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Obama’s Message, Still Loud and Clear: Taxes for the Wealthy

Will President Obama and congressional Republicans make a deal on taxes before January 1, when the Bush tax cuts are set to expire? Will they let a set of automatic spending cuts take effect? Will they find a new way to boost job growth this coming year—or, at least, renew temporary boosters like extended unemployment insurance? I have no idea. Nobody in Washington does.

But after Wednesday’s press conference at the White House, I’m even more convinced that Obama isn’t treating this political confrontation the way he did the last two, in the winter of 2010 and the summer of 2011. This time, he has leverage over congressional Republicans. And on the question of the Bush tax cuts, the issue that has sparked the most controversy so far, he is using it.

To review the positions quickly: Republicans want to extend all of those cuts indefinitely. Obama and his Democratic allies want to extend only those that apply to low and middle incomes. They want the tax cuts that apply to incomes above $250,000—cuts that would benefit only the wealthiest Americans—to lapse. 

Ending those high-end tax cuts has always been Obama’s preference, going back to his 2008 campaign. But in late 2010 he agreed to extend them for two years. At the time, Obama said it was a one-time deal, necessary to concessions like the extended unemployment insurance. Many of us have wondered whether he’d live up to that promise and, at Wednesday’s press conference, CNN’s Jessica Yellin channeled those doubts into a blunt, but fair question:

Two years ago, sir, you said that you wouldn’t extend the Bush-era tax cuts, but at the end of the day, you did. So, respectfully, sir, why should the American people and the Republicans believe that you won’t cave again this time?

Obama’s answer was unambiguous: 

...what I said at the time is what I meant, which is this was a one-time proposition. And what I have told leaders privately as well as publicly is that we cannot afford to extend the Bush tax cuts for the wealthy. What we can do is make sure that middle-class taxes don’t go up.

Obama restated that position at several other points in the press conference, albeit in different ways. He called upon the Republican-controlled House to pass a bill, which the Senate has already approved, extending the low- and middle-income tax cuts. He noted that failing to act quickly on middle-income tax cuts might dampen holiday shopping—a clear signal he wants a deal now, not two months from now. And he warned the Republicans in Congress not to take the middle class “hostage” by refusing to accept his position—which, he reminded them, commanded support from an even larger majority than voted for him last week.

Did he leave any wiggle room? In the last few days, Republican congressional leaders have suggested they might embrace a deal that raised revenue, but only if the new revenue came from closing loopholes and assumptions of high growth—in other words, anything but letting the top rates go back up. And on Wednesday, Obama did say:

I am open to new ideas. If Republican counterparts or some Democrats have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn’t getting hit, reduces our deficit, encourages growth, I’m not going to just slam the door in their face. I want to hear ideas from everybody.

But this was less of a concession that it might have sounded because, as Obama pointed out, the Republican alternatives won’t simply generate enough revenue. "It’s very difficult to see how you make up that trillion dollars—if we’re serious about deficit reduction—just by closing loopholes and deductions," the president said. "The math tends not to work." Obama reiterated that point later on, emphasizing that if the wealthy don't pay more now then everybody else will pay more later.

What I will not do is to have a process that is vague, that says we're going to sort of, kind of, raise revenue through dynamic scoring or closing loopholes that have not been identified. And the reason I won't do that is because I don’t want to find ourselves in a position six months from now or a year from now where, lo and behold, the only way to close the deficit is to sock it to middle-class families, or to burden families that have disabled kids or have a parent in a nursing home, or suddenly we've got to cut more out of our basic research budget that is the key to growing the economy in the long term.

You don't have to take my word for it. After the press conference I checked in with some Democratic Hill staffers who, in the past, criticized Obama for ceding too much ground to the Republicans. I heard no such criticism this time, nor have I in the last few days. "I think it was exactly right," one senior House aide told me. "He left a little room but made it crystal clear that top two rates had to increase." 

So why is Obama being so much more aggressive this time around? The obvious answer is that he can be. The economy is stronger, his job approval numbers are higher, and he just won reelection with votes to spare. Also, Republicans simply don't have the policy leverage they did previously—when, for example, doing nothing caused the nation to reach its debt ceiling.

But other factors may be at work. For one thing, he’s simply gotten better at navigating this terrain. The opening of Wednesday’s press conference was virtually identical to the remarks he made on Friday, in his first public appearance since the election. That’s boring—and effective. It’s the kind of message discipline he frequently lacked during his first term.

It's also possible—and this is pure speculation—that Obama’s goals have changed. For better or worse, depending on your perspective, Obama has always thought of himself as a transformational leader, somebody who can do what no other political leader could. And for much of his first term, one transformation that he seemed to covet was an end to traditional partisan rancor. If that meant conceding a little extra ground in order to get a deal on spending and deficits—say, by accepting more spending cuts for just token amounts of revenue—he seemed willing to do it.

Political circumstances demanded some bipartisanship then, just as they do now. Republicans still control the House and wield a filibuster in the Senate. But Obama’s strong language and his insistence that the wealthy effectively cough up nearly $1 trillion in new revenue suggest the actual terms of a deal matter a little more to him this time around. The transformation he seeks isn't a coming together of the parties. It’s a crushing of Republican opposition to higher taxes on the wealthy—and a significant reduction in the deficit. 

Or maybe not. Maybe Obama will start giving a lot more ground if Republicans don't. Or maybe Obama will make other concessions, agreeing to cut Medicare benefits or giving up essential job boosters like extended unemployment insurance, for the sake of a grand bargain that has liberals exasperated all over again. At the moment, though, Obama is acting like somebody ready to fight for progressive values. It's what he did throughout the presidential campaign—and partly why he won.

Update: I changed an early reference to make clear the current controversy is about only the Bush tax cuts. The future of other tax breaks, such as the temporary payroll tax break, hasn't gotten much attention. And as Matthew Yglesias very properly points out, renewing the payroll tax holiday—or finding some suitable substitute—is critical for sustaining the recovery. Obama has spoken in general terms about the need to keep the economy going; it was actually the first thing he said in his prepared remarks on Wednesday, just as it was last Friday. But the payroll tax specifically has received virtually no mention either from politicians or pundits.