The top 5 issues dividing Democrats

For liberals indulging in schadenfreude, the post-election fracturing of the Republican Party and the conservative movement has been enormously satisfying. But it's not the most important story in Washington. In fact, the most pressing truth — the one that really threatens to derail President Obama's second term — is the quieter, wonkier friction within the Democratic Party.

Here are the top five "Democratic Divides" that President Obama has to navigate:

1. Social Security

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The president's move to include Social Security benefit cuts in his new budget proposal is quickly bringing this divide to the surface. Obama's intention is to jumpstart bipartisan negotiations for a "grand bargain": revenue-increasing tax reform in exchange for money-saving "entitlement" reform. But even if Obama manages to scratch out some Republican support on taxes, he can't count on a unified Democratic caucus to back his concessions on Social Security.

Last month, Sen. Bernie Sanders, the Vermont independent who caucuses with the Democrats, told the Washington Post that any plan that cuts Social Security benefits is an "obscenity" and "filibustering may be part of" any strategy to prevent one. Nine days later, during a Wall Street Journal–sponsored event, Senate Majority Whip Dick Durbin defended the concept of extending Social Security's solvency by changing the cost-of-living-adjustment formula, known in wonk circles as "Chained CPI." While opponents characterize the impact as a stiff benefit cut of 3 percent, Durbin downplays the severity: "The cost is $3.50 a month, and the dividend is 50 more years of solvency." He called his "liberal friends" who are resisting such measures "short-sighted."

A recent Senate vote magnified the conflicted feelings (or conflicted politics) of many Senate Democrats. Sen. Sanders and three others proposed an amendment to the Senate budget that would express opposition to the Chained CPI, though it wouldn't have the force of law. The amendment passed, but senators opted for a voice vote instead of a roll call vote, which let them escape putting their votes on the record. Senators did not want to box themselves in, in case the president calls upon them to accept the "grand bargain."

2. Taxes

The distance between Republicans and Democrats on taxes is so wide that it's easy to miss the rifts within the Democratic Party that have long complicated Obama's tenure. He was unable to fully repeal the Bush tax cuts for the wealthy when Democrats had complete control of Congress, because some left-leaning Democrats in close races pressured congressional leaders not to force a vote on the issue before the 2010 midterm elections. Furthermore, some right-leaning Democrats simply disagreed with raising tax rates on the wealthy while the economy was struggling.

Democratic divisions go beyond top income tax rates. In the "fiscal cliff" deal, which finally, if only partially, repealed the Bush tax regime, Obama was unable to reduce the enormous $5 million exemption for the estate tax. Stubborn resistance from a Democratic faction sensitive to the opinions of certain home-state business and land owners made winning that fight impossible.

The push to close the "carried interest" loophole fizzled in 2010. That tax code quirk allows hedge fund millionaires to exploit the 20 percent capital gains tax rate instead of the top income tax rate of 40 percent (though the "fiscal cliff" deal bumped up the capital gains rate from 15 percent). It's the basis of the killer Democratic talking point that Warren Buffett should not pay a lower tax rate than his secretary. Yet when the rubber hit the road, various Democrats complained that home state financial interests should be exempted.

Today, President Obama wants more than $600 billion in tax revenues over 10 years as part of any "grand bargain." Part of this could come from broader corporate tax reform that in theory would lower tax rates but raise revenue by closing loopholes. But the corporations themselves are deeply divided on the specifics — one CEO's unfair loophole is another's desperately needed incentive. Past history suggests those specifics will induce much Democratic agita yet again.

That said, closing the carried interest loophole may be put back on the table… by Republicans. Some are now championing it as a way to stick it to wealthy Democratic donors.

3. Guns

Why is President Obama having such a tough time locking down support for seemingly simple, widely popular gun regulations like universal background checks, even after a deeply traumatic tragedy like Newtown?

Consider that 25 states have gun ownership rates of over 40 percent. Those states are represented by 18 Democratic senators. This is primarily an urban-rural divide that is practically pre-ordained to come to a head in the Senate, a body designed by the Constitution to provide affirmative action to rural states.

