Obama is planning a next act

By Charles Krauthammer

I have a warning for Republicans: Don't underestimate President Barack Obama.

Consider what he has already achieved. Obamacare alone makes his presidency historic. It has irrevocably changed one-sixth of the economy, put the country inexorably on the road to national health care and, as acknowledged by Senate Finance Committee Chairman Max Baucus but few others, begun one of the most massive wealth redistributions in U.S. history.

Second, there is major financial reform, which passed Congress on Thursday. Economists argue whether it will prevent meltdowns and bailouts as promised. But there is no argument that it will give the government unprecedented power in the financial marketplace. It will create at least 243 new regulations that will affect not only, as many assume, the big banks but just about everyone, including, as noted in one summary (the Wall Street Journal), “storefront check cashiers, city governments, small manufacturers, homebuyer and credit bureaus.”

Third is the near-$1 trillion stimulus, the largest spending bill in U.S. history.

But Obama's most far-reaching accomplishment is his alteration of the U.S. budget. The creation of ruinous deficits as far as the eye can see are not easily reversed.

These are not mere temporary countercyclical measures. They are structural deficits because, as everyone from Obama on down admits, the real money is in entitlements, most specifically Medicare and Medicaid. But Obamacare freezes these out as a source of debt reduction.

The result? There just isn't enough to cut elsewhere to prevent national insolvency. That will require massive tax increases - most likely a European-style value-added tax. Just as President Ronald Reagan cut taxes to starve the federal government and prevent massive growth in spending, Obama's wild spending - and quarantining health care costs from providing possible relief - will necessitate huge tax increases.

The net effect of 18 months of Obamaism will be to undo much of Reaganism. Both presidencies were highly ideological, grandly ambitious and often underappreciated by their own side. In his early years, Reagan was bitterly attacked from his right. Obama is attacked from his left for insufficient zeal on gay rights, immigration reform, closing Guantanamo - the list is long. The critics don't understand the big picture. Obama's transformational agenda is a play in two acts.

Act One is over. The stimulus, Obamacare, financial reform have exhausted his first-term mandate. And the Democrats will pay the price for ideological overreaching by losing one or both houses, whether de facto or de jure.

Act Two, the next burst of ideological energy - massive regulation of the energy economy, federalizing higher education and “comprehensive” immigration reform (i.e., amnesty) - will require a second mandate, meaning re-election in 2012.

That's why there's so much tension between Obama and congressional Democrats. For Obama, 2010 matters little.

If Democrats lose control of one or both houses, Obama will probably have an easier time in 2012, just as Bill Clinton used Newt Gingrich and the Republicans as the foil for his 1996 re-election campaign.

Obama is down, but it's very early in the play.

The real prize is 2012. Obama sees far, farther than even his own partisans. Republicans underestimate him at their peril.

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