Obama Won't Play That Way, Fiscal Cliff Edition

The president's hard line on the Bush tax cuts represents the first major test case for his theory that the GOP "fever" can be broken in his second term.

obamafiscalcliff.banner.reuters.jpgObama arrives to deliver a statement on the fiscal cliff in the East Room of the White House three days after being re-elected. (Kevin Lamarque/Reuters)

Goodbye, conciliator. Hello, Mr. Tough Love.

If Republicans are unwilling to compromise on allowing the Bush tax cuts for the wealthy to expire, America is going to go over the fiscal cliff at the end of the year. Whether out of firm belief or firm belief in saying it as a negotiating strategy, President Obama has made it abundantly clear that this is one area where he will not budge.

"Administration officials ... hardened their insistence that Obama is willing to take the nation over the cliff rather than give in to Republicans and extend the tax cuts for upper-income earners," the Associated Press reported Monday.

"We're going to have to see the rates on the top two percent go up. And we're not going to be able to get a deal without it," Obama told Bloomberg's Julianna Goldman on Tuesday.

"There's no prospect for an agreement that doesn't involve those rates going up on the top two percent of the wealthiest," Treasury Secretary Timothy Geithner said in an interview with CNBC on Wednesday. The administration is "absolutely" prepared to go over the fiscal cliff, he said.

In case there was any doubt, Obama repeated his position Thursday. "Just to be clear, I'm not going to sign any package that somehow prevents the top rate from going up for folks at the top 2 percent," he said during an event with a middle-class Northern Virginia family set up by the White House to press the president's case.

While Republicans are bemoaning the president's intransigence in hewing fast to a position he ran and won on in 2012, they might do well to look to their own behavior in setting up this month's epic power struggle with him -- and why he feels he's now in a strong enough position to stand firm on behalf of his agenda.

Obama laid out a theory for how his second term might go in remarks to donors at the Bachelor Farmer Restaurant in Minneapolis on June 1:

In this election, the Republican Party has moved in a fundamentally different direction. The center of gravity for their party has shifted. And so things that we used to be able to take for granted, that's been more difficult to take for granted over the last three-and-a-half years.

And let's just take one example: deficit reduction. We have a significant long-term debt that has to be dealt with. Now, our top priority should be putting people to work right now, because if our economy is growing faster, that actually will help reduce the deficit. But there's no doubt that it's unsustainable for us to keep on having health care costs in Medicare and Medicaid go up 6, 8, 10 percent, when the overall inflation rate and growth rate are coming in lower. That's a recipe for long-term disaster.

So what we've said is, look, let's cut out waste; let's streamline programs; let's reorganize government where we can. Let's end the war in Iraq; let's wind down the war in Afghanistan. Let's use some of those savings for deficit reduction. Let's tackle Medicare and Medicaid in an intelligent way that preserves this critical social safety net but also achieves significant savings. And let's ask those of us who've been most fortunate just to pay a little bit more. And if we put that package together we can achieve $4 trillion of savings and we can pay right now to rebuild our roads and our bridges, and rehire some teachers, and grow the economy right now. We can package that together to make progress.

And we couldn't get them to take yes for an answer -- because, ideologically, the notion of billionaires and millionaires paying a little bit more in taxes didn't adhere to the philosophy that they've been fighting for over the last several years.

Now, I believe that if we're successful in this election -- when we're successful in this election -- that the fever may break, because there's a tradition in the Republican Party of more common sense than that. My hope and my expectation is that after the election, now that it turns out the goal of beating Obama doesn't make much sense because I'm not running again -- that we can start getting some cooperation again, and we're not going to have people raising their hands and saying -- or refusing to accept a deal where there's $10 of cuts for every dollar of tax increases, but that people will accept a balanced plan for deficit reduction.

To summarize: If the "fever" of hard-line GOP opposition were to break, it would be on the question of revenues in advance of what would be a give and take on entitlements and a broader deficit reduction package. But in Obama's telling the fever would not be something brought down by endless negotiation. It would break when the GOP came around on raising taxes.

In addition to not budging on raising tax rates for the top 2 percent of earners, Obama has said he will not negotiate major budget cuts for the sort of debt-ceiling increases routinely granted to his predecessors. Reported Politico Wednesday of a meeting between Obama and the Business Roundtable:

The president also told the group that he would not allow Republicans in Congress to try and barter a debt-ceiling increase in exchange for more spending cuts, noting that the horse-trading alone over an increase last year sent the economy reeling.

"We can't afford to go there again," he said. "...The only thing the debt ceiling is good as a weapon for is destroying your credit rating... I will not play that game."

Here's the hand that's strengthening Obama's resolve:

1. He just won re-election having campaigned on getting rid of the Bush tax cuts for the top earners as a central plank of his next steps for the economy.

2. The majority of the public supports his position. A Quinnipiac poll released Dec. 6 showed Americans favored raising taxes on households earning more than $250,000 per year 65 percent to 31 percent.

3. Polling shows the public will blame the GOP for failure to come to a deal, raising taxes on all Americans. A recent Pew Research Center for the People & the Press/Washington Post poll found 53 percent said congressional Republicans would be more to blame if there's no deal by Jan. 1, while only 27 percent said they'd lay blame at the feet of Obama.

4. Obama is much more popular than Congress overall. Quinnipiac reports him with a 53 percent approval rating, while Congress has only a 9 percent approval rating, according to survey research from the Center on Congress at Indiana University.

5. If taxes go up, it will happen right at the moment Americans are feeling most financially strapped, thanks to the holidays, though it also won't happen in the first paycheck of the new year for most people.

6. No one wants to bankrupt America's charities, whether one could get the amount of desired revenue from capping deductions on charitable donations or not, just to keep tax cuts for the wealthy. Too many people rely on them for services. So that means that GOP strategy of relying on deductions is out, unless a Republican Party trying to recover from being painted as a bunch of scrooges and meanies during 2012 thinks it will help with a comeback to weaken private-sector funding for hospitals, schools, and arts groups to preserve tax cuts for the wealthy.

7. Obama is able to prosecute his case on the tax cuts and the debt ceiling with the public using all the tools and freshly organized power of his successfully concluded political campaign and the full power of the presidential bully pulpit, combined. The #My2K hashtag, the GOPHostageTakers.com site, the tweeting, the meeting with regular Americans -- it all has a familiar flavor.

8. Obama will have an even bigger platform for his views in January, thanks to the Inauguration on Jan. 21 and the timing of his annual State of the Union address.

"The president's idea of a negotiation is, roll over and do what I ask," Speaker John Boehner complained earlier this month. But Obama just solidly won reelection after a very nasty race. Why would he forgo pushing hard for his agenda right out of the gate, right after it was reaffirmed by the public?

The bottom line: The odds we go over the cliff are high if the GOP doesn't come around. Fortunately, it sounds like Republicans are starting to get the message.