12/10/2010 01:42 pm ET | Updated May 25, 2011

You Gotta Know When to Hold 'Em and Know When to Fold 'Em -- Obama Doesn't

When Barack Obama was a junior Illinois State legislator, in order to make friends with veteran Democratic and Republican legislators and lobbyists, he joined a regular dollar-ante poker game held first at the home of State Senator Terry Link and later at the offices of the lobbying group, the Illinois Manufacturers Association.

Apparently Obama wasn't much of a poker player. "Obama was a cautious player, folding hand after hand" writes biographer David Remnick. According to former State Senator Larry Walsh, "he wasn't a bluffer. When Barack was betting, you could pretty much know that he had a hand" And if his opponents bluffed, says Walsh, "he'd give her about two shots and then fold".

Obama plays politics against Republicans pretty much the way he played poker. He doesn't know how to bluff and he folds way too early.

While my passionate avocation is politics, for my day job I'm an entertainment lawyer where I earn my living negotiating deals between "talent" (e.g. actors, directors, writers) and studios/producers, and between producers and studios/distributors/financiers. The first rule of negotiating is that you almost never get the best possible deal unless you and your client are willing to walk away from the table, or at least bluff the other side into thinking that you are. Conversely, if the other side is willing to walk away (or convincingly bluff) and you and your client isn't, s/he will almost always get screwed.

In his brief career as a practicing lawyer, Obama apparently did little negotiating and never learned these basics of Negotiating 101. In negotiating with hard-nosed Republicans who are expert bluffers, he never bluffs himself but folds quickly when Republicans bluff. He negotiates against himself, making concessions without getting anything in return. He telegraphs his final move, long before the last cards are dealt. He's clueless when it comes to knowing when to hold 'em and when to fold 'em.

This pattern was evident from the start of Obama's Presidency. From the beginning, Christina Romer, the first Chair of Obama's Council of Economic Advisors and an expert on the Great Depression argued that a $1.2 trillion stimulus package would be needed to get unemployment down to a manageable level by the time of the midterm elections. It's probably true that a package this large couldn't have made it through the Senate. But smart negotiating tactics would have been for Obama to propose it, make sure it was tilted towards stimulative spending on not towards less-stimulative tax cuts, and then, after tough negotiating, end up with a $900 million package. Instead, Obama negotiated against himself, making concessions to the Republicans, initially proposing a too-small $775 billion package (35% less than Romer said was needed) with made up nearly half of tax cuts in the vain hope of winning over Republicans. After adding further tax cuts in a further attempt to gain Republican support (including $70 billion in fixes to the Alternative Minimum Tax which had little to do with stimulus but made the final package look larger than it was), the final package enacted by Congress totaled $787 billion, received no Republican votes in the House, and only 3 in the Senate (one of whom was by Arlen Specter who soon defected to the Democrats).

In signing a too-small stimulus package, too-weighted to tax cuts, President Obama may have lost the mid-term elections for the Democrats right then nearly two years ago. While the stimulus package did create jobs, the unemployment rate still hovered at 9.5% at the time of the elections, and Obama lost the political argument that he had proposed a bigger stimulus that would have brought the unemployment rate down further, and didn't get it because he was thwarted by obstructionist Republicans.

With health care, Obama followed the same pattern of negotiating against himself, making key concessions without gaining Republican support in return. He didn't seem to stand for any fundamental principals when it came to health care reform, following Rahm Emanuel's mantra that "a win is a win" regardless of the actual content of the legislation. He made special interest deals which very publically gave away key campaign promises and helped turn voters against the legislation and Democrats.

During the 2008 campaign, Obma promised to abolish President Bush's ban on Medicare using its market clout to negotiate lower drug prices for the taxpayers and on Americans being allowed to buy cheaper drugs from other developed countries like Canada. He dealt that promise away in a deal with big PHarma. The most popular part of the health care reform proposals was a public option to compete with rapacious private insurance companies and put pressure on them to lower premiums, which polls showed was supported by over 60% of voters. Obama dealt that away in a deal with the for-profit hospital industry. By the time Congress passed the final bill, a majority of voters had turned into opponents and it didn't get a single Republican vote. Obamacare is likely to be an albatross around Democrats' neck for years to come.

