The President sends mixed signals on the fiscal cliff

The President sends mixed signals on the fiscal cliff

President Obama is sending mixed signals on the fiscal cliff.  Here is how I interpreted the President’s statement last Friday (emphasis added today).

I think the most positive thing that can be said about the President’s statement today is that he didn’t say anything that clearly made a deal more difficult.  With one important exception, he didn’t budge on substance …

… The one important exception is that today the president did not insist on raising tax rates on the rich, only that they “pay more in taxes.”  I assume this was intentional.  It allows for at least a portion of the deal like that suggested by the Speaker’s comments:  scale back tax preferences for the rich without raising their marginal rates.  Of course, that’s only part of what the Speaker said was necessary, but it’s a critical part.

My interpretation was far from unique.  Several other observers drew similar conclusions from the President’s apparent constructive ambiguity. It appeared the President was, in reaction to Speaker Boehner, leaving the door open to a deal that raised taxes on the rich but did not raise their tax rates.

But later that same day the President’s press secretary Jay Carney reiterated the President’s prior veto threat:

MR. CARNEY:  The President would veto, as he has said and I and others have said for quite some time, any bill that extends the Bush-era tax cuts for the top 2 percent of wage earners in this country, of earners in this country.

I think that means the President would veto a bill unless the top rates go up.  He is not requiring that they increase to pre-Bush levels (i.e., not requiring that the top rate increase from 35% to 39.6%), but he is requiring that the 35% number increase, since otherwise the bill would be “extend[ing] the Bush-era tax cuts.”

My interpretation of the President’s apparent implicit flexibility is inconsistent with Mr. Carney’s explicit statement.  There are a few possible explanations.

  1. Intentional Presidential head fake – Mr. Carney’s reiterated veto threat accurately represents the President’s position. The President’s apparent constructive ambiguity was a head fake. While it is consistent with the Boehner offer, it is also consistent with no change in the Presidential position. Leaving “higher rates” out of the President’s Friday statement was a head fake to make him seem constructive without giving any ground.  In this explanation we should treat the reiterated veto threat as binding (at least for now), and I was too optimistic in my interpretation of the President.
  2. Intentional mixed signals to play for time – By setting up the President as the good cop and Mr. Carney as the bad cop, they can point to the two conflicting statements depending on the audience. Liberal audiences are reassured by the reiterated veto threat, while reporters are directed to the President’s more open statement that makes him look flexible.  They can then choose later which statement to make the “real” one.
  3. Unintentional Presidential head fake – This is the same as #1, but the head fake was an accident. They didn’t intentionally leave out “rates” from the President’s statement, and observers (including me) jumped to a mistaken conclusion.
  4. Mr. Carney didn’t get the memo – The President is open to the Speaker’s suggestion and intended to signal this in his Friday remarks. Mr. Carney failed to update his talking points to be consistent with the President’s new posture.  In this scenario we should ignore the veto threat, or Team Obama may look for an opportunity to “walk the threat back” in one of their many public events on this topic this week.

I hope Speaker Boehner and Congressional Republicans take advantage of Team Obama’s ambiguity and try to move an agreement forward.  If asked about the Carney veto threat, a Republican should reply, “When they conflict, I take the President’s words as trumping what his staff says. The President sounded like he was leaving the door open to a solution like that suggested by the Speaker. I will remain hopeful of progress unless I hear the President change his language.”  Congressional Republicans should ignore the veto threat for now.

We know that President Obama relishes public fights about tax distribution; he made this issue an important one in his campaign. We don’t yet know whether he is as effective at finding common ground with Republicans as he is at fighting with them.

The fiscal cliff is a test of President Obama’s ability to negotiate with people with whom he disagrees.  He was unsuccessful in this regard in his first term. If he fails again over the next seven weeks, American taxpayers and workers will suffer for it.

(photo credit: Tom Magliery)

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