Obama Supporters Looking for a Sign in Tax-Cuts Brawl

The other day I had lunch with a fellow active in Democratic fundraising, and he told me about a multimillionaire (nearly a billionaire) who was once a big backer of President Obama. Now this mega-money man says no more. Why? I asked. Obama, my lunchmate replied, doesn't have a spine. And when I was in California this past weekend, several Obama supporters I encountered also expressed intense frustration with the president, each asking a version of the question: When is he going to start fighting?

I understand why people wonder that -- even though the president beat his Republican opposition on the Hill on health care reform, the stimulus, Wall Street reform, and other key matters. Many of those battles became enshrouded by a legislative fog, in which Obama adopted a nuanced and sometimes hard-to-follow legislative strategy. He won, but it didn't always look as if he was swinging hard at his foes -- while they were certainly blasting away at him.

As George Bush notes in his limited and self-serving memoirs -- especially in the chapter on Hurricane Katrina -- perceptions count greatly in politics. If Obama's natural supporters don't believe he's waging the good fight for their side, he's in trouble. And the battleground of the moment is tax cuts for the rich.

Will Obama, as Walter Shapiro put it, "go wobbly"? That seems to be how worried Obama fans are framing the debate. To many on the left-of-center side, the issue is clear. Bush gave tax breaks to all, including the rich, but set them to expire at the end of this year, to not be accused of blowing a gargantuan hole in the U.S. government's budget and increasing the national debt by several trillion dollars. Now with the economy in the ditch and tens of millions of Americans experiencing real pain -- following the Bush-Cheney crash of 2008 -- no politician wants to see middle- and lower-income Americans experience a return to higher tax rates. So they're for extending those cuts for mid-income Americans (which do cost trillions). But the rich? With deficits and debts a key issue, why preserve the Bush breaks for them -- especially at the price of $830 billion over 10 years? (Actually, if only the middle-class cuts are extended, the wealthy will still receive the same tax break on the first $250,000 of their income; they merely won't enjoy a bonus break on their income above that.)

Obama has declared he doesn't see the need for extending the tax cuts for income over $250,000. The Republicans have been essentially holding tax cuts for the middle-class Americans hostage, maintaining they won't vote for any tax cut extension that doesn't cover all the income pocketed by the well-heeled. It's a basic fight over a basic issue: Should the wealthy continue to receive the bonus tax breaks Bush gave them? It raises a fundamental issue that has long divided liberals and conservatives: Do tax cuts for the wealthy produce economic gains for the entire nation? And progressives justifiably expect Obama go to the mat on this.

Obama has already disappointed. He has raised the prospect of "decoupling" the tax rates, meaning permanently extending the cuts for the middle- and lower-income taxpayers and only temporarily doing the same for the wealthy. Republicans have said no to such a compromise. And last week David Axelrod, Obama's top political adviser dispatched conflicting signals on whether the White House will stand firm or compromise.

This is not a battle Obama can afford to lose politically (and the country literally cannot afford to lose it financially). The recent elections showed how weak the Democrats are in Ohio, Wisconsin, Florida, and other key states for 2012. The president will need all his electoral troops for the reelection campaign; he cannot tick them off. And don't forget this: Afghanistan. Obama has pledged to initiate meaningful troop withdrawals this coming July, but it's a good possibility the military will resist and push Obama toward a position that further discourages his base. Bonus tax cuts for the wealthy, continuing mess in Afghanistan -- if Obama caves on such matters, it will be tough for him to rally his party's foot soldiers. (Of course, if the GOP nominates Sarah Palin, that would boost recruitment.)

Pundits are fond of proclaiming particular events or actions as decisive. Sometimes they're right; sometimes not. But with this tax-cuts tussle, Obama is facing a definitional challenge. After the midterms elections, there's been much jabbering about how he must win back independents, and that's true. But he also has to worry much about his supporters redefining their own impressions of the man who inspired them so deeply merely two years ago. Since the elections, Obama has not said or done much to buck up Democrats and his fans. They are waiting for a sign. And the place they will look is the tax-cuts brawl.

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