Battle Over Tax Cuts Tests Obama’s Leadership Skills
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Battle Over Tax Cuts Tests Obama’s Leadership Skills

Minutes after their meeting broke up yesterday, President Obama and Republican congressional leaders sounded more conciliatory than at any time since the beginning of Obama’s presidency. But even as their upbeat comments were the talk of the town in Washington, battle lines were being drawn.

Republicans are united in favor of an across-the-board extension of the Bush tax cuts due to expire at the end of the year — something Senate Minority Leader Mitch McConnell, R-Ky., made clear. “We did have an opportunity to reiterate that it is the view of 100 percent of Senate Republicans and a number of Senate Democrats, as well, that the tax rates should not be bifurcated; in other words, that we ought to treat all taxpayers the same,” McConnell said at a press conference after the White House meeting.

That means there may be little give in the GOP negotiating stance — except on a timeline for extending the cuts. Perhaps the most Republicans would compromise was signaled by Sen. Jon Kyl, R-Ariz, the assistant Senate minority leader, who said on NBC’s Meet the Press on Sunday, “Obviously, we'd like to do it permanently, but if it's three or four years, that's fine, too.”

Obama's Options
Obama doesn’t have the luxury of a unified party. He has said repeatedly that tax cuts should be limited to those earning $250,000 or less, a position embraced tenaciously by his party’s base. These progressives insist that the president must hold firm.

But if Obama were to draw a line in the sand and resist even a temporary extension of the tax cuts for all taxpayers, he not only will be challenging Republicans, but also as many as seven Democratic senators who reportedly favor a temporary extension for everybody.

As the president weighs his options, it is clear this is a test of his leadership. Obama cannot handle it as he has other major issues, when he sat back as lawmakers hammered out the details, said Stuart Eizenstat, who was President Jimmy Carter’s top domestic policy adviser. “He will have to take the baton and try to fashion a compromise. It will be extremely difficult because he will be under pressure from the left in his party not to compromise on tax cuts above $250,000.

“The great balancing act,” Eizenstat added, “which Bill Clinton had after the ’94 elections, is to try to keep the base satisfied while at the same time showing independents and moderates that he can govern and that he understands the need to hew to the center … It is going to take a lot of creativity and talent and work.”

But what if the president refuses to budge on extending tax cuts to the wealthiest and Republicans don’t blink, sticking to their guns that the cuts must be extended for everybody? Might the moderates who deserted the Democrats in droves in the recent midterm elections be further turned off by a president who appears inflexible?

Liberals insist the public will rally to a principled stand against tax cuts for the wealthy at a time of high debt and deficits, especially since so many others are sacrificing, including federal workers who face a two-year pay freeze that Obama announced earlier this week.

“We have to be tougher negotiators in general, we Democrats,” Rep. Janice Schakowsky, D-Ill., said in an interview with The Fiscal Times. “The American people are worried about the deficit and the debt, which will be enormously increased if we extend tax cuts for the wealthy. All of these things are in play and the Republicans keep moving the goal posts. We have to draw some lines in the sand.”

Others are just as adamant that Obama must be tough. “We desperately want the president to hold firm on not extending the tax cuts for the wealthy,” Thea Lee, deputy chief of staff of the AFL-CIO, said in an interview with The Fiscal Times. “The Republicans have a different view on this. To me, that is sheer hypocrisy. They claim to care about the budget deficit; they claim to care about job creation. If they claim to be worried about those two things, then extending the tax breaks for the very wealthy should be at the very bottom of their list. Instead it is at the top and they are willing to go to the mat to fight President Obama and the Democrats.”

“It's really whose side are you on? The Republicans are on
the side of millionaires and billionaires. We're on the
side of the middle class.”

Others on the left agree that this is the moment to dare the Republicans to insist on extending tax cuts for the wealthiest Americans, even if their stance results in a breakdown in negotiations.

“You've got to draw a bright line,” declared Sen. Sherrod Brown, D-Ohio, on MSNBC’s Hardball with Chris Matthews. “It's really whose side are you on? The Republicans are on the side of millionaires and billionaires. We're on the side of the middle class. I think there's no better way to show that than this tax vote.”

Still, even the tenacious Schakowsky hinted at a way to a possible compromise — making a trade over both sides’ priorities. “I just can’t see ending this lame duck session with tax cuts extended for the wealthiest and not getting unemployment insurance. That is just completely off the table for me,” she said.

Schakowsky’s hope for some horse-trading is shared by other Democrats, who may seek other deals. Still, it won’t be easy. Despite the handshakes and rhetoric yesterday, there’s still animosity on Capitol Hill. This morning, every GOP senator signed a letter to Senate Majority Leader Harry Reid, D-Nev., threatening to filibuster any bill until action is taken to extend the tax cuts and to continue funding for the federal government, which expires at the end of the month. Votes on repealing the “Don’t Ask Don’t Tell” policy on gays in the military and on an immigration measure, among other priorities, would be put on the shelf until the other two issues are resolved. “The true effect of this letter is to prevent the Senate from acting on many important issues that have bipartisan support,” Reid said on the Senate floor earlier today.

Amidst these battles, Schakowsky insists that political benefits will redound to Democrats if they fight for the middle class. “I want to see the president project strength and especially a willingness to stand up and fight for the middle class,” she said. “Incredibly, the elitist label stuck to some Democrats in the 2010 elections. What we need to do is recapture the brand as fighting for the middle class — that’s a majority position in this country. I don’t really think it will splinter the party. It certainly won’t splinter the country.”

Is Obama as deft as Clinton was? We’ll see.

But Eizenstat contends that Obama should agree to a short-term extension of the tax cuts for everybody as a way to position himself to tackle these issues on a grander scale, as was done with tax reform legislation in 1986 and with the budget deal that Clinton engineered in 1995. “It would be a bad idea for Congress to leave with people uncertain as to what their taxes will be,” he said. “That would show a lack of governance, and Obama will get blamed even though it won’t be deserved. So get the best one-year deal you can and then come up with something that has more broad-based support.”

But is Obama as deft as Clinton was? In 1995, Clinton regained the political momentum when he refused to make large spending cuts in various programs that precipitated two government shutdowns. “We are going to find out,” Eizenstat said.