The Price of Politics (12 page)

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On Monday, Biden called Pelosi and other key House Democrats to the White House Roosevelt Room to give them the good news.

“We got a good deal,” Biden said. “I told your leaderships on Saturday night when they were at my house that we were working on this,” and here it is. He attempted to summarize, mentioning now that the Bush tax cuts for all would be extended for two years.

Blindsided, the House Democrats erupted. There were raised voices, raw emotions, even shouts of anger.

“I thought we were going to be part of these negotiations,” said Van Hollen. “I thought I was going to be at the table. We weren’t at the table.”

This is brutal, thought Sperling, who was backstopping the vice president. He knew it was a bitter pill, having to extend the Bush tax cuts for the top income brackets. In the White House they were grieving too, but they’d had time to come to terms with the idea.

“Speaker Pelosi,” Sperling interjected, “remember what we did in ’93? Remember when we passed the Earned Income Tax Credit? I went back and totaled up how much difference that made. It was like $150 billion to $200 billion.” The EITC, a “refundable” credit, reduces the tax burden on poor and middle-class families, and if the amount of the credit exceeds taxes owed, the difference is “refunded” to the taxpayer. It will be extended under the new agreements, he said, and they should consider the power of that.

“In the Recovery Act [the stimulus of 2009] you fought to increase the child tax credit of $1,000, and to increase the refundability. The Republicans are saying they’ll extend it for two years. If they extend it for two years, it could go on and on. This could be a great legacy for you.”

Sperling rolled on. Under the deal, 2 million people would have their unemployment insurance extended for 13 months, and 8 million students and their families would see an extension of the American Opportunity Tax Credit, which provided college tuition assistance.

Pelosi replied that the vice president was going to have to personally present the deal to all the House Democrats. She wasn’t going to sell it for him.

Ron Klain also sensed the grief in the room, and he knew it wasn’t just the result of giving in on a fundamental tax issue. The sorrow was amplified by the recent election results. Pelosi—just two years earlier the first female speaker of the House—was suddenly going to be minority leader. They would all be moving to smaller offices, giving up committee chairmanships and the larger staffs and status that come with being “Mr. Chairman.” And for the 63 Democrats who had either been voted out or were retiring, passing this deal would likely be their last act as members of Congress. The political setback was enormous.

When Obama entered the Roosevelt Room, having just returned from a speech in North Carolina, the mood was still angry.
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“I’m drawing a line in the sand after this,” Obama promised, trying to rally the group. This was his final compromise on taxes. “Let’s protect the fragile economy. Come the next round when these things expire, I’m holding. Not happening again.”

Biden had walked over to the Cabinet Room to break the news to the leading Senate Democrats. Most seemed resigned, but not Senator Chuck Schumer of New York. Schumer was a showman, and the joke among reporters on Capitol Hill was that the most dangerous place in Washington was between Chuck Schumer and a television camera. He had personally engaged the tax issue with a so-called Schumer amendment to continue the Bush tax breaks for everyone except those who made $1 million a year or more.
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That meant 315,000 Americans would pay at the pre-Bush top marginal rate of 39.6 percent. McConnell and the Republicans voted unanimously against opening debate, which Schumer said was proof that they loved and protected rich people.

“Joe,” Schumer said to Biden, “you’ve got to let this go on.” Schumer planned to make the Republicans vote again and again and again, to embarrass them.

“Chuck, you had your vote,” Biden said. “You got your press release. You’ve got whatever political gain we’re going to get out of this.” Time to move on. “If we do this now, we can get the tax thing done. We can also get START done. We can also get Don’t Ask, Don’t Tell done.” The nuclear weapons treaty and the elimination of the ban on gays serving openly in the military were two of the Democrats’ major goals. There is too great a cost for waiting. Scoring political points two years before the next election? Biden asked. No one would remember.

Biden’s most sensitive conversation was with Harry Reid, who had not been included in the negotiations.

Reid was frosty. “You guys went and did this deal,” he told Biden. “You go sell it. Not my deal, not my problem. Not telling you I’m against it, not telling you I’m for it, not yelling at you, just saying you guys made this deal. Hope you can line up the Senate Democrats behind you because I’m not going to.”

Later, the president wanted Reid to come to the White House to discuss the deal. Obama’s life and his operating style had been built
around avoiding confrontation. Reid’s had been about having confrontations. “I’m not going to come in after the fact,” Reid said. “No, Mr. President, you went and did this. You’re going to have to live with it.”

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At 6:30 that night Obama announced the deal from the White House.
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The Republicans, he said, wanted to “make permanent the tax cuts for the wealthiest 2 percent of Americans,” and he had held the extension to two years.

It was spin. The Republicans would have liked to make the cuts permanent, but it was never a serious part of the negotiations.

“There are things in here that I don’t like, namely the extension of the tax cuts for the wealthiest Americans and the wealthiest estates,” the president said.
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“It’s not perfect.”

However, he said, the result would keep taxes from going up by “$3,000 for a typical American family.”

“I’m not willing to let working families across this country become collateral damage for political warfare here in Washington.”

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In the end, Biden and Klain realized, it had been an easy deal to make. Everyone had gotten what they wanted. “We walked in with a big bowl of candy and said, ‘What do you want?’ ” Klain said. “Allocating goodies in negotiations is a little easier than allocating pain.”

