The Fiscal Cliff Spectator

A President Loses His Power

If you want to know why King Louis XVI Obama is pouting…

By From the May 2013 issue

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He stood astride the republic. He had real power. The first time he had it taken away. The second time he gave it away. 

PRESIDENT OBAMA is not Saul Alinsky or Richard Nixon—aware of how one gets power and uses it, or self-aware when he loses it or faces the greater power of others. He is more Louis XVI, believing power is his birthright. It just happens. It isn’t supposed to be taken away. It never fades. He plays with it, then tosses it aside like a child fondling a pearl, ignorant of its value. When he drops or loses the pearl, he pouts and demands his toy back. 

First time out, Obama was elected president in 2008 with 53 percent of the popular vote and 365 electoral votes, along with a Democrat-controlled House and Senate. He commanded one-party rule in Washington. There was no real opposition. The national media were alternately cheerleaders or groupies who challenged nothing and excused everything. His party held a 79-seat majority in the House of Representatives and 59 votes in the Senate. (That later became a filibuster-proof 60 votes when Al Franken was declared the winner in Minnesota.) With Nancy Pelosi and Harry Reid in charge, the president could raise any tax and pass any legislation. Obama acted as if this was the natural order of things and that it would last forever. No need to play defense or focus on the long term. 

Almost immediately, Obama chose to throw an $838 billion stimulus spending spree. This, in conjunction with Obamacare, spawned the Tea Party and a backlash that took away his 60th vote in the Senate when Scott Brown was elected in Massachusetts. Then in 2010, his Democratic majority in the House was tossed out. Two years of power as complete as exists in American national politics ended and were followed by two years  in which others held the power to say no. The Republican House wrestled away $2.5 trillion in spending reductions as the price for increasing the government’s “debt ceiling.” Obama could pass no new legislation. His first term lasted two years.

AFTER WINNING a second term last year, Obama again wielded very real power. Yet by January 2, 2013, 57 days after winning re-election and before his inauguration, he’d already given it away. Not since George Washington declined a third term has an American president voluntarily surrendered real power so nonchalantly. And at least Washington did so on purpose. Obama foolishly did not understand what he was sacrificing.

Obama’s big stick was the “perfect storm” of three temporary tax cuts that were scheduled to lapse on January 1, 2013: the Bush tax cuts of 2001 and 2003 and the Alternative Minimum Tax (AMT) patch. No vote needed to be taken by Congress. The total automatic tax hike amounted to $500 billion in 2012 alone; over 10 years, it would be $5 trillion, the largest tax hike in the history of the world. This sword was in Obama’s hands thanks to the Republicans’ failure to extend these tax cuts when they had the power to do so in 2005 and 2006.

Republicans in the House and Senate were opposed to higher taxes. Almost all had signed the Americans for Tax Reform Taxpayer Protection Pledge, promising to vote against all efforts to increase net taxes. But since the tax increases were automatic, they were powerless. The GOP House did twice pass legislation to extend the lapsing tax cuts, but it was never brought up for a vote in the Senate. 

Obama could decide to allow all $500 billion in automatic tax increases to take effect, or only just some of them. He had the power of the Roman emperor to stand above the crowd and hold out his thumb, up or down.

He focused on hitting just the top 1 or 2 percent of American earners. He said this was in the name of fairness. One notes that the top 1 percent already pay 40 percent of total federal income taxes, and the top 10 percent pay 70 percent. The top half of earners pay 98 percent of all federal income taxes. But Obama’s sense of social justice demanded that the “rich” pay their fair share, which meant “more.” 

Obama spent the months of November and December reveling in his power to get his pound of flesh from the rich. He thought, as he sat across from Republican negotiators, that he was empowered by his election victory, his personal popularity as measured in polls. He misunderstood. His power flowed from the fact that he held the fate of a $500 billion annual tax hike in his hands.  Like an upriver landowner with a dam and sluicegate, Obama alone would decide how much income would flow and to whom and for how long.

He chose to take $600 billion in tax increases over the next 10 years. That was 15 percent of the tax cuts that were lapsing. His increases targeted the top 1 percent. On January 1, taxes automatically increased $500 billion. On January 2 the Congress voted to cut taxes $280 billion that year and $3.7 trillion over the decade. Many Republicans voted against the final “compromise” even though it technically was a significant tax cut. They didn’t want to be in the room when taxes increased, even though it was automatic and there was nothing they could have done to stop it.

But the most important point is this: 82 percent of the Bush tax cuts of 2001 and 2003, along with the AMT patch, have now been made permanent, never to lapse again. The only way to increase taxes in the future will be for Democrats to pass a bill through both the House and the Senate and have the president sign it. By making this deal, Obama unilaterally disarmed. He no longer holds the leverage of automatic tax hikes. Had he extended the tax cuts for just one or two years, he would have maintained the threat of automatic tax hikes—significant leverage in debates on sequestration or the debt ceiling or the budget.

WHY, THEN, DID HE give away power? There are three schools of thought. First, Obama believed his own press clippings. He really thought he was in possession of a mandate, that the world would bend to his will, because he won the election. But elections are good for four years; popularity endures until it doesn’t. He mistook the source of his power in the fiscal cliff negotiations and didn’t understand that making the lapsing tax cuts permanent removed his unanswerable threat and ended his power.

Second, after Republicans agreed last year to delay the debt ceiling vote and the imposition of the sequester, Obama believed they were retreating. The courtier press reinforced this by joining in the premature celebration. What was really happening was more akin to the Carthaginian troops falling back in the battle of Cannae…luring the Romans into believing they were collapsing. Republicans wisely took the debt ceiling vote and the sequester—an automatic spending cut of $1.2 trillion over the decade—away from and outside the blast radius of the fiscal cliff negotiations where Obama held the power.

Third, Obama assumed that he had the whip hand on the looming sequester fight just as he did in the fiscal cliff talks. Here the establishment press created some of his confusion, because they paraded Senators John McCain and Lindsey Graham  across the TV networks to announce that they spoke for all Republicans in preferring anything—anything—to reductions in the increases in the Pentagon budget. Obama assumed the GOP would raise taxes, or at least delay or kill the sequester, to protect its precious Pentagon spending. But the “defense spending is sacrosanct” caucus in the Republican Party now has approximately 20 members, and 17 of them are newspaper columnists without a vote in the House or Senate. The small-government worldview is in control now. Obama misunderstood the changing correlation of forces.

So now we are in sequestration. Now the spending cuts are automatic. The Republicans have the upper hand. Obama cannot raise taxes or reduce the sequester without a majority vote in the House and Senate. And it is unlikely that Speaker John Boehner or Majority Leader Mitch McConnell will give away control as easily as Obama did.

That’s a lot of power to lose in such a short period of time. 

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About the Author

Grover G. Norquist is the president of Americans for Tax Reform.