Tuesday, December 28, 2010

Has Obama's Comeback Started?


A string of legislative successes have left some pundits arguing that Obama has already started his comeback. I’m not so sure.

Let’s start with the tax cut package. It is true that Obama was able to extend unemployment compensation. But the Bush era tax rates were extended, and in a way that will give Obama less maneuvering room in future tax fights. The tax rates will expire again during the 2012 elections. Obama and his advisors will not want to run in the general election having opened themselves to charges of overseeing the largest tax increase in American history. To mitigate this, Obama may only extend tax breaks for the middle class. Regardless, it will be a tough spot as Republicans typically have the advantage on taxes. If Obama capitulates and agrees to extend taxes on the wealthy as well, he will come under immense pressure from his base, which he needs to turn out in force.

Besides, I think anything that could be defined as a political comeback needs to improve Obama’s chances of winning reelection. Ratifying START and repealing “don’t ask, don’t tell” may well make America safer and fairer. But I don’t see significant political upside. Gays and lesbians already voted heavily for Obama, and I just don’t see the average voter caring as much about something like START when the economy is still front and center.

Obama’s fortunes will still rise or fall with the economy. To the extent that any of the measures including the tax cut package accomplish that, then they will indeed fuel a comeback. In terms of policy, the next year with an emboldened Republican majority could well have a large impact on the economy. It will certainly be interesting to see what Obama can accomplish.

The next Congress will make some important decisions. Obama will have to make some substantive moves on the deficit to reassure worried moderates, but making specific cuts in programs risks upsetting voters. Republicans will try to repeal and defund Obamacare, and so Democrats could be left defending unpopular features like the mandate. There is plenty of room to slip politically.

Of course, this is all hard to judge right now. I think comebacks are only easy to spot in retrospect. On election night 2012, we may call this the beginning of his comeback. We’ll have to wait and see.

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