October 11, 2011 7:30 pm

Senate Democrats seize initiative from Obama

As Barack Obama sets out a re-election agenda for 2012, he is facing competition from Democrats in the Senate who are challenging – and sometimes usurping – the political strategy set by the White House.

Led by Chuck Schumer of New York, Senate Democrats have commandeered their party’s political programme; from a proposal that punishes China for undervaluing its currency that the White House finds problematic, to a millionaires’ tax that received a cool endorsement from the president, to potential legislation that would create a temporary tax break for companies that the administration opposes.

It is happening in ways that could create a headache for Mr Obama. As president, Mr Obama is strategist-in-chief for his party. But the increasing propensity of Mr Schumer, in particular, to put his own stamp on the Senate’s priorities and on legislation indicates that there are disagreements – sometimes subtle, sometimes significant – about the direction and tone Democrats should be adopting as they head into election season.

Mr Schumer is widely seen as one of the most savvy politicians on Capitol Hill. He has not shied away from taking up big fights with Republicans, including his suggestion that the rival party was deliberately sinking the economy to hurt Mr Obama. In a recent interview with Capital New York, Mr Schumer hinted at frustration with the president.

“The president’s basic view for the first six, eight months of this year was ‘let’s all come and reason together,’” Mr Schumer said. “And what he has seen is something that many of us felt from the beginning, and that was this hard-right group [in Congress] … do not want to come reason together.”

But other Democrats in Washington are loath to give Senate Democrats credit for being more politically astute than the White House, arguing that no group has made life more difficult for Mr Obama. For example, some senators’ pursuit of special favours during the healthcare debate needlessly delayed the passage of reform, to the detriment of public perceptions of the law.

“Even when they had 60 votes [before the 2010 election], they failed to unite and push the president’s agenda,” says Andy Stern, the former labour leader.

The White House has argued that it is setting the agenda in Washington and that any differences are within reason.

When Mr Obama in September proposed a series of tax increases on households making more than $250,000 to help pay for his $450bn jobs bill, the plan was replaced in the Senate by an idea that had long been championed by Mr Schumer: a 5.6 per cent tax surcharge on millionaires. Mr Obama said he believed the change was “fine” and, to casual observers, the policy endorsed by the Senate leaders seemed consistent with an unrelated policy put forward by the White House – the “Buffett principle” – that said billionaires ought not to pay lower tax rates than their secretaries.

But the adoption of the millionaire tax, which is not expected to pass because of Republican opposition, highlighted a significant division between Mr Obama, who has consistently counted families making over $250,000 as “wealthy”, and senators such as Mr Schumer, who represent affluent districts in the US.

Privately, Democrats in the Senate say the focus on millionaires brings greater clarity to the tax debate while not alienating supporters. But they also acknowledge it could complicate efforts by Mr Obama in the future to rescind Bush-era tax breaks for those making more than $250,000 because a marker has now been set at $1m.

Mr Schumer now appears to be considering a concession on the jobs bill in order to create a national infrastructure bank in exchange for passage of a tax break that would temporarily lower the tax on foreign profits when they are brought back into the US. The Obama administration has said it would only consider such a repatriation cash holiday in connection to broader tax reform. On this issue, it would be difficult for Mr Schumer or the White House to deny their disagreement.

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