Big budget big gamble for Obama

WASHINGTON —

Whatever else it is, President Obama's budget is a political gamble of the first order.

In his ambition to put his own stamp on liberalism and to move domestic policy leftward, Obama has much going for him.

The nation seems to yearn for leadership, and his political standing is strong. In an era where taxpayers and markets are confronting bad numbers in the trillions, the price tags on some of his initiatives do not seem quite so breathtaking. In any case, good economic policy demands the fiscal floodgates remain open for a while. Populist anger could render Republican arguments against taxing the rich less powerful.

But Obama faces many constraints. He is asking Congress to take on a broad set of complicated issues all at once, after years during which it had trouble dealing directly with almost any one of them.

His own party remains seared by the last time it followed a new Democratic president on a course of tax increases and ambitious social engineering.

Interest groups, while demonized by the White House, have hardly fled from Washington and are mobilizing for battles that could have big winners and losers.

Crisis advantage

Like Ronald Reagan and Franklin Roosevelt before him, Obama "does have the advantage of a crisis," said Rep. Tom Cole, R-Okla. "The politics of the country are changing profoundly and rapidly," Cole continued, "much as they did in 1932 and 1980."

But, he added, "If he is wrong, and I believe he is, Democrats will pay a hefty political price."

Whether Obama has overreached or succeeded in putting the nation on a different course will largely depend on the political skills that won him the presidency.

To translate the vision embedded in his budget into legislation he can sign into law will require assembling coalitions on Capitol Hill issue by issue, holding together his own party while peeling off Republicans here and there.

To keep the pressure on Congress, he will have to keep public opinion on his side through what could be a long, deep recession and through necessary but unpopular steps such as allocating hundreds of billions more taxpayer dollars to bailing out banks.

"The economic crisis has destroyed the credibility of the premises that have dominated public debate since the late 1970s," said William Galston, a top White House policy aide under President Clinton. "This doesn't mean that Obama has sold his alternative, only that he has an opening to make his case."

These Reagan-era political premises emerged from the phenomenon of stagflation, in which high inflation and slow growth during the 1970s crimped the rise in living standards that families had enjoyed after World War II.

Reagan revamp

With top income-tax rates then at 70 percent, the conservative movement Reagan led prevailed by persuading middle-class and upper-income voters alike that they would benefit from tax cuts, reduced regulation and less government spending on social programs.

Clinton challenged those premises during the 1990s, promoting a combination of tax increases, deficit reduction and "investments" in health care and other priorities that foreshadowed Obama's approach.

But the force of the nation's political turn toward markets and away from government curbed his agenda. Congressional Republicans blocked his "stimulus" spending and took control a year after he pushed through tax increases, and soon he declared, "The era of big government is over."

Obama is building a case that an era of Republican dominance has bequeathed a set of economic and social problems that demand a more active government capable of restoring fairness to the U.S. model of democratic capitalism.

Fearful Americans have watched their retirement savings decline with the Dow Jones industrial average, enhancing appetites for government help instead of the vagaries of the markets.

They have grown angry at those they hold responsible, notably corporations and the lavishly paid executives who run them.

"The public is ready for a new burst of activism and to pay for it in part by raising taxes on what you might call the undeserving rich," said Will Marshall, a policy adviser to the Democratic Party's centrist, pro-business wing.

Tony Fabrizio, a Republican pollster, said, "If the battle is, 'You can have free health care if we only tax rich people making over $250,000 a year,' most will say, 'Where do I sign up for the free stuff?' "

Yet the electorate has grown convinced much government spending is wasteful. Republicans have begun scouring Obama's budget for ammunition to persuade middle-class voters they will be hurt.

Obama's senior adviser, David Axelrod, predicted the president would be shielded from political fallout by his decision to direct tax increases toward the rich; to focus on long-neglected priorities such as energy, education and health care; and to monitor closely the effectiveness of government programs.

Asked about opponents' "tax and spend" charges, Axelrod replied, "You shouldn't get trapped in an old construct."

One new construct lies in the shape of the Obama-era electorate. For reasons that in some cases are unrelated to economics, such as social issues or the Iraq war, many of those affluent taxpayers whom Obama wants to finance his agenda enter the debate as his political supporters, not opponents.

In the November election, exit polls showed, Obama defeated his Republican opponent, Sen. John McCain of Arizona, among voters with incomes of $200,000 or more by 52 to 46 percent.