Try as he might, Obama can't shake Bush tax cuts

[August 03, 2011]  WASHINGTON (AP) -- Time and again during his presidential campaign, Barack Obama was unequivocal: "We are going to roll back the Bush tax cuts for the wealthiest Americans."

But when the chips were down, now-President Obama blinked and backed away.

Twice in less than nine months, Obama has shelved his pledge in deadline-pressing negotiations with congressional Republicans. Obama insists he still is determined to find new revenue by making taxpayers who make more than $200,000 and big corporations pay more, but frustrated liberals say he has already missed key opportunities.

Inaction on taxes and his willingness to consider structural changes to Medicare and Social Security, long-cherished Democratic programs, have strained relations with some Democratic lawmakers and liberal backers who complain Obama has been too willing to backtrack from his positions. The increasingly urgent twists and turns over raising the government's debt ceiling placed Obama's concessions in sharp relief.

"It's his wanting to be the reasonable guy and thinking this is the way to appeal to independent votes," said Lawrence Mishel, president of the labor-leaning Economic Policy Institute. "I think he's engaged in a fool's game that ultimately won't win him independent voters and will actually just hurt people and the economy."

The Bush tax cuts would have expired in December of last year, but Obama agreed to extend them in a deal cut with Senate Republican leader Mitch McConnell during a lame-duck session of Congress. In exchange, Obama won a payroll tax cut and an extension in jobless aid. Overall, the president came out ahead then, winning a repeal of the ban on gays serving openly in the military, a nuclear-arms agreement with Russia, even a food safety bill.

Since then, Obama has had to deal with the Republican-controlled House and his compromises have been more evident. He and House Speaker John Boehner avoided a government shutdown in April by agreeing on immediate spending cuts in domestic programs. But the debt ceiling has been his biggest test, raising the risk of a potentially disastrous government default.

The president initially insisted that an increase in the debt ceiling could not be linked with efforts to reduce long-term deficits. In time, he relented to Republican demands. He then stipulated that any effort to lower deficits had to contain spending cuts and new tax revenues.

Polls showed public support for a mix of cuts and taxes. But in short order, tax revenues were off the table at the insistence of Republicans, and Obama was left to endorse a Senate Democratic bill that would raise the debt ceiling by his requested $2.4 trillion but cut spending by $2.2 trillion, including $840 billion in non-war spending by government agencies.

"Once he went down the road of being willing to cut the deficit and had to move constantly to the right to try to get a deal, it made it virtually impossible for him to talk about letting the Bush tax cuts expire," said Roger Hickey, director of the liberal Campaign for America's Future. "That was the No. 1 thing Republicans wanted to prevent."

A "grand bargain" with House Speaker John Boehner, R-Ohio, would have achieved nearly $4 trillion in deficit reduction and would have included up to $800 billion in new tax revenue. But Boehner broke off those talks.

The $800 billion in revenue would have been virtually the same as the amount generated by repealing the Bush tax cut for people making $200,000 or more. But under the deal, tax rates would have been simplified, with the top rate remaining at the current 35 percent. The revenue would come from eliminating loopholes, tax breaks, subsidies and myriad deductions.

The solution ending the stalemate over the debt ceiling contains a requirement that Congress undertake broader and deeper cuts. If Congress does so, the failed Obama-Boehner negotiations could form a foundation for that agreement.

But it could force Republicans to agree to reduce deficits with new revenue and for Democrats to accept such changes as an increased eligibility age for Medicare, higher premiums and co-pays for wealthier recipients and lower cost of living adjustments for Social Security beneficiaries.

Even as he signed the debt limit bill into law Tuesday, Obama once again sounded his now-familiar call for higher taxes on the wealthy as a tool to curb budget deficits. He said there would have to be a "balanced approach where everything is on the table. ... It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share.

"And it means getting rid of taxpayer subsidies to oil and gas companies and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses."

[Associated Press; By JIM KUHNHENN]

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