include the possiblity of tax increases to deal with the deficit. So, I am not sure what you are arguing.

    There is only one party in this country that is completely against tax increases and that is the Republican party, which is completely unrealistic, but then again the GOP does not care about the deficit and debt.

  • balconesfault

    Springy: Balcone I disagree. Tax cuts are never the issue, spending is.

    That’s because you don’t see Government spending as an investment in our future prosperity.

    I do.

    Allowing Americans to keep their money, using it the best way possible to create jobs and invest far exceeds anything the politicans can accomplish.

    Perhaps … although what the last decade demonstrated is that you end up creating most of those jobs in foreign countries.

  • sdspringy

    Balcone having jobs created overseas is the direct result of government policy. NAFTA, China free trade, all government policy.

    Washington sponsored, some even signed by Dem Presidents. So blaming American Business for jobs overseas is denying the obvious.

    America has the second highest corporate tax rate on the planet. Those jobs moved for reasons created and pushed by higher regulatory and higher tax and spend politicans. Lets make that clear.

  • balconesfault

    Balcone having jobs created overseas is the direct result of government policy. NAFTA, China free trade, all government policy.

    Perhaps. I see them more as abdication of government policy – dropping of trade barriers. I’d arguing that maintaining trade barriers/tarriffs is a government action/policy.

    It’s kind of like coming up to someone who you told to do jumping jacks before, and telling them they can now quit jumping … and then claiming that them not jumping is a result of your instructions. Not jumping/no trade barriers is the default position if there is no directive from you/government.

    America has the second highest corporate tax rate on the planet.

    As a percentage of GDP, America taxes on corporate income (1.8%) is well below the OECD average (2.5% weighted, 3.4% unweighted). The only OECD nations with lower %’s were Iceland and Germany.

    Meanwhile I don’t see how your argument makes sense when many of those jobs are moving to countries with national healthcare systems, for example. In addition … many of those corporations who are exporting jobs still maintain HQ and charter in the US.

  • sdspringy

    China’s national healthcare system, really, Mexico’s national healthcare system, those are the countries we have moved to. Not France, not Britain so that statement has absolutely no validity.

    Whether American business is told to jump or stand still it has received that direction from Washington. Place any symbolism on it you want it does not change the fact it’s government policy.