But not all Democrats were happy with the distribution of the goodies. Many on the left viewed the president’s compromise as tantamount to betrayal. Ohio Senator Sherrod Brown accused the president of “blowing a $700 billion hole” in the budget in order to give tax cuts to the rich.
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It was in this atmosphere that Obama appeared before reporters on December 7, and held forth on the necessity of compromise.
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He sounded as if he had been robbed at gunpoint.

“The middle-class tax cuts were being held hostage to the high-end tax cuts. I think it’s tempting not to negotiate with hostage takers, unless
the hostage gets harmed,” he said. “In this case the hostage was the American people and I was not willing to see them get harmed.”

Looking back on the negotiation, the president later told me, “There’s no doubt that the politics of it, as well as the substantive policy of extending the high-end tax cuts as well as the middle-class tax cuts, was very difficult and hard to swallow, partly because it was hard to justify that [top] 2 percent contributing significantly to economic growth.
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But we were in a political situation, having just gotten slaughtered in the House races, and the Republicans feeling ascendant, where we felt that what we did end up negotiating would give the best chance of continuing to grow the economy. Essentially, we were willing to swallow some stuff that was not as helpful to get all the stuff that was helpful.”

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On Wednesday, December 15, the Senate voted 81–19 to approve the tax deal, and the next day the House passed it 277–148.
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Most of the no votes came from 112 Democrats.

What was noted only in passing in most news accounts was that the cost was about $900 billion over two years, more than the controversial stimulus bill. It would be funded by increasing the deficit and the national debt by that amount.

In other words, it wouldn’t be paid for.

Bruce Reed, who had been the staff director of the Simpson-Bowles commission and who would soon take over for Klain as Biden’s new chief of staff, said, “The era of deficit denial is over.
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They’re just having a big year-end close-out.”

On December 15, Don’t Ask, Don’t Tell repeal passed the House, and three days later it was approved by the Senate and went to the president.
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On December 22, the START treaty was ratified by the Senate 71–26.
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Privately, McConnell thought the Republicans got the better end of the deal. If they had not taken over the House and picked up five seats in the Senate, he reasoned, they never would have gotten the deal. The victors didn’t roar into Washington and pillage like in the old days, but they had momentum on their side.

Biden felt that in the 45 days since the staggering political defeat of early November, Obama had stabilized his presidency. They were back in the game.

On February 11, Biden spoke at the University of Louisville’s McConnell Center, which had been personally endowed by McConnell.
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A 1964 graduate, McConnell loved the university and was a self-described “rabid” fan of its sports teams. He had invited Biden to speak. The McConnell whisperer’s theme was that the political system was not broken, that progress could be made, and that not only could Republicans and Democrats work together, but they often like each other. “They do,” Biden said. “They really do.”

At the White House, Biden’s Senate style of doing business had, for the moment, supplanted the House approach, exemplified by Rahm Emanuel’s “We have the votes. Fuck ’em.”

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The administration’s success in getting several of the more controversial items on its agenda through the lame-duck session of Congress gave rise to criticism, from Democrats, that the White House ought to have pushed to settle the upcoming debt ceiling issue as well.

“We saw coming that this debt ceiling could end up being a problem because, historically, that’s always an unpopular vote.
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Nobody, certainly on the other side of, or in the other party to, the White House, feels like this is a winner to them,” Obama later recalled.

“A whole bunch of people would say, Why didn’t you get a deal on the debt ceiling back in December? Because you should have anticipated this was coming. We knew it was coming,” he said.

“Mitch McConnell, who knew he was gaining seats, and John Boehner, who knew they were gaining seats, were not going to go along with a situation in which we got a free pass on a debt ceiling, or were they going to put on a whole bunch of votes to let us off the hook on the debt ceiling,” he said with a laugh. “They were very explicit about it. So it wasn’t for lack of trying or lack of awareness. We just couldn’t get it.”

S
ummers resigned as head of the National Economic Council effective the last day of 2010.
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Later, one night at Harvard, he gave an associate his private conclusions about Obama and what was driving him. “I don’t think anybody has a sense of his deep feelings about things. I don’t think anybody has a sense of his deep feelings about people. I don’t think people have a sense of his deep feelings around his public philosophy.” He found Obama to be a judicious manager who did not have driving, long-formed and long-held convictions on the issues. He was not ideologically driven.

Once, in a conversation on the longtime liberal cause of disability insurance, the president said he realized that sending excessive payments to people who were not working would lead them to not return to work. There was what Summers told others was an “excessive pragmatism” in the president, causing him to have some difficulty in taking a line and sticking with it. It is not a political triumph to have the left outraged at you and the business community think you’re a socialist, Summers said.

One day, he said, the president would decry the “fat-cat bankers,” and then later call top bank CEOs like Jamie Dimon of JPMorgan Chase and Lloyd Blankfein of Goldman Sachs “savvy businessmen,” adding that he didn’t begrudge them their success or wealth.
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Summers
said he thought Obama should have taken a consistent line more reassuring to business. Though he had been the chief business contact for the administration, Valerie Jarrett was the ambassador, and Summers said the president paid a price with the business community for keeping her in that role.

“And she sure talked like she was speaking for [the president],” Summers said, “and he didn’t disabuse them of that, so I think they felt patronized and offended by Valerie.”

Summers found the president defensive in some interactions with business leaders, which wasn’t effective. The Jarrett solution was often, “We’ll just set up three more lunches with the president and business leaders.” She had the view that if you simply arranged more meetings, that would solve any problem. But the interactions had an emptiness that made the problem worse. Sometimes, it’s not a good idea to have a meeting and discussion.