When President Obama got Republicans to raise taxes on the top one percent of income earners as part of the January deal that ended the threat of the fiscal cliff, some Democrats gloated that Republicans had been made to go back on the famous Grover Norquist pledge never to raise taxes. It appeared that Obama, fresh from his November victory and taking advantage of Republicans’ divisions, had won big.
Well, think again.
If you compare the leverage that Obama had in that set of bargaining with the leverage he has now in the post-sequester budget negotiations, it is like night and day. Had Obama hung tough and demanded a lot more in the way of tax increases on the wealthy, Republicans were just stuck—because no action would have caused taxes to increase on everyone. Obama had begun the bargaining requesting a reversion to the pre-Bush tax levels on the top two percent, targeting revenue increases of at least $1.6 trillion over a decade. Instead, he settled for just $620 billion—meaning that another trillion has to be taken out of the spending side. Senate Majority Leader Harry Reid was holding out for the higher number, correctly calculating that Republicans would have to give ground, when Obama undercut Reid by shifting the leadership to Joe Biden with instructions to make more concessions, without even the courtesy of informing Reid. The White House also disastrously miscalculated that the threat of defense cuts in the sequester would bring Republicans back to the table on taxes. Oops. Republicans realize that Afghanistan is winding down, and what’s most interesting about the Paul Ryan budget is that its proposed defense spending over the next decade is scarcely different from the Democrats’ proposal.
I happened to be speaking at The Atlantic’s Economy Summit conference this week, where Norquist was also a speaker, and I had a chance to discuss the January and March budget negotiations with him afterward. According to Norquist, when House Republican negotiators were told that Obama would settle for as little as reverting to the pre-Bush tax rates only on the top one percent, they were astonished at their good fortune. Obama’s cave-in was almost too good to be true. As Norquist sees it, the White House was so fixated on the symbolism of getting Republicans to say “uncle” on some form of tax increases on the rich that Obama lost track of both the substance and the larger tactical situation. In late December, when the automatic tax increase of the fiscal cliff was the threat, Democrats held all the cards. Now, with the automatic spending cuts of the sequester in play, the Republicans hold the cards. Why, Norquist wondered, didn’t Obama hold out for only a one-year deal on tax cuts, so that the Democrats would have the leverage of automatic tax increases to hold over the Republicans in the sequester negotiations and next year?
Great idea! I’d never heard anyone propose that gambit.
"Who came up with that?" I asked. "I did," said Norquist. He was worried that the Democrats would think of it. The White House should hire this man.
But what about Norquist’s famous pledge? Didn’t the New Year's deal on the fiscal cliff force Republicans to violate it? Not exactly. The New Year's vote was to allow taxes to stay at Bush levels for the bottom 99 percent and to revert to pre-Bush levels for the top one percent. Tactically, it allowed Republicans to say tax hikes were now off the table. As Chairman Mao might have said, one step backward, six steps forward. It’s the kind of pledge violation Norquist can take to the bank.
Norquist told me he was about to go on television to say what a great bargain it was, and prudently decided to keep his mouth shut until the deal was inked. Who is advising Obama on this stuff? Norquist kept asking me. Damned if I know.
A couple of months ago, Washington was filled with talk of Republican humiliation and division. Romney had cratered. House Speaker John Boehner and Majority Leader Eric Cantor were barely on speaking terms. Social issues were sorely dividing the Republican Party. The GOP’s spokesmen were either goofy or plumb ugly and mean, like the Kentucky Turtle who serves as their senate leader. Today, at least on the budget issues, Republicans are showing that if they hang tough on no-tax-increases, Obama will come to them. The latest talk is that Obama is persuading liberals like Nancy Pelosi to walk back her opposition to no disguised cuts in Social Security via a change on the cost-of-living formula. Democrats are evidently willing to discuss a ten-year budget deal that includes two or three dollars of spending cuts for every dollar of tax increase. Even Senator Patty Murray’s relatively liberal Senate budget is about a dollar in spending cuts per dollar of tax hikes. All signs point to a grand bargain in which Republicans, starting in the Senate, very reluctantly agree to close some loopholes, and Democrats throw Social Security and Medicare into the pot to get cuts that are “back-loaded” (bite more heavily in later years) so as not to depress the recovery. House Republicans then kick and scream—and take the deal. And once again, Norquist will decide that this deal did not really violate the sacred pledge.
Democrats, can’t you see how you are getting rolled? The only sensible budget on the table in Washington is the Back to Work Budget proposed by the Congressional Progressive Caucus, which includes more deficit spending and more public investment now, faster growth and job-creation, more progressive taxes on the rich, and eventual deficit reduction at a higher level of GDP. This is the only budget that is both smart economics, socially just, and good politics for Democrats. If Obama were the president we thought we were voting for, he’d be leading the charge for it. At least the eventual compromise would be far more progressive than what we’ll likely get.
Back in 2008, the word was that Obama was playing chess several moves ahead while everyone else was playing checkers. I prefer a poker metaphor. This is a president capable of folding a royal flush.