Daniel Gross

Role Reversal: White House Stiff-Arms House GOP Plea for Deal

Contrary Indicator

The shoe is definitely on the other foot.

For the first three years of his term, President Obama has generally found that, when he wanted to strike a deal, he couldn't find a willing partner in the House of Representatives. Obama would compromise, negotiate with himself (thus angering his base), politely ask for cooperation and comity, beg, cajole, and ask — only to be stiff-armed, often nastily. From Rep. Joe Wilson's "you lie" shout, to then House-Minority Leader John Boehner's near-hysterics over the health-care bill, to the brinksmanship surrounding the debt ceiling, House Republicans have been immune to the president's charms. No Deal!

Now, however, on the debate surrounding the extension of the payroll tax cut, House Republicans are finding that their appeals to the spirit of cooperation are falling on deaf ears. At their press conference Thursday morning, House Republicans filed to the podium and pleaded for parley, presenting themselves as the reasonable, rational ones — let's work it out, surely we can come together. But Democrats and Republicans in the Senate, having ironed out an (admittedly lame) two-month temporary fix, have left town. And President Obama emerges a couple times per day to deliver blunt ultimatum: Pass the compromise the Senate overwhelmingly approved and then come back and argue about it next year. Now it's the president who declares: No Deal!

What gives? It seems like there have been several reversals. It's possible that, after three years, Obama and his administration have developed their own taste for brinksmanship. Perhaps they've seized on what seems to be a winning political issue and just want to use the bully pulpit and public opinion to bludgeon Republicans. (The White House is soliciting citizen testimony on what the $40 per paycheck which would be lost if the temporary payroll tax cut expires means to individuals). Or maybe the White House has finally had enough of trying to work with House Republicans behind the scenes. What's the point in negotiating with people who really don't want to make a deal? What's the point of making a deal with a Speaker who can't seem to deliver his own caucus?

A second reversal: In previous legislative debates, the White House frequently found its position was undermined by disagreements within the Congressional Democratic caucuses. Now it's the Republicans who are split. For the past few years, House and Senate Republicans have generally marched in lockstep. But last weekend, Senate Republicans overwhelmingly voted, along with Senate Democrats, for the two-month extension. There's now a serious cleavage between the House and Senate Republican caucuses. The inability to present a united front seriously undermines Republicans' negotiating posture now, and strengthens that of the White House.

A third reversal: For much of the past three years, President Obama has been the one petitioning Congress to act; he has wanted something from the House and Senate. At this moment, however, it's the House that wants something from the Democrat-controlled Senate and White House. When it comes down to it, House Republicans aren't enthusiastic about extending the payroll tax cut or extended unemployment benefits. But they don't want to be blamed for letting them expire. And they would like to see passage of a measure that shields Medicare providers from big reimbursement cuts.

There's a final reason the White House may be more willing to play hardball: the economy. A year ago, or six months ago, the White House would have been desperate for any deal that would provide some much-needed stimulus. After all, the economy was growing at a truly anemic pace — a .4 percent annual rate in the first quarter of 2011, a 1.3 percent annual rate in the second quarter of 2011. When the economy was close to stalling out, a measure like the one being considered would have meant the difference between contraction and expansion.

The administration still expresses deep concern about the state of the economy. But things are different now. The economy isn't out of the woods by a long shot. Growth in the third quarter was revised down to 1.8 percent. But the data over the last month have been almost uniformly positive, even with all the chaos in the world. Gas prices are lower. Unemployment claims are coming down, and car sales in December are clocking at their highest rate since Cash for Clunkers in 2009. The Leading economic index was up nicely in November and is pointing toward continued expansion. Consumer confidence is up. Macroeconomic Advisers estimates that the economy is expanding at a 3.8 percent annual rate in the fourth quarter.

The apparently strengthening economy has two political impacts that strengthen the White House's hand in negotiations. First, it helps make the president more popular, as recent polls have shown. Second, the economy is in a much better position to weather the short-term shock of expiring tax cuts and unemployment benefits than it was a year ago. Let's assume there's no deal in the next week. Come January 1, payroll taxes go up and some unemployment benefits start to expire. That will create real hardship for millions of Americans. But it won't instantly put a meaningful dent in economic growth — and it will give Democrats what they believe to be a winning issue.

With the shoe firmly on the other foot, House Republicans shouldn't expect the White House to be in a giving spirit as Christmas approaches.

Daniel Gross is economics editor at Yahoo! Finance.

Follow him on twitter @grossdm; email him at grossdaniel11@yahoo.com.

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