Democrats have been able to submerge the divide for years. In 2007, political scientist Tom Schaller published Whistling Past Dixie, which counseled Democrats to focus on winning back states in the West and Midwest, and to give up on southern states for the foreseeable future. The difference? In the south, fundamental differences on "God, guns and gays" is too much to overcome. But in the West and Midwest, it's just guns. Give ground there, and swing voters in the West will hear you out on economic issues.

Democrats took the advice, and in 2008 Obama won in Colorado, Nevada, Ohio, and Indiana — states that neither Al Gore nor John Kerry could nab. Then during Obama's first term, Democrats did not push gun control legislation when mass shootings occurred, while enacting legislation that allowed concealed weapons in national parks.

Calculating politics? Sure. But the numbers added up. It would not have helped the gun control cause, or saved any lives, for Obama to propose legislation in 2009 that was both legislatively doomed and politically risky. But after Newtown, and after re-election, the mood has changed, and Obama is in a position to act. The fresh outrage doesn't erase the Democratic divide, but it does force Democrats to confront it.

4. Trade

The White House plans to ask Congress to restore "fast-track" authority, giving the president the ability to negotiate trade agreements that Congress cannot amend — and, in turn, upend. Securing that authority is a precursor for forging two possible agreements, one with Pacific nations and the other with the European Union.

But Democrats have long been split between "free" traders, who believe more global trade boosts economic growth, and "fair" traders, who believe past trade agreements have degraded labor standards and encouraged companies to move jobs overseas. Democrats let fast-track authority lapse in 2007 upon retaking Congress.

Before then, Congress had voted to extend fast-track in 2002, with 21 members of the Senate Democratic caucus voting yes and 29 voting no.

President Obama has walked a very delicate line on trade. In his book The Audacity of Hope, then-Senator Obama signaled that "we need a new approach to the trade question," as he both sympathized and chided corporations and unions for their reflexive positions. As president, he renegotiated unfinished trade deals from his predecessor in an attempt to improve benefits to American workers. He successfully attracted the support of the United Auto Workers for the South Korean agreement, and he mitigated union opposition for the Colombia and Panama agreements by informally pairing them with increased aid for displaced workers.

Obama's maneuvering only partially healed the split in his party. Most House Democrats opposed all three deals, and a majority of Senate Democrats opposed the Colombia deal. Nevertheless, the deals got done.

Can Obama keep walking the trade line to win a "fast-track" vote? Fair traders are nervous about the Pacific and Atlantic trade talks. Charges of excessive secrecy sparked a formal protest by four Democratic senators last year. But one Financial Times columnist argues the "strategic objective" of both deals is to "contain China's rise by setting a high bar for regulatory standards" — a goal that is shared by fair traders. If true, these pending deals would represent another advancement of Obama's "new approach."

5. Climate

President Obama is reportedly not even considering legislation to cap carbon emissions, after a failed attempt in his first term. Instead, he is looking to achieve what he can through new EPA regulations, which may be easier to enact, but also easier to repeal by one of his successors.

Why couldn't he get climate legislation done when Democrats controlled Congress? The simplest answer: In 2009, 17 Democratic senators hailed from the top coal-producing states along with a few others from the big oil states. Those numbers are little changed today. Enviro-friendly Democrats furiously tried to come up with compromise legislation that would make fossil fuel interests happy, offering lots of subsidies to help them transition to a clean energy-powered economy. They came close, closer than many realize, but fell short in the end.

So far, Obama has avoided widening the intra-party rift by settling for increased funding for clean energy projects and several new EPA regulations geared to reducing carbon emissions. At the same time, he has mixed those green advances with strategic retreats designed to keep the fossil fuel industry at bay, such as aggressively pushing Arctic oil drilling (pleasing vulnerable Alaska Sen. Mark Begich) and delaying new ozone standards.

Much attention is being paid now to Obama's pending decision on the Keystone oil pipeline. But many enviro leaders recognize that the impact of one pipeline is far outweighed by the potential of new EPA regulations on existing power plants, facilities that spew 40 percent of America's greenhouse gas emissions.

We don't know what Obama's political strategy around new EPA regulations would look like. Would he offer a mild rule, getting a foot in the door without exacerbating the Dem divide and stoking political backlash? Or would he push for a tough rule, then tell fossil-fuel-friendly congressmen from both parties: If you don't like the regulations, which don't come with any subsidies, then get back to the negotiating table and help pass some comprehensive legislation.