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How 'Trojan Horse' Strategy Strengthened Obama's Current Edge

David Corn's "The Myth of the Obama Cave-In" in Mother Jones is one of the most perceptive analyses of President Obama's legislative and economic strategy yet written. Corn, a solid left-progressive and author of "Showdown: The Inside Story of How Obama Battled the GOP To Set Up the 2012 Election," tells the story of how the President shrewdly took the heat from his left flank and let the Republicans crow about how they forced the President to accept a renewal of the Bush tax cuts during his first term. In reality, however, Obama achieved something of immediate benefit to working people and laid the groundwork for a host of progressive reforms that were not likely to pass had the President chosen to let the tax cuts expire. Corn explains, citing:

...a notion that took root within the mainstream media and progressive circles: Obama surrendered in the lame-duck session of late 2010, when he and the Republicans tussled over continuing George W. Bush's tax breaks for the well-heeled. In this view, weeks after the president's party was trounced in the midterm congressional elections and weeks before the tea partyized GOPers were to take control of the House, Obama, who had vowed during the 2008 campaign to kill those tax cuts, acceded to Republican demands for continuing tax relief for those pocketing more than $250,000 a year. The establishment media reported that Obama had lost the showdown; liberal House Democrats and progressives off Capitol Hill complained Obama had turned his back on his promise and blinked. There was grousing that Obama either had no taste for a political battle or no spine (or both) and that he had sold out a fundamental principle.

However, explains Corn, "that narrative was wrong when it emerged--and it is not the key to predicting what Obama will do in the present predicament." Corn adds:

...Obama didn't wave the white flag in 2010. He turned a face-off over the Bush tax cuts into an opportunity to enact a second stimulus that he otherwise could not get past Senate Republicans. His failure at that time was not that he mustered insufficient mettle; he failed to convey to the world that he had jujitsued the GOPers.

...A game of chicken was on. Obama and the Democrats claimed the Republicans were holding tax cuts for the middle class hostage. (No tax breaks for the rich, then no tax breaks for anyone else.) And the GOPers were daring Obama to stick to his position, see all the tax cuts perish, and end up being blamed for a rise in taxes for everyone.

...In the fall of 2010--both before and after the midterm elections--Obama and his aides cooked up a different script. Fretting that the slow recovery was bottoming out, they had been searching for ways to juice up the economy. But they knew the notion of additional stimulus was a political nonstarter. Though Obama's original stimulus had worked, raising employment levels by millions of jobs (according to the nonpartisan Congressional Budget Office), Obama had lost that message war. The idea of government spending to boost the economy had become discredited. (See the tea party victories in the congressional elections.)

Obama's aides, though, also knew that by the end of the year there would be some legislation regarding the Bush tax cuts--however that knotty issue was to be resolved--and they came up with a plan to turn this measure into something of a Trojan horse that could contain (or hide) various stimulative measures. Before the midterm elections, Obama's economic team began compiling a list of possibilities, including a payroll tax cut and various tax credits.

At a postelection meeting with labor leaders and progressive activists, several of whom were itching for a tax cut fight with the Republicans, White House aides were blunt. To win these stimulative shots, Summers told them, we're going to have to give up on killing the tax cuts for the rich. "Getting more for our people is more important than getting less for their people," he said at the meeting.

The heat from the left was formidable, and many progressives began to angrily denounce the deal as a sell-out. Corn notes, however, that "Obama was willing to eschew the fight his Democratic comrades yearned for in order to win something bigger and better: more stimulus to aid the ailing economy." Corn adds:

...Obama was looking to rack up other accomplishments during this lame-duck session, before the House would be in the hands of tea partiers. He was hoping to end the Pentagon's Don't Ask, Don't Tell policy, to ratify the New START nuclear arms reduction treaty, and pass the DREAM Act reforming immigration law. If he went DEFCON-1 on taxes with the Republicans, there would be no opportunity to steer these other measures through Congress in the holiday season, as it was wrapping up its business. It was quite clear: a bare-knuckles brawl on taxes would mean no more stimulus and no chance to abolish Don't Ask, Don't Tell, ratify that treaty, or pass any other legislation.

So Obama went after a deal. And what Biden cooked up with McConnell was pretty good for the White House. The package would extend the Bush tax cuts for all taxpayers for two years and would reduce estate taxes for the wealthy (a move many Democrats couldn't stand), but it also included a payroll tax cut, a child tax credit, additional unemployment insurance, renewable energy grants, and other stimulative measures. A White House chart noted that Obama had won $238 billion of stimulus in return for yielding on $114 billion in high-income tax cuts.

"In policy terms," Corn explains, "Obama clearly had gotten the better deal." However, "the media depicted the compromise as a loss for Obama, and progressive Democrats squawked mightily about the continuation of the tax cuts." However, adds Corn, "This was not full capitulation. It was a strategic retreat to accomplish a bigger mission." Corn quotes President Obama:

Well, two years ago, the economy was in a different situation. We were still very much in the early parts of recovering from the worst economic crisis since the Great Depression. And ultimately, we came together not only to extend the Bush tax cuts, but also a wide range of policies that were going to be good for the economy at that point--unemployment insurance extensions, payroll tax extension--all of which made a difference, and is part of the reason why what we've seen now is 32 consecutive months of job growth and over 5.5 million jobs created and the unemployment rate coming down...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.

All of which puts the President in a stronger position to challenge the Bush tax cuts this time around. As Corn concludes, "What happened two years ago is not an indication that Obama is likely to yield in the new face-off, but that he will be assessing the political dynamics in gridlocked Washington and be willing to bargain hard for a good deal with true benefits. That's not caving in. It's governing."