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What Obama Is Really Bargaining For

December 13, 2012

As the country waits to see if Washington avoids plummeting over the "fiscal cliff," let's consider what President Obama's demands reveal about his motivations.

Mr. Obama wants more revenues, lots more. He's asking for $1.6 trillion over the coming decade, twice as much as he had tentatively agreed to with House Speaker John Boehner this summer (until the president blew up the deal by demanding more).

According to a CNNMoney.com report this month, a sizable chunk of his current demand, some $200 billion, is for short-term spending on measures such as the extension of unemployment insurance benefits, infrastructure projects and the extension of the payroll tax holiday. The president also wants authority to unilaterally decide how much money the government borrows.

The tax increases and stimulus spending are similar to the budget he submitted early this year to Congress—a budget that was unanimously rejected. Nor will Congress surrender its right to set the debt ceiling.

So why ask for these things? Part of the explanation is ideological. The president does want to expand government's size, cost and reach in order to, in his words, "transform" America.

Mr. Obama's strategy is also partly political. The obvious budget deal is to agree to the GOP offer to raise revenues by closing tax loopholes and capping deductions and exemptions, while keeping the current tax rates. This is what Mr. Obama's deficit-reduction commission, aka Simpson-Bowles, recommended in December 2010, and Mr. Obama endorsed a cap on deductions last year to pay for a stimulus bill.

But the president is now less interested in raising revenues than in raising marginal tax rates on top earners. He apparently believes that Republicans, in a weakened state and defending an unpopular position, might buckle on a central GOP tenet, opposition to any increase in marginal rates. That might kick off a Republican civil war, resulting in divisive party primaries in 2014 that leave the president's opposition even more weakened and produce more subpar candidates like this year's Republican Senate candidates in Indiana and Missouri.

This brings us to Mr. Obama's real goal: having Democrats recapture the House in 2014 and once again stave off losses in the Senate.

Mr. Obama may be right that he can pit Republicans against Republicans, and there is a certain political logic to making this a priority—if you are the chairman of the Democratic National Committee. Still, the strategy will probably fall short, and it could cause him significant collateral damage.

Republicans will be the majority in the House of Representatives at least for the next two years. The president's actions now will make future cooperation more difficult. The less Mr. Obama achieves in the next two years, the more his party suffers in 2014 and perhaps in 2016.

Moreover, it is likely that the GOP will retain and even grow its House majority in 2014. Since 1938, the incumbent president's party has lost an average of 33 House seats and seven Senate seats in the midterm following a re-election.

It is not just history that suggests that the president's strategy for 2014 is a stretch. There are five Democratic representatives whose districts were carried by Mitt Romney and 39 other House Democrats re-elected with less than 55% of the vote. Seven of the 20 Democratic senators up next time are in states Mr. Romney won, six of which he carried by double digits.

To get things done, Mr. Obama needs both the House speaker and the Senate minority leader to be strong partners who can deliver on a deal when it is negotiated, even if they are of the opposite party. If Mr. Obama is successful in weakening Speaker Boehner, then it will be more difficult to get legislation like comprehensive immigration reform brought to his desk. On the other hand, the president may prefer to have immigration as an issue, not an accomplishment.

Mr. Obama's shortness of vision is puzzling. Ten years from now, what will be more important—that he raised marginal income-tax rates on the wealthy, or that he struck a bargain with new revenues and spending cuts that put America on the road to fiscal health and avoided a damaging crisis? The question answers itself. Or does increasing taxes on the top 2% really mean that much to the president?

Mr. Obama has less than two years before the window for serious legislative action comes to a close. All his bludgeoning of House Republicans to raise marginal rates may well appeal to his political instincts. But when the animating force for a president is humiliating the opposition rather than working with them, bad things usually come to pass.

This article originally appeared on WSJ.com on Wednesday, December 12, 2012.

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