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Why Democrats Surrendered on Taxes…

December 8, 2010 by  
Filed under News, Politics, Weekly Columns

( The tax fight was lost before it began, so President Barack Obama decided to play for a tie.

Nowadays it’s popular to apply the “bad poker player” analogy to President Barack Obama and Democrats when it comes to their failure to match wits with Republicans on expiring tax cuts. The New York Times’ David Leonhardt has a “Kenny Rogers Theory”: Democrats can’t figure out when it’s time to hold ’em or fold ’em. But that’s not quite it, because they fold all the time.

Progressives urged Obama to call the GOP’s bluff. But it didn’t look as if Republicans were bluffing on what they’d do to extend tax cuts. Democrats’ problem, as any good poker player will tell you, is that they haven’t figured out that in order to win, you have to force the other guy to make a decision about his chips before he forces you.

Instead they made a deal Monday night that gave the GOP what it wanted: extending the life of Bush-era 35 percent maximum tax rates for all brackets for two more years. It’s not only a retreat from Obama’s pledge to cut taxes only for those households making under $250,000; it also means that rates will be set to expire again — just in time for Republicans to dust off the issue and drag it back out for the 2012 presidential election.

Democrats had a chance to have a showdown over taxes before the election, when Republicans had something to lose — but they didn’t. They could have voted on unemployment benefits before taking up the tax issue, making Republicans vote against an extension right at Christmastime. But to do that, they would have had to be willing to lose — and they were not — even if half the unemployed people they think they represent probably voted Republican in November. So Republicans got the lower tax rates and a chance to flog the issue again two years from now.

Obama didn’t get what he wanted, but he got what he had to have politically: a mercifully short debate and a chance to come out looking reasonable in comparison with both parties in Congress. Congressional Democrats didn’t get anything they wanted, and if they’re indeed playing poker, right about now they look like the guy who has to cut his Vegas trip short because he’s all out of cash and got sick eating too much $4.99 prime rib.

But if they’re confused about what went wrong, they shouldn’t be. The tax debate was lost a long time ago, and Democrats have only themselves to blame. It feels like ancient political history now, but it was the president’s ill-fated dialogue with “Joe the Plumber” that got Obama off on the wrong foot on taxes. He turned his own reasonable, nuanced explanation of his tax proposals into a punch line when he said he wanted to “spread the wealth” — and he’s never been able to shake it.

Then, desperate for a bumper-sticker-sized slogan, Democrats tried to shame Republicans out of a tax cut for “millionaires and billionaires.” But they forgot that most Americans want to be rich. Instead of trying to convince families making $251,000 that they’re well off, Obama would have done better telling people over and over that he’s worth millions, and he’s so rich that he’d be glad to kick down and pay 39.6 percent on his taxes.

And the outgoing lame-duck Democratic majority should remember that throughout 2009, the left insisted that Obama spend all rather than save some of his political capital. They pushed as much legislation as they could under the mantra “Elections have consequences,” and in the process exposed Obama to a 2010 cycle where he was fresh out of political capital that would have come in handy on the tax issue — or the “Ground Zero mosque” issue, or the Gulf oil spill or WikiLeaks. Elections, indeed, have consequences.

Now some liberals are saying thatObama caved. Even MSNBC’s Joe Scarborough — a Republican — chided Obama for “deciding to throw in the towel on tax cuts before the opening bell rings.”

But the more realistic view, as Slate’s John Dickerson observes, is that postelection items on the Dems’ wish list — like an extension of benefits, or an up-or-down vote on the START treaty — “come with a price determined by the GOP.” So now the president is going his own way. In poker terms, he mucked his hand and stayed at the table instead of going all in before the flop.

Obama is counting on getting credit in the short term for rising above partisanship. But even if the economy improves, he’s taking a risk, because that credit won’t come from Republicans. They’re unlikely to reverse course two years from now and agree to let the lower rates expire. Next time around, they’ll insist on more tax cuts and ask for big cuts in government — cuts that will be unpopular with just about everyone. Next time around, Obama is going to have to play a hand.

But if the current compromise pans out for Obama with voters in the long term, one day they might be calling it a great political laydown. Place your bets.

Written By David Swerdlick

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