President Obama has apparently decided what price Republicans should pay for their refusal to work with him the past four years: $800 billion.
That’s the difference between the amount of new revenue Republicans put on the table in the summer of 2011, when they pushed the country to the brink of a debt default, and what Obama is now demanding as discussions over the gradual fiscal slope open.
Obama will hold his first post-election press conference later today, and his press secretary indicated on Tuesday that he would use it to outline his call for $1.6 trillion in new revenue – to be achieved through an end to the Bush rates on income over $250,000, the Buffett Rule, and tightening loopholes. By contrast, as the Aug. 1, 2011, debt ceiling approached, House Speaker John Boehner had proposed a far more modest $800 billion revenue scheme, one that relied on reforming the tax code and not raising rates on the wealthy.
Whether Obama will get all or most of what he’s now demanding remains to be seen. There’s also the question of entitlements. The deal Boehner and Obama toyed with last year included cuts to Medicare, Medicaid and Social Security, and Republicans are now insisting they be included in any new deal. But Obama’s Democratic base is in much less of a mood to play along now, in the wake of their election victory, and is pressing the president hard to take entitlements off the table. It remains to be seen what Obama will be willing to accept on this front, but his opening offer on taxes at least suggests his appetite for cuts will be reduced.
This, of course, speaks to the leverage with which Obama suddenly finds himself. For one thing, he just spent the last year running for reelection on a promise to raise income tax rates on those making over $250,000. Now that he’s won a resounding victory at the polls, it’s a lot easier for him to insist on this provision. There’s also the basic nature of the Dec. 31 deadline policymakers are now facing. The immediate consequences of failing to reach a deal are a lot more favorable to Obama than to Republicans. And initial polling suggests that Americans would be far more likely to blame the GOP if a deal isn’t reached. So Obama is in a position to ask for a lot more than he asked for last year, and to give in on a lot less.
There’s another reason for Obama’s superior bargaining position: Republican hubris.
The story goes like this. When Obama was elected, Republicans immediately settled on a strategy of reflexive opposition and obstruction. If Obama was for it, they were against it – passionately and unwaveringly. And for this, they were initially rewarded. Burdened by a gruesome economy, Obama’s approval rating fell to under 50 percent early in his term, and his party suffered a midterm drubbing in 2010. The message Republicans took from this: Keep doing what we’ve been doing.
Except after 2010, they had a measure of power in Washington, since the election had given them control of the House. And in the first two years of Obama’s term, the GOP had been overtaken by the absolutist Tea Party movement, which believed not just in opposing Obama but also in cleaning the Republican Party of leaders who weren’t ideologically pure or who had any instinct for compromise. Sensing this movement’s power, most top Republicans gave in and played along – and the pressure to prove their purity only intensified after 2010.
This was particularly true in the House, where Boehner had no choice but to call for a vote in early 2011 on Paul Ryan’s plan to transform Medicare into a voucher program, and just about every Republican in the chamber had no choice but to support it. Boehner also had no choice but to play along with the purists in forcing confrontations with Obama over continuing resolutions to fund the government and turning the Aug. 1 debt ceiling deadline into a national crisis. Boehner, a Washington lifer who’d once been a pragmatist in the House, had an instinct to strike a deal with Obama, which is where the $800 billion revenue offer came from. But even that was too much for the true believers on the right, and to prevent a mutiny, Boehner was forced to pull back from the “grand bargain.”
What may have saved the country from a debt default was Wall Street, which panicked and pressured Republican leaders – who in the wake of Dodd-Frank were raking in massive sums of campaign money from the financial services industry – to cut some kind of a deal before Aug. 1. That’s where the “fiscal cliff” came from – a package of automatic cuts falling heavily on defense and largely sparing the safety net set to kick in on Jan. 1, 2013, in the absence of a deal.
Combined with the scheduled expiration of the Bush tax cuts on the same day, it was clear back then that Obama would have significant leverage if he could win reelection. But this is where Republican hubris comes in. When the deal was finally cut in 2011, Obama’s approval rating had fallen to the lowest point of his presidency, into the low 40s. Comparisons to George H.W. Bush in 1992 and Jimmy Carter in 1980 were beginning to seem apt. This sense was heightened on the right, where Obama’s presidency was treated as an epic failure from the very beginning, one that had alienated the majority of Americans. In other words, Republicans recognized that Obama would have the upper hand on the “fiscal cliff” if he could win reelection; they just figured he was a goner and that they didn’t have anything to worry about.
So now they will surely object to his $1.6 trillion revenue demand. But they have only themselves to blame for their weak position. A much, much better deal was theirs last year if only they hadn’t been too cocky to take it.