With Tax Deal, Obama Embraces Clinton's 'Third Way'

By accepting his own reduced political standing and admitting Republican thinking into his own policy formulation, President Obama has plunged headlong into the political calculus known as triangulation.

That's what we called it back in the mid-1990s, when President Bill Clinton tried to save himself (and the last power the Democrats had in Washington) by posing himself against both Democrats and Republicans in Congress.

All the tough talk in the president's statement Monday night was directed at Republicans, who over the weekend blocked the president's effort to extend current tax rates except on income above $250,000 per family. They even threatened to filibuster an attempt to raise rates only on incomes of $1 million or more.  The GOP was ready to let taxes go up on everyone Jan. 1 (when current rates revert to higher rates from the 1990s) rather than permit a policy change unfriendly to the wealthiest.

But after the tongue lashing for the Republicans, the president proceeded to outline a deal that lacerated the Democrats. By agreeing to a two-year extension of tax cuts for the wealthy — sacrificing his own long-held position — the president can be seen as embracing the centerpiece of Republican orthodoxy. By doing so, the president is putting considerable distance between himself and the convictions of progressives everywhere.

Indeed, it is hard to imagine the Barack Obama of 2008 making such a deal, even if he got a payroll tax reduction and extended job benefits in the bargain. And that is not all. The president also agreed to reinstate the estate tax (after a one-year hiatus) only on estates larger than $5 million and at a rate of 35 percent, substantially reducing the revenue from this longstanding assessment on the wealthiest families.

The spectacle of this onetime community organizer signing off on a major reduction in the estate tax is enough to give plenty of Democrats a case of vertigo.

So who will be happy with this deal? In the short run, probably no one, including, as he said Monday night, the president himself.

Republicans will flinch at rhetoric they call "class warfare," even as they go to war for the uppermost class and risk the interests of all others.  Democrats will ask, with arms outstretched and mouths agape, how the man they put in the White House two years ago could have joined the "revolt of the haves" against the needs of the have-nots.

And the crossfire from both parties will be the point. That is how triangulation works.  If it works. Right now, Mr. Obama is betting his presidency on his own personal perception of the American voting public.  If he is right, he will likely win a second term.  If he is wrong, he almost surely will not.

He can read the polls that say most Americans do not favor tax cuts for the rich and are ready to see them expire. But he also knows the same Americans are loath to press the point if it means paying more taxes themselves. Most wage earners would rather have a few hundred or a few thousand to keep than savor the satisfaction of seeing the rich compelled to pay far more.

And in any event, as this White House calculates, the average American would rather not pay a suddenly higher tax bill in January just to prove that the Republicans can't get away with that old "class warfare" line any more.

Here's another way of thinking about the bet the president is making: It represents a wager that he can spend the next two years running against the popular distaste for both of the major political parties — including his own — while still seeking the votes of people in either party and people in neither.

If that seems implausible, it is.  But it is also precisely the path President Clinton followed on his way to a surprisingly easy re-election in 1996.

It should be remembered that Clinton achieved that re-election just two years after suffering a midterm election disaster just as bad as Mr. Obama endured last month. The Clinton response was to pose the two parties against each other and emerge as a third option. The operative term at the time was "Third Way."  Watch for something similar to emerge from the Obama White House in the months ahead.

The key here is not just to be different but to be closer to that ineffable American center than either of the two parties is or can be. The parties are animated by the heat at their innermost core, the fervor of their most intense supporters. We saw that in the primary defeat suffered by Republican moderates and some establishment conservatives in 2010.  We also saw it in the November defeat of Democratic moderates and the survival of Democratic liberals.

Propelled in this way, Republicans are willing to say "tax cuts for all or tax cuts for no one." They will brave the bad poll numbers because they think they will prevail and the voters will move on.  For their part, many Democrats will now rail and vote against the president's deal and risk having the current tax rates expire.  They believe they can ride the wave of popular anger that follows to a confrontation they can win.

Both parties are willing to go to the brink to please their base.  The president is betting the less intensely political middle of America does not want brinksmanship but statesmanship.  And he is betting that, in the long run, they will see his deal-making in such terms.  It is a high-stakes bet, not only for his own political future, but for the direction of the economy and the Republic as well.



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