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In Debt Talks, Obama Is Ready to Go Beyond Beltway

Jackie Calmes | The New York Times
Monday, 12 Nov 2012 | 4:15 AM ET

President Obama, emboldened by his decisive re-election and lessons learned over four years in office, is looking to the renewal of budget talks with Republicans this week as a second chance to take command of the nation's policy debates and finally fulfill his promise to end gridlock in Washington, associates say.

Photo by: Pete Souza

As he prepares to meet with Congressional leaders at the White House on Friday, aides say, Mr. Obama will not simply hunker down there for weeks of closed-door negotiations as he did in mid-2011, when partisan brinkmanship over raising the nation's debt limit damaged the economy and his political standing. He will travel beyond the Beltway at times to rally public support for a deficit-cutting accord that mixes tax increases on the wealthy with spending cuts.

On Wednesday, Mr. Obama will meet with corporate executives at the White House as he uses the nation's fiscal problems to start rebuilding relations with business leaders. Though many of them backed Mitt Romney, scores have formed a coalition to push for a budget compromise similar to the one the president seeks. He hopes to enlist them to persuade Republicans in Congress to accept higher taxes on the assurance that he can deliver Democrats' votes for future reductions in fast-growing entitlement programs like Medicare and Medicaid.

"Every president learns lessons from their successes and failures, and President Obama is no different," said Dan Pfeiffer, his communications director. "There is no question that lessons were learned in the summer of 2011 that will impact his approach to the presidency for the next four years."

And with the election campaign over, the campaign for the Obama legacy begins: Mr. Obama will keep his grass-roots organization in place to "have the president's back," as its members like to say, on the budget negotiations and other issues in the second term. Democrats concede that the network has not been a particularly effective legislative lobby to date. But they argue that when it was activated to pass payroll tax cuts and low-interest student loans, the pressure made a difference.

Ultimately, however, success or failure will depend on Mr. Obama, starting with his attempts to steer negotiations during the lame-duck Congress, which starts Tuesday, to a successful two-part conclusion.

First, that means averting the "fiscal cliff" created by the coincidental combination of expiring tax cuts and unemployment benefits with across-the-board cuts in military and domestic programs that are set to take effect after January 1. Both parties seek agreement on alternative savings that would be less damaging to the economy than up to $700 billion in immediate tax increases and spending cuts.

Second, for the long term, success means consensus on a framework to overhaul the tax code and benefit programs in 2013 to control the mounting federal debt.

Whether Mr. Obama succeeds will reveal much about what kind of president he intends to be in his second term. Beyond the specifics of any accord, perhaps the bigger question hanging over the negotiations is whether Mr. Obama will go to his second inaugural in January with an achievement that starts to rewrite the unflattering leadership narrative that, fairly or not, came to define his first term for many people.

That story line, stoked by Republicans but shared by some Democrats, holds that Mr. Obama is too passive and deferential to Congress, a legislative naïf who does little to nurture personal relationships with potential allies — in short, not a particularly strong leader. Even as voters re-elected Mr. Obama, those who said in surveys afterward that strong leadership was the most important quality for a president overwhelmingly chose Mr. Romney.

George C. Edwards III, a leading scholar of the presidency at Texas A & M University who is currently teaching at Oxford University, dismissed such criticisms as shallow and generally wrong. Yet Mr. Edwards, whose book on Mr. Obama's presidency is titled "Overreach," said, "He didn't understand the limits of what he could do."

"They thought they could continuously create opportunities and they would succeed, and then there would be more success and more success, and we'd build this advancing-tide theory of legislation," Mr. Edwards said. "And that was very naïve, very silly. Well, they've learned a lot, I think."

"Effective leaders," he added, "exploit opportunities rather than create them."

The budget showdown is an opportunity. But like many, it holds risks as well as potential rewards.

"This election is the second chance to be what he promised in 2008, and that is to break the gridlock in Washington," said Kenneth M. Duberstein, a Reagan White House chief of staff, who voted for Mr. Obama in 2008 and later expressed disappointment. "But it seems like this is a replay of 2009 and 2010, when he had huge majorities in the House and Senate, rather than recognizing that 'we've got to figure out ways to work together and it's not just what I want.'"

For now, at least, Republican lawmakers say they may be open to raising the tax bill for some earners. "We can increase revenue without increasing the tax rates on anybody in this country," said Representative Tom Price, Republican of Georgia and a leader of House conservatives, on "Fox News Sunday." "We can lower the rates, broaden the base, close the loopholes."

The challenge for Mr. Obama is to use his postelection leverage to persuade Republicans — or to help Speaker John A. Boehner persuade Republicans — that a tax compromise is in their party's political interest since most Americans favor compromise and higher taxes on the wealthy to reduce annual deficits.

Some of the business leaders the president will meet with on Wednesday are members of the new Fix the Debt coalition, which has raised about $40 million to urge lawmakers and their constituents to support a plan that combines spending cuts with new revenue. That session will follow Mr. Obama's meeting with labor leaders on Tuesday.

His first trip outside Washington to engage the public will come after Thanksgiving, since Mr. Obama is scheduled to leave next weekend on a diplomatic trip to Asia. Travel plans are still sketchy, partly because his December calendar is full of the traditional holiday parties.

Democrats said the White House's strategy of focusing both inside and outside of Washington was smart. "You want to avoid getting sucked into the Beltway inside-baseball games," said Joel Johnson, a former adviser in the Clinton White House and the Senate. "You can still work toward solutions, but make sure you get out of Washington while you are doing that."

The president must use his leverage soon, some Democrats added, because it could quickly wane as Republicans look to the 2014 midterm elections, when the opposition typically takes seats from the president's party in Congress.

In particular, Mr. Obama has to convince Republicans that he would veto an extension of the expiring Bush-era tax cuts for incomes of $250,000 and higher, said John Podesta, a chief of staff to President Bill Clinton who oversaw Mr. Obama's 2008 presidential transition. The top tax rate of 35 percent would increase after December 31 to 39.6 percent, the rate in place during the Clinton administration, raising about $1 trillion over 10 years.

"The Republicans think he caves," Mr. Podesta said, "and he has to disabuse them of that."

What is unclear is whether Mr. Obama might agree to extend the top income-tax rates if Republicans agree to raise revenue from wealthy taxpayers by limiting their deductions instead, as Mr. Boehner suggested last week. The president did not mention rates on Friday in his first postelection remarks on the budget talks, and people in both parties interpreted that as a sign of his bargaining flexibility.

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