While His Base Rages, Obama Faces Tax-cut Reality

Reality strikes. Barack Obama spurned the advice of columnists Paul Krugman and Katrina vanden Heuvel and agreed with Republicans to extend the current income tax rates -- the so-called Bush tax cuts -- for another two years.

He got a few things in return, primarily extended unemployment benefits for another 13 months, and agreed as well to a 2 percent cut in the Social Security payroll tax.

But he recognized the reality that in order to prevent a tax increase on those with incomes under $250,000 he had to prevent a tax increase on those over that line, as well.

This has infuriated liberal Democrats like outgoing Speaker Nancy Pelosi, but they share some of the blame themselves. They probably could have passed their version of the tax bill earlier this year, before the economic recovery stalled in the spring.

But with the economy faltering, there's a strong argument against raising anyone's taxes -- strong enough to have persuaded many congressional Democrats.

Obama had to abandon his goal of raising taxes on high earners not because Republicans opposed it but because not enough Democrats supported it. Pelosi couldn't summon up a majority on the issue back in September, and Harry Reid could get only 53 of the needed 60 votes this month.

Democrats, not Republicans, are responsible for extension of all the "Bush tax cuts."

Still, Obama in his surly statement Monday evening and his unusually brief press conference Tuesday afternoon, was at pains to attack Republicans.

The president who first came to national attention for expressing respect for those with whom he differed insisted that he was eager to "fight" Republicans and described them as "hostage takers," with the American people as hostages. Not much evidence of civility.

And he addressed most of his remarks to what last month's election revealed as a narrow segment of the nation's electorate, the Democratic base.

Over the years, I've noticed that politicians tend to view the whole nation through the prism of their electoral base, even when they know it's not typical. On Monday and Tuesday, Obama seemed to be aiming his remarks at the 13th state Senate district of Illinois, which he designed and which is about 60 percent black and 25 percent gentry liberal, not to the political independents who supported him and his party in 2008 and then went heavily Republican last month.

Thus Obama lauded the health care bill jammed through Congress by Democratic leaders and, addressing liberal complaints that it lacked a public option, said it could be expanded as Medicare was. That might mollify liberal Democrats but will repel independents, who opposed and still oppose Obamacare by wide margins.

Obama did argue that "tax breaks for wealthy individuals" are unpopular and would prove a political liability for Republicans in 2012. But for every poll supporting that proposition you can find another going the other way -- it all depends on how the question is worded.

The strongest part of the press conference came when Obama told liberal Democrats that robust economic growth will make everything easier. That's true: Robust growth produces a boom in revenues far beyond what government statistical models predict. In 1995, Bill Clinton refused to even promise to balance the budget, but the tech boom generated enough revenue to do so a few years later.

But that raises the question of why the economy has been growing at such a limp rate two years into the Obama administration. The specter of higher taxes on high earners -- delayed now for two years, but still threatened by the president -- surely has done something to choke off growth.

So has uncertainty about the extent and cost of the administration's regulatory policies -- which are not limited by the deal on taxes. Extension of unemployment benefits, arguably good policy at a time when jobs are genuinely scarce, tends to perpetuate unemployment as the economy grows, by inducing some workers to hold out for higher-paying jobs.

The tax deal is certainly better for the economy than political gridlock over extending the tax cuts. How much better is uncertain.

But the Democratic base seems more interested in expanding government than in stimulating the economy. They are bellowing with rage not so much at Obama but at the reality that he is grudgingly acknowledging. They had their time, and now it's gone.

Michael Barone, senior political analyst for The Washington Examiner, is a resident fellow at the American Enterprise Institute, a Fox News Channel contributor and a co-author of The Almanac of American Politics.

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