Tax Analysts Blog

Is Obama the Worst Legislative Negotiator of the Last Century?

Posted on Jan 1, 2013

Some day, I’d like to get President Obama at my poker table. Whatever your feelings about the fiscal cliff and its optimal resolution, one thing is clear: Obama doesn’t know a winning hand when he sees it.

On the merits, yesterday's fiscal cliff deal is pathetic. It does nothing to solve the nation’s long-term fiscal problems, it guarantees an immediate rehash once the debt limit runs out next month, and it ensures that pretty much every American will still see a substantial tax hike (since it doesn’t include a payroll tax cut extension or similar replacement), That means middle class Americans can expect to see their after-tax incomes fall by about 1.5 percent. Which, in turn, should shave about 0.6 of a percentage point off GDP growth. So we've got that to look forward to.

But what’s really amazing about this deal is how completely Obama bungled it. He entered this fight with a biggest political edge than he's had at any time during his presidency. And probably a bigger one than he will ever see again.

Judged simply in terms of governing skill, the deal is a remarkable self-inflicted wound. It's not the deal you make when you hold all the cards. It’s the deal you make after calling the GOP bluff. After you let the tax cuts expire. After you introduce your own plan to cut taxes for The 98 Percent,. After you’ve dared the Republicans to vote against that tax cut. And after they've inflicted even more political harm on themselves by doing exactly that. At that point, and only then, do you make a deal like this.

Maybe Obama knows something I don’t know. Maybe he knows to a certainty that a week or so on the far side of the fiscal cliff really would send the economy into a tailspin. Or maybe he’s just a better person than I am.

But speaking as an historian -- as someone who’s spent a lot of time examining the partisan politics of previous decades – I think it’s safe to say that Obama is among the most shockingly inept negotiators to occupy the White House in a century. Maybe shockingly is the wrong word, because he seems almost deliberately inept. By the time most presidents get to the Oval Office, they know a thing or two about how to win a political fight. But even after a full term of on-the -job training, Obama still doesn't get it. Even Jimmy Carter -- in my estimate, the reigning champion among lousy negotiators during the last 75 to 100 years -- could have done better than this.

Obama entered this debate with impressive advantages. He has now obliterated all of them. And he's certainly reassured Republicans that he is still the same easy mark he’s always been.

Read Comments (7)

Ray in BowieJan 1, 2013

I'd like to know what he should have done that the GOP would endorse. I agree
with your argument, but you're not dealing with rational people here. In fact,
reinstating the Making Work Pay credit in lieu of the payroll tax and
substantially raising the rate of taxation on Cap Gains & Dividends (Carried
Interest?) should be obvious, but not to these neanderthals. Both were
non-negotiable. Idiotic.

Rusty SteeleJan 1, 2013

At times like this I wish our republic operated on a parliamentary system of
governance.

Vivian DarkbloomJan 1, 2013

You make it sound as though Obama had a grand plan to reduce the budget deficit
and he did not get what he wanted because he was out-negotiated by those foxy
Republicans. Your sense of "history" apparently begins before the Obama
candidacy for president.

Obama "bungled it" long before these negotiations started. He bungled it by
not having a realistic plan to reduce the budget deficit in the first place. He
actually ran on that platform and won. The sole element of that plan was to
increase taxes on "rich". He *promised* not to raise taxes one penny on those
earning Less than $250K and he promised not to reduce entitlement spending.
And, in his "bungling" he got most of what he wanted:

--increasing income tax rates back to Clinton-era rates for those earning more
than $400K (vice $250K which is not a big overall deal when it comes to the
deficit);
--*On top of* the above, 3.8 percent increase on investment income for those
earning more than $250K and 0.9 percent on earned income above that amount (all
dedicted to additional spending---none to lowering the deficit);
--Increased taxes on dividends and capital gains;
--Re-introduction of PEP and Pease;
--Higher estate and gift taxes and lower exemption threshold (again, the budget
effect of not getting the Fully Monty is negligible);
--*No* spending cuts and in fact an increase in spending by extending
extraodinary unemployment benefits;
--More candy to preferred business sectors such as bio-fuel subsidies, etc.
.

And yet, you write: "It does nothing to solve the nation’s long-term fiscal
problems...". No kidding, but his dream plan would not have done that. You
are confusing having a bad policy plan with failing to negotiate a result
inconsistent with that plan. Have you ever heard the phrase "Be careful what
you ask for"?

If Obama "bungled it", does that mean, from your unique and rather peculiar
"historical perspective" that he's left himself open to later agreeing to
spending cuts that might, just might, reduce the long-term budget deficit?

AMT buffJan 2, 2013

I'm convinced that Obama intends to ignore the debt ceiling and keep issuing
Treasury debt. Who's going to stop him? Not the courts, not the voters, and
almost certainly not the markets, at least not immediately.

I don't think Obama is very concerned about having to concede anything to get a
debt limit increase.

Edmund DantesJan 4, 2013

The permanent AMT inflation patch is probably the largest single tax cut in the
history of taxation, amounting to trillions of dollars. Getting the Democrats
to abandon that weapon makes this deal a long-term victory for Republicans.

vivian darkbloomJan 9, 2013

" Getting the Democrats to abandon that (AMT) weapon makes this deal a
long-term victory for Republicans."

Edmund,

The AMT patch was always part of the tax policy agenda of Democrats---at least
the one they are publicly promoting. Here's the Tax Policy Center's description
of Obama's tax proposals as contained in his FY 2013 budget:

"The "adjusted baseline" used in the president’s budget in place of current law
assumes that the 2011 AMT parameters—exemptions, rate brackets, and phaseout
thresholds—are permanently extended and indexed after 2011 for inflation. As a
result of this baseline assumption about changes in the AMT, no revenue loss is
shown in the president’s budget for an AMT patch. Relative to current law,
however, the president’s proposed AMT patch would reduce revenues by $1.9
trillion between fiscal years 2013 and 2022."

Whether this is a "tax cut" or failure to allow a tax increase depends entirely
on the baseline used. There is little question, however, that the "AMT Patch"
was never part of the Democratic Party agenda. You cannot "abandon" a position
in negotiations when you never held in the position in the first place.
Because Obama got exactly what he proposed in his budget, it doesn't sound like
a "Republican victory" to me. It does strike me as a very rare example of
bipartisan good sense.

Grubber FunquistJan 10, 2013

Huh? We've just seen one of the largest tax increases in American history -
taxes, according to the far-left NYTimes, are the most "progressive" since
1979. So, while I agree that Obama is busy destroying the country, on tax
policy at least, the Republicans got thrashed without so much as a whimper.

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