Democratic Self-Destruction

On tax cuts, the far-left chooses electoral suicide over economic stability.

The rift between President Obama and his once ardent supporters on the far-left widened even more yesterday. The House Democratic Caucus voted to reject Obama’s tax deal with Republicans, and Speaker Nancy Pelosi indicated that she wouldn’t bring the bill to a vote on the House floor unless changes were made. The president and his team continue to try to push House Democrats to pass the measure as is, but the divergent interests of the White House and leftist Democrats in the House appear to be irreconcilable. Obama needs to extend the tax cuts if he’s to have a chance of resurrecting the economy and winning re-election in 2012 -- and if extending those cuts for higher-income earners is the price to pay, so be it. Yet, extending the tax cuts for the so-called rich is the last thing that Democrats who represent safe districts dominated by progressives can afford to do. Demonizing the Bush-era tax cuts has been a leading theme of the progressive narrative for the better part of a decade. There is simply no way that voters in leftist havens like San Francisco, Berkeley and Cambridge would ever forgive their congressperson if he or she did a volte-face now.

Still, while the self-interest that motivates House Democrats to draw this line in the sand is understandable, there is still a surreal quality to their defiance. They cannot win. The only real question is how badly will their party lose, and the petulant House members who continue to defy both their president and common sense are surely aware of it. It is akin to a poker player going all-in even though he only holds a pair of fours and has to play with his cards face up. The tax cuts will be extended, either now or when the next Congress is seated in January. If the lame duck House doesn’t pass the bill, the only practical effect will be to stir up further resentment among voters in the center and the Right; anger that could equate to an even worse disaster for Democrats in 2012 than they suffered in 2010.

If the Democrats in the House are successful in killing the bill during this session, the newly elected, Republican-led House will surely bring tax cuts back to the table next year. That bill would undoubtedly contain far fewer of the spending provisions in this bill that some conservatives find so troubling. Such a bill would be crafted to pass the House and the Senate, leaving the president with a decidedly uncomfortable choice. He could sign the bill, which would enflame even more of his leftist base, because it would not only include tax cuts for “the rich,” it would contain less sops to the Left than the original version. Or, he could veto the bill, which would virtually ensure continued economic stagnation, and likely a deepening recession. That’s a decision that Obama desperately wants to avoid, which more than explains his eagerness to get this deal done as quickly as possible.

Right now, the president seems to have enough support among the center and the Right to get the tax bill through both chambers. Yet, the longer the debate drags on, the more that support will erode, because disenchantment among conservative Republicans is growing. The cost of the bill is estimated at $990 billion by the Congressional Budget Office, although the use of the word “cost” is a bit disingenuous. Most of the costs are calculated in terms of lost revenue as applied to current economic conditions. If the bill is successful in generating economic growth, then the “cost” would be substantially mitigated. Yet, if we accept the $990 billion figure, than $343 billion of that (about 35% of the total) is chewed up by provisions that conservatives believe are counter-productive and unnecessary, like extending unemployment benefits and the payroll tax holiday. In contrast, $79 billion (about 8% of the total) of the predicted revenue loss can be attached to extending tax-cuts to those who earn over $250,000 per year.

The longer that conservatives in Congress have to do the math, the more that they are likely to conclude that this isn’t such a good deal after all. They’re giving up an awful lot of spending that they don’t want, in return for a modicum of tax breaks that they believe are important. Why bother? If the Left is determined to kill the deal, why not let them? If Pelosi and her pals can keep the bill from reaching the House floor, it’s all the better. Republicans will be able to pass a bill that’s even more attractive to the private sector and less “stealth-stimulus” than this one. Assuming that the president signs it, the GOP will have an even stronger leg to stand on in 2012 with regard to economic issues. And, if the president doesn’t sign it, the economic disaster that the nation has endured will be even worse, which will in turn further alienate voters from the Democratic Party.

Barack Obama and his advisors are savvy enough to grasp all of these outcomes. That’s why they are pushing so hard for their party to accept the current tax break deal before the Republican support they so desperately need evaporates. This episode represents the classic, Clintonesque test of the Obama presidency. Can the president triangulate and deftly move toward the middle? Will he ultimately be the kind of unrepentant ideologue that leads his party toward disaster, or is he too foolish to understand the difference? The next two weeks will tell, during which, Barack Obama will have to make some very tough, very important, and very presidential decisions to make.