When it comes to Obama's failure to live up to his signature campaign promise of ending tax cuts for the richest 2% who don't need them, and the continuation of which will add $700 billion to the deficit over a decade, Obama shares part of the blame with Congressional Democrats. Obama and the Democratic leadership should have insisted on a vote last fall, before the elections, when their political hand was stronger, and when John Boehner declared on TV that if his only choice was tax cut for the bottom 98% with tax cuts for the top 2% expiring and going back to Clinton-era rates, or all the Bush tax cuts expiring, he would accept the former. But Congressional Blue Dog Democrats didn't want to be forced to vote to raise anyone's taxes, even the top 2%, for fear of being attacked by Republicans as tax and spend liberals. In a vain attempt to protect them, Obama and the Democratic leadership put off a vote on taxes until after the election. The result--most Blue Dogs lost anyway. And Democrats were unable to frame the election as a choice between Democrats who stood with 98% of Americans who make less than $250,000 and Republicans who stand for millionaires and billionaires. The result was that Democrats lost more seats than they had to.

Since the midterm election, Obama has displayed his worst characteristics as a poker-player and negotiator, telegraphing his bottom line to the opposition and folding his hand long before the final cards are dealt. In a news conference the day after the elections, President Obama emphasized "that it was important to extend the tax cuts to the middle class while expressing flexibility by saying he was 'absolutely' willing to negotiate on the matter." The next day Press Secretary Robert Gibbs reiterated that Obama was open to extending the tax cuts for the richest Americans for at least the next one or two years, saying Obama "would be open to having that discussion and open to listening to what the debate is on both sides of that". David Axelrod went on the Sunday talk shows to say that Obama was opposed to a permanent extension of tax cuts for the top 2% (translation, Obama would compromise and accept a "temporary" extension of the tax cuts). Moreover, Obama allowed the Republicans to tie an extension of unemployment benefits to accepting tax cuts for the rich.

The right way to play poker would have been to refuse to telegraph his bottom line, leaving open at least the possibility that if Republicans blocked tax cuts for 98% of the population to protect tax cuts for millionaires and billionaires, that the tax cuts could expire and Republicans would get the blame. On his MSNBC show, Laurence O'Donnell has been asking progressive activists and Democrat congress people to state whether they would be prepared to let taxes rise for everyone if Republicans insist the price for tax cuts for 98% is tax cuts for the top 2%. The correct answer should be--as it should have been for Obama--is "I don't know and I wouldn't tell you if I did know. I'm not revealing my final bet until all the cards are dealt." Democrats should have brought tax cuts for the bottom 98% and extension of unemployment benefits to the floor of the Senate daily and forced Republicans to filibuster in person. If necessary, Democratic leaders should have kept Congress in session right up until New Year's Eve. Obama should have held massive campaign rallies in states like Massachusetts and Maine demanding that "moderate" Republicans like Scott Brown, Olympia Snowe, and Susan Collins break with their Republican colleagues' filibuster. Instead, Obama folded his hand long before the final card was dealt.

The result is capitulation to Republicans on extending tax cuts for the rich and estate tax cuts for the richest. An extension of unemployment benefits is not a trade-off. If Obama had kept the issues separate and fought, he would have gotten them anyway.

The other "Obama" tax cuts in the "compromise" package like a 2% payroll tax holiday and accelerated write-offs for corporate investment and pure Reaganite trickle down inefficient stimulus. At a cost of over $900 billion dollars, they are likely to be mildly stimulative in the short-run, adding perhaps a 0.5% increase to the GDP, but are extremely inefficient and will explode the deficit. They set up Obama and the Democrats for the next set of defeats, when faced with an additional $900 billion dollar hole in the national debt, Republicans and corporate Democrats demand cuts in social programs, Social Security and Medicare. As for the 2% payroll tax holiday, when it expires, I can already hear Republicans demanding it be extended, claiming to let it expire is to increase payroll taxes by 1/3. The result--a bigger hole in Social Security and stronger pressure to decrease benefits and increase the retirement age.

If Obama is using the "compromise" to create a Reaganite trickle down stimulus, he would be something worse than a bad poker player and an incompetent negotiator. He would be cynical politician who's willing to use voodoo economics to juice the economy just enough to secure his own reelection, even if it means jeopardizing the nations' long term fiscal future and putting the country's solvency, and its safety net like Social Security, Medicare, public education, and a sustainable economy, in danger.