There's a lot of grousing around here today, for obvious reasons: this Debt Ceiling fiasco has been incredibly dispiriting... but what's done is (almost) done, and what's important now is what to take from this going forward.
The Republicans Ace in the Hole this time around was that they had a gun to the head of the American economy and they were perfectly willing to pull the trigger. Obama should never have agreed to negotiate with terrorists, but once he did he pretty much had to find a way to satisfy their demands.
The fight over the Bush Tax cuts will be different...
Now, "doing nothing" (the one thing our government seems to be capable of these days) works to our advantage. I would prefer that the cuts expired only for the rich, making the tax code that much more progressive, but that would involve negotiating a deal which, obviously, will not be possible with the Tea Party caucus running the House of Representatives. At the very least, though, we can blame Republicans unwillingness to make a deal for taxes going up on everyone, thereby returning to Clinton era tax rates.
Jonathan Chait makes this point well in his most recent column for TNR:
Obama has one golden ticket out of the revenue dilemma. As I’ve written multiple times, the expiration of the Bush tax cuts gives him enormous leverage over the GOP. Republicans signaled last year they’d rather kill off the entire Bush tax cuts than sacrifice the portion that only benefits the rich. Holding firm on the Bush tax cuts would let Obama maneuver Republicans into the position of killing off all the Bush tax cuts. That would provide all the revenue he needs – some $4 trillion over a decade, as opposed to the $800 billion he’d raise merely by ending tax cuts for the rich.
Then we can argue that the new revenue should in large part be used on programs that help the middle class (and hopefully work something in to help the unemployed and working poor as well... although politically that's not such a winner), and finally address the issue of JOBS that seems to have fallen off Washington's radar.
But this is where the issue of Obama's fortitude comes into play. I'm as big a fan of Obama as your likely to find, but there's been nothing to celebrate in the political route Republicans just achieved. They come out looking strong and Obama comes out looking weak, and as the economy falters further, which this deal likely ensures, he will only look weaker.
That said, having made the early mistake of putting himself into this hostage situation some time ago, the current deal may have been the best he could muster. Certainly a default would have been even worse.
But, looking forward, can we expect Obama to get serious and play hardball with Republicans? Chait isn't sure:
There’s a limit to how much faith one can place in a man who has so badly misjudged his political opponents time and time again. The debt ceiling ransom may be a shrewd strategic retreat, or it may be the largest in a series of historic capitulations. We won’t know until the fight over the Bush tax cuts has been settled.
Personally, I still have hope. Obama is nothing if not smart, and I have to believe he has learned something from this battle. But I agree with Chait that we'll find out one way or another when the the Bush tax cuts come up for renewal. In the meantime it's up to us to keep the pressure on.