Is this Obama’s defining moment going into 2012?

The payroll tax cut debate is a perfect opportunity for Obama to draw a line in the sand

The payroll tax cut controversy is providing President Obama with a moment similar to the government shutdown confrontation between President Bill Clinton and Newt Gingrich in 1996, which most observers credit for Clinton’s successful re-election campaign in 1996. Back then Speaker Gingrich refused to vote for appropriations to keep the government in operation in order to force government reductions in spending programs , giving Clinton the choice to either capitulate or allow the government shutdown. He chose the latter and Gingrich got the blame. It became a test of strength and leadership on the part of the president. It was a defining moment for his presidency and his re-election the following year.

The Senate last weekend voted to extend both the payroll tax cut and unemployment benefits for two months. Granted, Obama got less than he wanted—he wanted one year and wanted to tax millionaires to pay for it—but he is winning the debate on middle class tax relief. Senate Republicans understood that and joined their Democratic counterparts in voting for the measure. The House, in later rejecting the deal, showed that Tea Party intransigence still has a hold on the Republican caucus and could give Obama an edge as the election year begins in earnest in the New Year.

House Speaker John Boehner initially seemed willing to support the measure, only to reverse his position when he consulted his caucus. The Wall Street Journal condemned the move and chastised the Republicans for making Obama look like a tax cutter after spending years painting him as a reckless spender. As a result, Obama, who seemed to be in the ropes entering the election year, suddenly finds himself on the right side of what could be the defining issue of the upcoming election—income inequality.

Boehner has since made a deal with the Senate to extend the measures for two months, and has agreed to work toward an agreement to extend the tax cut and expanded UI benefits for a full year, as Obama requested. It is a meaningful concession, but the question remains: Who pays for it all?

A word of caution here: the debate will resurface after the holidays and the Republicans are not expected to mellow as the party primaries begin. Obama will once again be facing some strong GOP resistance . This time, however, he should not count on the Republicans being divided, as was the case this past week.

The GOP, whose best hope to recapture the White House depends on making the upcoming election a referendum on Obama’s presidency and his handling of the economy, is just as suddenly on the defensive with respect to income inequality. The Tea Party’s successes from just a year ago are fading. Recent polls show support for Obama edging up and generic Republican poll numbers decreasing. The House’s tactics are turning into a holiday gift for Obama.

By all accounts, it was a good week for Obama and a really bad one for Boehner. While Obama held his ground, there will be many more challenges down the road. Obama had a lot at stake in this latest battle with Congress. The mid-terms were a disaster for him and, while he eventually recovered somewhat in the polls thanks to the killing of Obama Bin Laden, the summer showdown over the U.S. debt made him look weak and too compromising. This image still lingers; however, since Labour Day weekend and the presentation of his jobs bill, Obama has seemed more focussed and the campaign magic is returning. After the holidays , he cannot appear to back down now when the battle resumes. Too many middle class people are hurting. This is his moment to draw a line in the sand.

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