Articles

The Political Risks of Cliff-Diving

December 06, 2012

President Barack Obama has clear advantages in the public-opinion contest over the fiscal cliff. He recently won re-election, Democrats increased their Senate majority and the GOP controls only the House. In the Nov. 25 ABC News/Washington Post poll, 60% of respondents said they support "raising taxes on incomes over $250,000 a year," the centerpiece of Mr. Obama's approach.

Yet the president might be overplaying his hand—which would have ramifications not only for the fiscal cliff but for his entire second term.

It is often overlooked that Americans can hold conflicting opinions on the same subject at the same time. While Americans favor raising taxes on the wealthy, a Winston Group poll two weeks ago (conducted for the GOP House leadership) found just 26% of respondents agreeing that "given the state of the deficit, those making over $250,000 a year should have to pay 40% of their income in federal taxes." Some 68% disagreed. This is relevant because Mr. Obama wants wealthy Americans to pay 39.6% of their income in federal taxes, plus additional levies that would bring the total bite to at least 44.6%.

In the same survey, 60% said they believe taxes shouldn't go up for "small businesses that make over $250,000 a year." Yet the Obama plan would raise taxes on half of all small business income. As to the "better way to raise tax revenues," 61% said they prefer "reforming the tax code to lower tax rates and close loopholes," as House Republicans have proposed, while just 28% back Mr. Obama's plan for "raising tax rates on those making over $250,000 a year." So the GOP does have arguments to deploy.

The key for Republicans is to appear flexible rather than intransigent, willing to compromise rather than eager for a political smashup. This requires them to keep offering sensible alternatives and emphasizing that the country's problem is too much spending. It will eventually sink in with many voters that Mr. Obama previously endorsed the GOP's approach of generating more revenue through tax reform (not increased tax rates) and that his real goal is bigger government, not smaller deficits.

Still, the president has a big megaphone and few political figures are as comfortable as he is playing the blame game. So if he and Congress deadlock and the country goes over the cliff on Dec. 31, he will likely come out better in the court of public opinion. This might explain why his proposal last week wasn't serious. He doesn't think he needs to be, believing Republicans will cave.

But there are considerable downsides for Mr. Obama if the nation goes over the fiscal cliff. His approval rating (51% in the most recent Gallup Poll weekly average) will probably drop, as it did during the July 2011 debt-ceiling battle. While Congress's standing dipped a little then, the president's Gallup rating sank to 38% in August 2011 (from 47% at the start of the year). It didn't get back to 50% until April 2012.

By contrast, when Mr. Obama and Republicans amicably agreed to extend the Bush tax cuts for two more years following the 2010 midterm elections, his job-approval rating rose to 49% from 43% over the course of 10 days. Deadlock, controversy and stalemate cause Mr. Obama's numbers to drop. Bipartisan agreement causes them to rise.

If negotiations stall and Washington plunges over the fiscal cliff, it will weaken Mr. Obama's ability to bend Congress to his will, hasten the moment when congressional Democrats become more concerned about their standing than that of a lame-duck president, and further poison relations with Republicans.

On top of all that, a second-term president has total ownership of the economy. If the Congressional Budget Office is correct and going over the fiscal cliff causes the economy to shrink and unemployment to rise—while Americans see tax bills going up an average of nearly $3,500—then Republicans won't escape blame but neither will the president. The damage to him may be long-lasting.

A weakened Mr. Obama makes recruiting and preparing for the 2014 midterms easier for Republicans and harder for Democrats.

This article originally appeared on WSJ.com on Thursday, December 6, 2012.

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