In budget arbitrage, a test of Obama's political skills
iht.com
By John Harwood
Friday, February 27, 2009
WASHINGTON: Whatever else it is, President Barack Obama's budget is a political gamble of the first order.
In his ambition to put his own stamp on liberalism and to move domestic policy leftward, Obama has much going for him.
The nation seems to be yearning for leadership, and his political standing is strong. In an era where taxpayers and markets are confronting bad numbers in the trillions, the price tags on some of his initiatives do not seem quite so breathtaking, and, in any case, good economic policy demands that the fiscal floodgates remain open for a while. Populist anger could render Republican arguments against taxing the rich less powerful.
But Obama faces many constraints. He is asking Congress to take on a wide-ranging set of complicated issues all at once, after years during which it had trouble grappling directly with almost any of them. His own party remains seared by the last time it followed a new Democratic president on a course of tax increases and ambitious social engineering. Interest groups, while demonized by the White House, have hardly fled from Washington and are already mobilizing for battles that could have big winners and losers.
Like Ronald Reagan and Franklin D. Roosevelt, Obama "does have the advantage of a crisis," said Representative Tom Cole, Republican of Oklahoma.
"The politics of the country are changing profoundly and rapidly," Cole continued, "much as they did in 1932 and 1980."
But, he added, "if he is wrong, and I believe he is, Democrats will pay a hefty political price."
Whether Mr. Obama has overreached or succeeded in putting the nation on a sharply different course will largely depend on the same political skills that delivered him the presidency.
To translate the vision embedded in his budget into legislation he can sign into law will require assembling coalitions on Capitol Hill issue by issue, holding together his own party while peeling off Republicans here and there. To keep the pressure on Congress, he will have to keep public opinion on his side through what could be a long, deep recession and through necessary but unpopular steps like allocating hundreds of billions more taxpayer dollars to bailing out banks.
"The economic crisis has destroyed the credibility of the premises that have dominated public debate since the late 1970s," said William Galston, a top White House policy aide under President Bill Clinton. "This doesn't mean that Obama has sold his alternative, only that he has an opening to make his case."
These Reagan-era political premises largely emerged from stagflation, in which high inflation and slow growth during the 1970s crimped the rise in living standards that American families had enjoyed after World War II. With top income tax rates then at 70 percent, the conservative movement Reagan led prevailed by persuading middle- and upper-income voters that tax cuts, reduced regulation and less government spending on social programs would benefit them.
Clinton challenged those premises during the 1990s, promoting a combination of tax increases, deficit reduction and "investments" in health care and other priorities that foreshadowed Obama's approach. But the force of the nation's political turn toward markets and away from government curbed his agenda; congressional Republicans blocked his "stimulus" spending and took control of Congress a year after he pushed through tax increases, and soon he declared, "The era of big government is over."
Now Obama is building a case that an era of Republican dominance has bequeathed a set of problems that demand a more active government capable of restoring fairness to the American model of democratic capitalism.
Fearful Americans have watched their retirement savings decline with the Dow Jones industrial average, enhancing appetites for government help instead of the vagaries of the markets. They have grown angry at those they hold responsible, notably corporations and the lavishly paid executives who run them.
"The public is ready for a new burst of activism and to pay for it in part by raising taxes on what you might call the undeserving rich," said Will Marshall, a policy adviser to the Democratic Party's centrist, pro-business wing.
Tony Fabrizio, a Republican pollster, said, "If the battle is, 'You can have free health care if we only tax rich people making over $250,000 a year,' most will say, 'Where do I sign up for the free stuff?' "
Yet the same electorate has also grown convinced that much government spending is wasteful. And the attacks on Democratic tax increases that proved so powerful for Reagan and then for congressional Republicans under Newt Gingrich have not lost all their potency. "This is dangerous territory and can be taken a step too far," said Mark Mellman, a Democratic pollster.
Republicans have begun scouring Obama's budget for ammunition to persuade middle-class voters they will be hurt.
Obama's senior adviser, David Axelrod, predicted that the president would be shielded from political fallout by his decision to direct tax increases toward the most affluent; to focus on priorities like energy, education and health care; and to monitor the effectiveness of government programs. Asked about opponents' "tax and spend" charges, Axelrod replied, "You shouldn't get trapped in an old construct."
One new construct lies in the shape of the Obama-era electorate. For reasons that in some cases are unrelated to economics, like social issues or the Iraq war, many of those affluent taxpayers the president wants to finance his agenda enter the debate as his supporters, not opponents.
In November, exit polls showed, Obama defeated Senator John McCain among voters with incomes of $200,000 or more by 52 percent to 46 percent. |
