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Deal of the Century

If Obama wins in 2012, chalk it up to the tax-cut extension.

During the grim days of 2010, it became common to worry that President Obama was throwing his electoral prospects into disarray. He failed to win over key groups like the white working class, even as his actions divided and demoralized his own core coalition: an emerging, but still fragile alliance of minorities, young voters, moderate suburbanites, and other growing demographic groups. "One hallmark of 2009 and 2010 was the demobilization of the Democratic base," wrote pundit Brent Budowsky in The Hill, explicating this view. In this telling, Obama's compromises on health care, the economy, Wall Street regulation, and tax cuts for the rich had deeply alienated the president's core supporters; the Obama-McConnell deal to preserve the Bush tax cuts, especially, was a cynical feint that would bleed enthusiasm on the left. 

In reality, nothing could be more distant from the truth. Far from dividing Obama's coalition, the tax-cut deal is brilliant move that could cement it, in the process winning back some of the white working-class voters who deserted the Democrats in 2010. That's because Democrats' devastating defeat in the midterm elections resulted primarily from the weak economy and the government’s perceived failure to improve it, not from any lack of resoluteness in upholding liberal principles or applying liberal rhetoric. Therefore, the central task for the Obama administration after the election was—and is—to improve the economy by any means necessary.

A significantly better economy is certainly the key to reaching voters in the white working class, which supported House Republicans by an unprecedented 30 points in 2010. To be reelected, Obama needs to bring that gap down to around its size in 2008 (18 points), and he simply won’t get there if these voters, unsympathetic to Obama to begin with, continue to see a lack of economic progress.

That much may seem obvious. But, in addition, it’s also true that Obama’s performance among sympathetic constituencies will depend to a very great degree on the economy. (And by sympathetic constituencies, I don’t mean liberal activists and writers; they are almost certain to turn out and to vote for Obama in 2012, even if growth continues to limp along and Obama continues to annoy them.) The fact is that tens of millions of ordinary rank-and-file Obama supporters will end up basing their decisions on the state of their pocketbooks and the job market: Want 18-to-29-year-olds to turn out as 18 percent of the electorate and support Obama by anything like the 66-32 margin of 2008? Want minorities to turn out as 28 percent of the electorate and vote for Obama by a margin of 80-18? Want moderates to turn out as 44 percent of the electorate and support Obama by a margin of 60-39? Numbers near these will be impossible to achieve if the economy continues to stumble. Conversely, if a recovery seems to be kicking in, confidence will rise in Obama and his agenda, making it more likely that these voters will turn out and back the president.

It’s as simple as that. And Obama's $858 billion package of tax cuts, tax credits, and unemployment benefits will in effect deliver a second economic stimulus, albeit not one any progressive—or sane—economist would have dreamed up on their own. In a world where unemployment barely budged and GDP growth couldn’t get above 3 percent, Obama's re-election would be in considerable doubt. But with the tax-cut deal, there should be a significant decline in unemployment (though the absolute level will remain high) and a more robust growth rate, including during quarters two and three of election year, which political scientists tell us is particularly important to electoral outcomes.

If Obama is reelected in 2012, his tax-cut deal will most likely be recognized as the brilliant move that turned the corner for him politically and assured his second term. And liberals who are still upset about the compromise should be careful not to confuse their reactions with those of the Obama coalition's rank-and-file. These voters will ultimately be more concerned with the state of the economy than with discrete policy issues like the level of income tax levied on the rich. In the end it will come down to results. As Chinese leader Deng Xiaoping, himself an adopter of ideologically hybrid policies, put it: “Who cares if a cat is black or white, so long as it catches mice?”

Ruy Teixeira is a senior fellow at the Center for American Progress and the Century Foundation and fellow of the New Politics Institute.