The Amateur Becomes the Ace: President Obama Begins a Second Term and Sets the Stage for 2014

The inaugural swearing-in will take place on January 21, but Obama's second term effectively began the morning after election night 2012. In the following days and weeks, he came out swinging, took the measure of his Congressional opponents, and correctly calculated they lacked the will to put up another fight over the nation's staggering fiscal problems. New Year's night, they gave him the bulk of his demands: a huge tax increase for those making over $200,000 a year without even a meager commitment to cut government spending. The bluff was Obama's and it went uncalled. He has therefore surpassed the status of "amateur" Ed Klein and others dubbed him in his first term and has emerged the "ace" in my reckoning, as he cleared the first battle of the new term.

Yet, the president's well-played victory in the second battle of the fiscal cliff may prove his administration's high water mark. There is simply no place for him to go now. His "the rich don't pay their fair share" rhetoric has accomplished a cherished goal, perhaps one in which he wasn't sure he could reach. As a result of the deal worked out with House Speaker Boehner, 172 Congressional Democrats, and 85 Congressional Republicans, the Bush tax cuts for individuals earning less than $400,000 per year and couples earning less than $450,000 will continue. For those making more, tax rates will go up from 35% to 39.6%. In addition, a new 3.8% tax on investment income for everyone earning above $200,000 is part of the plan.

All these concessions and the House bill does not even address spending. Indeed, the plan grows government spending with an extension of unemployment insurance and new credits for child care, tuition, and research and development. With a 16.4 trillion-dollar national debt hanging on our shoulders we find our nation lurching closer to the real fiscal cliff Tuesday's plan kicked down the road. China does not even lend us money anymore. When will they call in the bill?

President Obama will not have long to celebrate his big win. The automatic spending cuts that would have gone into effect Wednesday (had no agreement been reached by New Year's) have been postponed another two months. What card will the president play when he and Congress argue over that battle in February? He has already played his ace (class warfare). The next battle will be all about spending; he can go no further on tax hikes.

Meanwhile, the president's list of discontents swells and will continue to. Taxes are set to rise even for those of us qualifying for the Bush tax cut extension. A new Social Security payroll tax will shrink our paychecks. Worse, the Federal Reserve has already announced it will keep short term interest rates low until 2015 because it foresees high unemployment for the next few years. With higher taxes and new health care costs growing for those with money to invest in job creation, how could the forecast be otherwise?

Perhaps the most ominous consequence of Tuesday's House bill the administration will face is the reality that nothing remains of John Boehner's credibility with the Republican party and every voter for whom fiscal responsibility is a major goal. Tea Party Patriots may damn Tuesday's betrayal a Republican cave, but I hope they do not. 151 House Republicans voted no on the deal. The final vote makes this look more like a Democrat House bill with enough Republican yeas (85), and Speaker Boehner's blessing, to have it pass.

Speaker Boehner has already heard grumblings that he step down. He will likely face growing pressure to do so. If the House selects a less compromising conservative to replace Boehner, President Obama's second term agenda will be in jeopardy. This is not to mention the concerns of the twenty restive Democrats in the U.S. Senate who will be up for re-election in 2014. Some of them (Al Franken of Minnesota, for one) have petitioned the administration to allow their state to qualify for an Obamacare exemption, despite having voted for the reform in 2010. Could the Obama legacy already be unraveling as the Ace takes another victory lap?

Patriot Thought