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Obama's tax-cut deal upsets many major donors

Some say they will withhold funds for the next election. Even if they come around before the campaign kicks into gear, the initial backlash could hurt early Democratic efforts to counter GOP-allied groups.

December 09, 2010|By Matea Gold, Tribune Washington Bureau

Reporting from Washington — President Obama's advisors are confident that liberals dismayed by his agreement to extend tax breaks for the wealthy will forgive him by the time the 2012 election kicks into gear.

But the current backlash on the left may intensify the immediate challenge Democrats face in building a new campaign finance apparatus to challenge Republican-allied outside groups that flexed their muscles in this year's midterm election.

Democratic operatives are already laying plans to set up new independent expenditure committees that can raise unlimited funds, and hope to enroll early contributors to establish a beachhead for the coming campaign. But some stalwart party donors are vowing to withhold funds because of their anger over the tax-cut deal.

"I do not plan to support Obama and his reelection effort," said Utah-based hedge fund manager Art Lipson, who gave hundreds of thousands of dollars to the Democratic Party and its allies in recent elections. He views the tax-cut compromise as a giveaway to Republicans that will increase the deficit.

"He's got many great qualities, but he is not a fighter," Lipson said of the president. "I've met with many donors and the level of disappointment is extreme."

Other discontented contributors are taking a wait-and-see approach.

"I would say I'm not a happy camper," said Paul Egerman, a software entrepreneur in Boston, who said this was the first time he felt Obama reversed himself on a significant policy issue. "That troubles me. I need to be convinced he really had no alternative."

The discontent in the party was underscored Thursday when House Democrats rejected the tax-cut plan in a rowdy closed-door caucus, raising questions about the measure's chances of passing.

Democratic officials said they were confident that both Obama and the party would have plenty of money in 2012, noting that the Democratic National Committee raised a record $195 million in this cycle despite anger in the liberal wing about the lack of a public option in healthcare reform and the slow pace of repealing the ban on gays serving openly in the military.

But the breach between Obama and his liberal financial backers comes at a time when Democrats are frantically trying to play catch-up with the GOP in building robust independent expenditure operations. Early fundraising in 2011 would help Democrats lay the groundwork, particularly in countering a slew of issue ads conservative groups are expected to air in the coming months.

"I can see why they're going to have some of difficulty," said Dennis Mehiel, a longtime Democratic contributor who runs a corrugated-packaging company in New York.

Mehiel said he would consider backing a well-planned independent expenditure operation, but noted, "People that have the capacity to write those kinds of checks are used to getting a return when they spend money," and that they may be reluctant to contribute if they do not feel the administration is effective.

This month, many Democratic donors joined a campaign dubbed Patriotic Millionaires for Fiscal Strength that called on the president to allow the tax cuts for the wealthy to expire. They are now expressing frustration — and some even fury — at the compromise he struck with GOP congressional leaders to extend the cuts for two more years.

"I would not financially support his candidacy again," said Guy Saperstein, an environmental activist and former trial lawyer in Piedmont, Calif.

Saperstein was an early Obama supporter in 2008, but he said he had lost so much confidence in him that he would consider backing a viable primary challenger to run against the president. "I think what he's shown is incredible weakness, which I don't think many people would have predicted," he said.

It's unlikely a serious Democratic challenger will emerge. But the willingness of formerly fervent Obama backers to even raise that prospect speaks to the challenge fundraisers will face in some quarters.

Party activists who work closely with Democratic donors said that reaction to the tax-cut deal had been split. Some contributors view it as an irrevocable breach, while others are disappointed but sympathetic about the difficult political calculus Obama had to make. A third group has come to view the agreement as a net positive because Obama extracted concessions from the GOP on unemployment benefits and payroll taxes.

"I think given the set of circumstances, it was a great deal for the America people," said Austin real estate developer Kirk Rudy, who was a member of Obama's national finance committee in 2008. "I feel good about it as a donor, and I feel as good about helping and working for the president as I ever have."

Many contributors were heartened by Obama's tone in a news conference this week, in which he compared Republicans to hostage-takers.

"I was worried he was going to come out and say, 'The Republicans extended a hand of friendship,' " said David desJardins, an early Google employee who is now an investor and philanthropist. "At the moment, I feel like I'm hopeful the administration understands they do need to draw lines."

Garrett Gruener, a venture capitalist who founded Ask.com, said he wished Obama had extracted more from Republicans, but added that the angst felt by many on the left would likely fade when the campaign draws near.

"Right now, we are having an intramural conversation about how we can do this better," Gruener said. "By the time we get to 2012, we will be comparing alternatives."

matea.gold@latimes.com

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