I think it's pretty clear that the issue of what to do about the expiring Bush tax cuts will shape the political climate for the 2012 elections. The issue boils down to what is good politics vs. what is good policy. I am also struck by how important campaigns really are in that they do actually tell us a lot about what a candidate will do while in office.
A lot of people on this site have expressed disappointment in Obama for his decision to compromise on the Bush tax cut issue. On policy terms. Obama is clearly attempting to follow a Reagan model of stimulating the economy through tax cuts and spending in order to push growth up, especially in employment. I have no doubt that if this compromise becomes law, the combination of an already improving economy at the fundamental level plus this stimulus will sharply accelerate economic activity in the country much like what happened to Reagan beginning in 1982.
I expect the economy will grow to an extent that Obama can re-declare 'morning in America' after a long, painful recession and he would cruise to re-election. Obama's mix of tax cuts and spending is more middle class friendly and more job stimulative than Reagan's, but there is a long-term impact to the federal deficit, to entitlements, and to confronting the GOP, which many have outlined here.
I think what people need to understand is that Obama is a politician. I support the President and am not nearly as angry with him as others on this site, and that's because I had a more realistic view of him in 2008. I voted for Hillary Clinton in the primary after going back and forth between the candidates. I contributed to both candidates and liked both very much. Ultimately, I thought Obama was better on foreign policy, but that Hillary would be better on domestic policy and in taking on the GOP machine. Since I was one of those who genuinely liked both candidates, I believe I was more dispassionate than others in assessing their strengths and weaknesses.
Obama tried to portray himself as above politics, but he struck me clearly as a real politician who makes decisions to balance long-term objectives with self-interest. His willingness to talk about cutting entitlements during the campaign is what led to this terrible commission. He did it in order to distinguish himself from HRC, and to make himself likable to the beltway crowd who are obsessed with cutting social security.
Many of those who criticize his lack of experience or his seeming unwillingness to fight may recall the critical comments of Hillary and John Edwards. The most memorable was Hillary's speech in Rhode Island when she mocked his utopian view that the 'skies would open up' once he got to DC and all our problems would be magically solved. I don't think Hillary would have ever allowed the GOP the chance to drag out the health care debate for as long as they did. That was the primary reason we lost the 2010 election. People thought we talked too much about health care when they wanted DC to talk about jobs. Obama admitted to getting beat by the GOP on that issue, but most Democrats find it hard to understand how he could have assumed that the GOP would have played nice....ever.
In addition, I thought Obama had analyzed the problem of what was wrong in DC incorrectly. He said that what was needed was more civility, the ability to listen to all sides, and try to bring people together to drive towards consensus. We needed to avoid partisan bickering, stop taking orders from lobbyists, and stop thinking about what was good for the next election, and instead focus on what was best for the country.
Hillary plainly stated that the problem in DC was Bush policies (which was code for the entire GOP) and that we needed to fight those interests and the GOP in order to get our house in order again. Hillary's message was much more confrontational than Obama's, and I thought more correct.
The other thing that struck me is that though Obama was clearly intelligent, thoughtful and had the ability to make observations on policy issues that other politicians could not, he was not as well-read on policy as Hillary. I did not see a Bill or Hillary Clinton like ability to break down complex issues to people so that they could understand them in simple terms. I also viewed him as more cerebral than emotional, and that could make it difficult to connect with working class white Americans, who tend to be very visceral and emotional. Bill/Hillary had mastered those talents, and that's why they won a lot of votes in places that generally don't vote Democrat. I looked at Obama as a real-life President Bartlett from the West Wing series.
In Obama's case, the inability to explain what he did during his first 2 years in office is the single most frustrating thing about his presidency. We disproved the notion that 'you can't beat something with nothing', as we lost to the GOP, who had nothing, when we had a long list of accomplishments that will make this Congress look great in the history books. Yet, we could not communicate to the American people. We were not adaptable to the mood of the people. We seemed aloof. Obama seemed to many, aloof. Bill Clinton got a worse beating in 1994 but not being able to explain what he did was not one of the reasons. There is still no more engaging speaker than Bill Clinton and I feel like I should be taking notes every time he speaks on anything. As a case in point: when Obama set Bill Clinton up to take over the WH briefing room (and the extent to which Obama let Bill have the reins seemed to genuinely surprise him) Bill explained the reasons to support this plan better than Obama has to date.
On this tax cut issue, we're seeing Obama in survivalist mode. He is willing, like any politician, to throw ideals under the bus for self-preservation. He did so in 2008. After he lost the NH primary, it was Obama who unleashed the race card with the critical ads in Latino media against Hillary. It was Obama's team who actively exploited off-hand comments by Bill and Hillary to drive a wedge between them and the African -American community so that he could run the table on the southern primaries. As a Hillary supporter at the time, I was angry at the tactics, but as a Democrat I was pleased that this guy had the chops to take on the GOP and could fight himself out of a corner.
That's what I think we're seeing now. Obama, above all, wants to be re-elected. Forget about history and being a great 1 term President. That's all just rhetoric. He wants to win. He knows that the biggest threat to his re-election is the unemployment rate (which btw is already coming down on the Gallup survey). He wants Americans to believe their economy is improving. This package of tax cuts will undoubtedly stimulate and accelerate economic growth in the next 18 months, including employment growth, which is all that Obama cares about.
From a political angle, this package also disarms the GOP. They can't argue the tax issue very well in 2012 when Obama will have spent 4 years keeping taxes low. They also can't portray him as a foreign invader or dictator because that card has been played and he is pretty good on the campaign trail. They can't argue the debt issue because they are complicit in extending the deficits and in fact the deficit will likely be lower due to growth and increased tax revenues. They can't argue that he didn't bring people together because he got this tax package passed. All Obama needs to do is galvanize his base, which will be there for him in an improving economic climate and when people reflect on the long list of real accomplishments he has achieved.
The improving economy will also allow Obama to campaign the way that he knows best - talking a bit about what he has done, but in more broader strokes about where he wants to take the country in the future. He can talk about themes, which is what he is really good at, and refer to his accomplishments to give those words added credibility and weight.
The problem is that the tax cut compromise is not good policy and most Democrats know it. I think that Obama will be much more popular in the next 2 years because the economy will improve and he will pick and choose his spots to highlight differences with the GOP. He is no longer Obama the 'messiah'. He is simply Obama the pragmatic politician and he will be freer to be who he is and that will resonate with average voters especially when compared to the middling candidates the GOP will present to the voters.