The Next Phase

John King: Can the president complete the sale to members of his own party? Gloria Borger and Jessica Yellin with us.

I was told the White House meting you had a mix of anger and frustration from the Democrats.

Borger: Yeah, of course. Because you know, they understand, and the Democrats have a point here, the Democrats understand that the Republicans are having the democrats do their dirty work for them right now. They're all at the buffet table. there's something in this for everyone, get it done during the lame duck session, then the Republicans take over and guess what's going to happen? They are suddenly going to talk about deficit reduction and they will nickel and dime Barack Obama on every single spending program because this isn't about the deficit.

Yellin: And this is where we have a real responsibility to keep them honest. because as much as politicians are talking about paying for everything, none of this is paid for. Senator Barrasso was on saying that unemployment insurance isn't paid for and that's not the only part of it. how are the tax cuts paid for and where's tht money going to come from? you heard Sherrod Brown there, saying it will come from China and uhm ..

King: It's borrowed money ...

Yellin: it's borrowed money

Borger: ... and we've just had a reality check. The deficit commission just came and said we have a huge problem we have now. Now I personally believe that Barack Obama can come out in the state of the union, call for a Deficit Summit call for reforming the tax codes, part of that perhaps being tax increases and calling the Republicans bluff but whether he does that or not ...

Yellin: The problem he has is with the left flank of his own party who are basically stupefied that he has endorsed George W. Bush's central economic policy.

King: And so the question is, has the president made the calculation that "the left might be mad at me, but they won't desert me in 2012 and so I'm going to cut a deal with Republicans?" The question is, what's the next step? As you said, does he say in the state of the union, "I'm going to embrace my deficit reduction commission and let's raise the retirement age for social security and lets get some cuts in medicare and lets get cuts across the government? Is a Democratic president going to do that?

Borger: I think he might. Look, this is about leadership at this point. It's not about his left flank. It's about leading the country. And it's about making sure that he's not the one leading the country into the ditch he used to talk about in the last campaign. he's got another ditch he's got to dig out of. And I think that it requires him to actually lead.

I believe and he believes that the public will reward him for it in the long term and right now his Democrats are going to be angry about it because the Republicans are clever.

King: It is remarkable, I mean remarkable, the number of Democrats who use the word "spine" in that the Democrats say the president doesn't have one. Now the president says he knows he was going to get criticised but he didn't want working families to get a three or five thousand dollar tax increase next year.

Yellin: And as he said, that's a real effect on real people. And the payroll tax holiday and the reduction in the payroll tax will be felt by millions of Americans and will make a real difference. The bottom line is that it's still a long time for the re-elect and he can figure out how to shape a message and try to get people back on board.

Borger: This is a political deal.

King: I'm shocked that you would say that about Washington DC. [hearty laughter all around]

Borger: Everybody understands that this is a political deal that he had to make. But the next phase is one we really need to pay attention to, what he does in the state of the union.

King: Thanks very much. The next phase is important and the next couple of weeks as we see whether this good will on the deal from the Republican side gets the president anything else.