Monday, December 31, 2012

Jonathan Chait is surprised at Obama's negotiating over taxes:

Some weeks ago Chait argued that Obama had learned his lesson during the 2011 debt ceiling fight and would bargain tough with Republicans this time over the fiscal cliff (sorry, can't find the link to that essay).

At the time, it seemed a little naive of Chait, since Obama has repeatedly demonstrated a willingness to "pre-concede" to Republicans. Frequently, the only thing stopping a bum deal from going through was Republican opposition - usually from hard-line Tea Party types.

Now the focus is on the fiscal cliff and tax rates. Chait has written that Obama should take advantage of his tactical position, let the Bush rates expire, and work from there.

But that's not what we've been reading lately. Chait now reassesses:

Why Is Obama Caving on Taxes?

The discouraging thing about the “fiscal cliff” negotiations is not that they have gone into the eleventh hour, or that they may go into the new year, or even that they won’t resolve the long-term budget deficit. It’s that President Obama has retreated on his hard line on taxes. ...
Now, by all accounts, Obama is prepared to extend the Bush tax cuts up to $400,000 a year. Or maybe more. ...

The erosion signals not only a major substantive problem in its own right, but it also raises disturbing questions about Obama’s ability to handle his entire second term agenda.

The odd thing about the retreat is that Republicans had all but conceded eventual defeat on the issue. ...

What happened? The administration’s line seems to be that Senate Democrats undercut, or were going to undercut, Obama’s position. ...

... if Obama fears trying to hold a line that Senate Democrats have abandoned, it’s just as likely they fear the same about him. Obama’s history of foolish negotiating with the Republican Congress gave Democrats every reason to fear he might fail to hold firm on his own line — the burden lay with Obama to prove otherwise. And two weeks ago, when Obama made a concession to Boehner that he would let the Bush tax rates stay in place on income up to $400,000, he gave them every reason to doubt him.

... the effect of Obama’s concession to Boehner — which of course went unrequited — was to reset the tax debate at a new, more GOP-friendly level.

Worse, exposing Obama’s willingness to move his seemingly unmovable demand emboldened Republicans to demand even more. If they could push the line to $400,000, why not $500,000? Maybe cut Social Security too?The negotiating style Obama has displayed in these instances is what poker players call “tight-weak.” A tight-strong player avoids throwing in his chips, saving them for a big hand, which he plays aggressively in hopes of a huge win. A loose-weak player plays lots of hands, bluffing frequently. Tight-weak is the worst of all worlds — when you have a weak hand, you lose, and when you have a strong hand, you fail to maximize your position.

... the tax cuts are the one area where he enjoys overwhelming leverage over the Republicans. Their only threat is to block extension of tax cuts on income under $250,000, a wildly unpopular stance countless Republicans have acknowledged they could not sustain for long without courting an enormous public backlash. This is the hand where Obama needed to collect all the chips.

Instead he is allowing Republicans to whittle down the sum by essentially threatening to shoot themselves in the head. And this is the most ominous thing about it. The big meta question looming over Obama’s term is whether he has learned to grapple with Republican political hostage-taking. Hostage-taking is not simply aggressive or even irrational negotiating. It is the specific tactic of extracting concessions by threatening to withhold support for policies you yourself endorse, simply because your opponent cares more about the damage. Republicans agree that the debt ceiling must be lifted, but forced Obama to offer them policies he opposed because they believed he cared more about damage to the country than they did.

Obama claims, and seems to genuinely believe, that he won’t let Republicans jack him up over the debt ceiling again. But if Republicans could hold the middle class tax cuts hostage, they’ll try to hold the debt ceiling hostage. Indeed, they will probably discover other areas of traditionally routine policy agreement that can be turned into extortion opportunities.

Obama may think his conciliatory approach has helped avoid economic chaos. Instead, he is courting it.
This episode is not over yet, but it does appear that Obama's Ahab-like obsession with cutting a deal makes him a poor bargainer. There have been a number of theories as to why this is so. They are mostly psychological profiles, and somewhat speculative. But the bottom line is that Obama does not come off as a strong fighter for core Democratic party principles. It's been a source of frustration for liberals, and will likely be that way for the next four years.

UPDATE: Chait Tweets:

. I thought I had a good read on Obama, but this deal will make me admit I badly overestimated him.


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