I think it's worth checking out Noam Scheiber's piece on Obama and end of his "grand compromise" trip. I don't know about other supporters, but I generally thought that when he claimed that there was no "red America" or "blue America" he was engaging in campaign rhetoric. When he claimed, as Ryan Lizza notes, that politics was mostly played between the "40 yard lines" I thought it was more packaging than principal.
After the midterm elections, Geithner's chief of staff, Mark Patterson, thought the administration should try to defuse the debt-limit issue once and for all before the incoming Republicans arrived. He drafted a law giving the president the authority to raise the debt ceiling unilaterally and sent it to the White House. To sell it politically, the president could explain that renewing the upper-income Bush tax cuts, as Republicans were then demanding, would cost the government $700 billion over ten years, forcing it to hit the debt ceiling sooner.The White House was initially interested, but dropped the idea once Republicans made clear they would oppose it. But, of course, the way to win concessions from obstructionist opponents isn't to sound them out quietly. It's to cause them public discomfort. As one former Treasury aide who was involved explains: "Imagine the alternative reality where the president comes out in December and says, 'I understand you want to increase the high-end tax cuts. But that will make the deficit go up. ... I am willing to do some of what you want to do, but you have to pay for it by raising the debt ceiling.'" At the very least, it would have put the GOP on the defensive.But the White House didn't have an appetite for going to war so soon after the midterms. Instead, it chose to bargain behind the scenes, renewing the Bush tax cuts in order to win more tax benefits for workers. "The feeling [at the White House] was, 'Let's go home, lick our wounds, sort it out.' There wasn't a lot of fight in folks," says the former Treasury aide. "We [at Treasury] were a little bit obsessed. They were, 'Yeah, yeah, yeah, we'll deal with it later...' "
Lew, Sperling, and Reed had served as top Clinton aides when the president had struck a budget deal with Republicans in 1997. The effort had led them to believe another deal was possible now. "The experience we had with the Republican Congress in the mid-nineties was that they came in and didn't want to reach agreement," says one Clinton veteran who returned under Obama. "But, by mid-'96, they were pleading with us to agree with them on something." Unfortunately, this analogy ignored some fundamental differences between the mid-'90s and 2011. Republicans were less extreme during the Clinton years--and as of 1995, the unemployment rate was under 6 percent. In 2011, on the other hand, the Republicans were in the grips of true fiscal fanaticism while the economy was distressingly fragile. Even if it were possible to eventually strike a deal, the country couldn't afford a prolonged debate over how to apportion the pain.
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