How tax cut revolt helps Obama: It's a page from Clinton playbook

Former President Clinton’s impromptu press conference in the White House briefing room Friday – in which he announced his support of President Obama’s tax-cut deal with the Republicans – could not have put in sharper relief the new political landscape in Washington.

Sixteen years ago, Mr. Clinton was in the same situation Mr. Obama finds himself in today: the Democratic majority in Congress swept out of power, and the need to rethink how policy is formed. For Clinton, the answer was “triangulation,” the practice of meeting Republicans part-way, often to the chagrin of Democrats.

Obama already appears to be getting the hang of it. This week’s crackup between Obama and his liberal base over a tax-cut deal he reached with the Republicans seemed poised to threaten Obama’s support among the progressive grassroots, whose energy and donations he will need to win reelection. But just as easily, it opens him up to a second look from independents and moderates who abandoned the Democrats in the midterms and whose support he needs if he wants a second term.

Thus, an alternate analysis is emerging. Conservative columnist Charles Krauthammer calls the tax deal “the swindle of the year” – and it’s Obama who came out on top, a point that House Democrats don’t even get, he says. The combination of tax cuts and spending increases will pump nearly $1 trillion into the economy over the next two years, more than the GOP-reviled stimulus package of 2009. That two-year period coincides neatly with Obama’s 2012 reelection effort.

“At great cost that will have to be paid after this newest free lunch, the package will add as much as 1 percent to GDP and lower the unemployment rate by about 1.5 percentage points,” Mr. Krauthammer writes. “That could easily be the difference between victory and defeat in 2012.”

Indeed, Democratic pollster Peter Hart points to the unemployment rate – currently at 9.8 percent ­– as the top indicator of Obama’s chances at reelection.

“I can’t tell you ... that 8 percent unemployment means he can’t get reelected,” Mr. Hart told reporters at a Monitor breakfast Wednesday. “I can tell you if it is 10 percent unemployment, he will not be reelected. If you look at this [tax-cut] agreement, if it helps to get employment, that is the only thing that counts.”

But what about all those liberals, unhappy that the wealthiest Americans get to keep their Bush-era tax cuts for two more years? Analysts predict the Democratic revolt in the House won’t prevent passage of the legislation. All along, the deal was billed as a “framework,” and tweaks have already been made.

The Senate version of the deal, unveiled Thursday night, revealed a one-year extension of expiring tax credits that promote ethanol, wind, solar, and other renewable energies. That provision, which wasn’t in the original framework, is likely to secure some Midwestern votes, though may not mollify unhappy liberals. Still, the plan all along has been to pass the tax-cut deal mostly with Republican votes, supplemented by Democrats.

Political speaking, unhappy liberals help to position Obama in the center, and that could help him. Obama, of course, does need his base to deliver for him in the 2012 elections. But as frustrated as liberals are feeling, they have other points to cheer: The administration is trying to lift the 17-year-old “don’t ask, don’t tell” policy that bans military service by openly gay men and women. It’s supporting the DREAM Act, which would create a pathway to citizenship for young people who are brought into the US as illegal immigrants.

But in the end, keeping the liberal base happy is not necessarily the most important factor in Obama’s policy choices, says Democratic pollster Hart.

“What the American public is looking for and what they’re trying to understand is essentially his backbone. ... Where will this man stand up and where will he fight,” says Hart. “I think the difficulty with what happened here is that instead of being eyeball to eyeball and blinking, I think they saw him at 40 yards and blinking.”

Democratic strategist Peter Fenn also wishes Obama had taken the fight further.

“I fundamentally believe we should have had a fight over millionaires,” he says, meaning that Obama should have drawn the line at not allowing families that earn over a million dollars a year to keep their tax cuts.

Obama promised during the campaign to allow tax cuts for families earning more than $250,000 to expire as scheduled on Dec. 31, but in the tax deal, he gave that up. Instead, all the Bush tax cuts would remain in place for the next two years, and unemployment benefits would be extended for 13 months. In another big tax break, the payroll taxes that fund Social Security would be reduced for the next year.

But Mr. Fenn doesn’t get too agitated over Obama’s concessions. “If it helps create jobs and stimulate the economy, what’s wrong with that?” he says. “Isn’t that what we need?”