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December 31, 2012

Obama Ready to Fold on Tax Rates

Posted in: Barack Obama

During the campaign President Obama’s big promise was to end the Bush tax cuts for income over $250,000 a year. After the election Obama made some very firm statements about sticking to this promise, but it now looks like the administration will abandon it in the deal being worked out between VP Joe Biden and Mitch McConnell (R-KY).

President Obama backed away from his $250,000 demand earlier as part of a possible far-reaching deal with Speaker John Boehner. Yet even though that big deal fell apart, Obama still let the GOP basically pocket this concession in this new smaller deal. It is this concession to the GOP that seems to have so angered Sen. Tom Harkin (D-IA) and made him say that “no deal is better than a bad deal.”

How much revenue will lost because of moving the rate to $400,000 may end up being less important than how this move affects all negotiations moving forward.

First, it signals to the GOP that Obama simple can’t draw lines in the sand. If Obama says he will not negotiate on something (say, the debt ceiling), any Republicans would be foolish to believe he won’t. Obama has never held firm before, and there is no reason to expect him to in the future.

Second, it again reinforced that the best negotiation tactic with Obama is for the Republicans to be purposely disingenuous. The GOP should pretend to be close to a deal so Obama publicly says what concessions he will make, only to have the GOP predictably blow up the deal. After that, the GOP can start negotiations again but use Obama’s concessions as the new goal posts.

After Obama again reinforced his image of weakness, I shudder to think how the next fight will go when Democrats inherently have significantly less leverage.

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