Obama relented on tax demands

WASHINGTON - It was President Obama's bottom line, a position he repeated in every recent public utterance on his debt-ceiling talks with Congress: Any deal must be "balanced" with spending cuts and tax increases.

But in his 11th-hour stare-down with the Tea Party-infused Republicans and a possible government default on the line, Obama blinked.

The apparent deal to trim the deficit by more than $2 trillion and increase the government's borrowing limit contains no guarantee that tax increases will be part of the equation. After weeks of presidential demands for sacrifice by corporate jet owners and hedge-fund managers, those taxpayers -- and everyone else -- can rest easy.

That is, unless Obama escalates his push for tax increases on the rich, as the White House signaled Sunday he would do.

Nonetheless, liberals were furious as the terms of the agreement came into focus Sunday, and yet another capitulation by Obama on economic policy threatened to further dampen enthusiasm among the core Democratic voters he will need to win reelection next year.

But, for a White House eager to improve its standing with centrist independents who have been fleeing Obama, even a losing deal can be a winning strategy.

Most importantly for Obama, the agreement that was being finalized late Sunday appeared on track to avert a government default. Such an outcome would almost certainly have further weakened the economy and added to the growing frustration among many voters about how Obama is handling it. A default would also have opened him to criticism from Republicans and others that he is a weak leader.

And the president, branded a socialist by many Republicans for his big-spending stimulus program and his health-care overhaul, can suddenly declare himself a deficit hawk as he courts the political middle.

Even an apparent capitulation by Obama helps present him to voters as a reasonable compromiser doing battle against rigid ideologues, his aides believe.

"In the short term, everyone suffers politically," said Obama campaign strategist David Axelrod in a recent interview. "In the long term, I think the Republicans have done terrible damage to their brand. Because now they're thoroughly defined by their most strident voices."

White House officials on Sunday insisted that the president had not given up his fight on taxes.

One official noted that the creation of a special bipartisan committee later this year to recommend the bulk of the deficit reductions gives the president more chances to apply public pressure for tax increases on the wealthy.

The president's big compromise on the debt-ceiling deal was agreeing to a "trigger" forcing across-the-board spending cuts even on entitlements such as Medicare by as much as 4 percent should the committee process not work out.

But an official argued that the ultimate trigger will be the Bush tax cuts, set to expire at the end of 2012. Obama would block extension of the cuts, either as a final act in office after losing the November 2012 election or as a safely reelected two-term president.

The trouble for Obama is that incumbent presidents generally do not want to turn their reelection campaigns into a crusade for higher taxes. Polling data may show voters siding with Obama on the details, but in general Democrats lose when Republicans paint them as tax-and-spend liberals.

Democratic pollster Mark Mellman said the ongoing debate over taxes and spending would take Democrats, and the president, away from addressing voters' larger concerns about how to create jobs and stimulate the economy.

"Every day Democrats aren't talking jobs is a less-than-optimal day for us," Mellman said.

Obama may declare victory, Norquist said, but after relenting on taxes, "he's playing hurt."