Obama Blinked Again

After insisting for weeks that he would not consent to any spending deal on the debt ceiling raise without placing tax increases on the wealthy and making big corporations pay up by closing loopholes, President Obama caved and agreed Sunday to a largely GOP-crafted proposal to cut federal spending by over $2 trillion.

The proposal offers no new taxes.

Obama’s 180-degree turn is deja vu. Throughout 2010, Obama insisted he was going to let the Bush tax cuts expire.

Without getting any consent from Congress, Obama could have allowed the tax cuts to expire, raising rates on the wealthiest Americans automatically.

But Obama ended up extending the Bush tax cuts, including for the wealthy, and, wisely, even added additional cuts in the deal. He and Congress agreed to a significant cut in payroll taxes.

Frankly, I like it when Obama does the right thing. Tax increases during this economic recession simply would be crazy.

The latest GDP revisions, which showed the economy grew during the first quarter at a rate of close to zero, were horrifying. When one factors in inflation, the U.S. economy is contracting seriously.

So Obama played it smart once again and backed off of his tax increase demands.

Still, I am perplexed about what Obama is trying to accomplish.
Obama's "tax the rich" class-warfare rhetoric and open hostility toward corporations clearly is intended to placate his liberal base. If Obama really believed it, he could have allowed the Bush tax cuts expire last year.

At the end of the day, Obama's political strategy is strange and perplexing to me. Despite the rhetoric, his liberal base sees what I see — and it is furious about his pragmatic decisions.

Conservatives take Obama's rhetoric at face value and have no love for him, even if he ends up signing on the dotted line.

And the all-important swing independent voters see that Obama doesn't offer clear and consistent leadership. The walk doesn't match the talk. He is failing to give them confidence.

And really key for these independent voters is not what Obama says and does in Washington. They are looking for how he affects their lives. Is the economy improving? Do I have a job? Is my portfolio increasing in wealth? Clearly, voters realize Obama's promise has not been realized.

Obama should have eschewed his liberal base (they have nowhere else to go) and moved to embrace free market ideas to grow the economy, for example, by creating stimulus through tax cuts. But he won't do it. He's a prisoner of his own rhetoric.