With the “Satan sandwich” debt deal signed, and his political base raging at him and at the injustice of it all, Barack Obama must have spent a few minutes alone this week in that famous Oval Office chair, wondering what to make of his three years in the presidency—and the one year he knows for sure he has left.

Barack Obama’s career successes so far are in large part a story of charisma and will. Some say he is the most arrogant occupant of the White House they’ve ever known. Maybe he had to be arrogant to get there.

What we know now, and what many claimed not to know during the 2008 campaign, is that Barack Obama is a man of the left, leading a congressional Democratic delegation further left than at any time in the party’s history. From the vantage of that achievement, he is now in deep tension with the nation’s economy and its moody voters, who’ve downgraded his approval rating to Baa (“protective elements may be lacking or may be characteristically unreliable”).

Here is a different way to think about Barack Obama’s plight: President Hillary Clinton (a phrase somehow in the air just now) would not have had this much trouble doing a deal on the debt ceiling. The Clintons invented triangulation. The left, recently rebranded as progressives, hated triangulation and its Rubinesque accommodations with the business sector.

Barack Obama’s greatest accomplishment before ObamaCare was defeating the Clinton political machine—its funders, its deep political network, and its tong-like loyalties. Recall the Shakespearean tragicomedy when Ted and Caroline Kennedy talked Bill Richardson into abandoning Hillary at primary crunchtime. When the new Obama machine won, the American left, in a constant rage for nearly 30 years, swept back into power. The Obama cabinet had no private-sector persons.

Alas, cruel history. Three years into their presidency, they find themselves trapped in the twilight years of the welfare state. They enacted a fourth entitlement obligation and an upward spending path at precisely the moment history turned against their ideas.

The European welfare model is cracking apart. France, with its long-running taxes on “wealth,” is splitting at the fiscal seams. Canada, another model, is shrinking its socialist legacy and enjoying the economic benefits. California, the crown jewel of their blue empire, is imploding.

Now the progressives are saying their president blinked this week. What broke Barack Obama’s will to win “revenue increases” out of the debt negotiations were last week’s nightmare-on-Main Street GDP numbers—1.3% growth in the second quarter and the first quarter revised downward to 0.4%. Even Keynes would have blinked.

The mini civil war in the GOP these days has been about spending. But the most important issue in the negotiations was taxes, the oxygen of the welfare state. Spending is the world of Washington, and that matters a lot. But tax reform is about nurturing anything productive in the country that hasn’t already rolled into Washington. A rational, efficient tax system is what will raise the American economy.

Attention now turns to the debt deal’s congressional Committee of 12, whose authority includes fiddling with taxes. Again the cry will go up that hallowed compromise looks impossible. But a bipartisan basis on taxes already has been struck—last year’s Bowles-Simpson Commission, which Barack Obama created and whose results he threw in the waste basket.

The members of Bowles-Simpson didn’t need this year’s no-growth data to convince them the U.S. needs a reboot. At the heart of its bipartisan blueprint for U.S. economic growth was a wholly unexpected proposal to reduce and flatten personal income taxes into three rates—8%, 14% and a top rate more or less at 24%, depending on how many tax breaks are eliminated. Right alongside, the bipartisan Rivlin-Domenici Commission proposed two individual rates, 15% and 27%.

Fat chance till 2013. But Bowles-Simpson also proposed dropping the U.S.’s corporate tax rate, recognized by every serious person as self-destructive, to 26% from 35%. Rivlin-Domenici said drop it to 27%.

The McConnell-Boehner delegates to the debt panel should propose a corporate-rate tax cut (or even elimination) in return for tossing out boxloads of corporate subsidies and tax breaks rotting in the Capitol’s catacombs. Democratic opposition to such a manifestly pro-jobs deal would be indefensible. Bipartisan congressional support exists for lowering corporate taxes this way—lower the rate, throw out the garbage. The real opposition is the soak-my-enemies president.

As to the tea party, take the money and run. The tea party walked away from the debt-ceiling poker table after successfully pulling off the amateur’s flyer of filling an inside straight. Its best bet now would be to pocket its new pot of political capital and move back into the country, where the next big reform fight will be won or lost, to spread understanding of the president’s second-term goal. To wit: Keep spending near 25% of GDP, forever, which will require ratcheting up rates in any tax system, forever.

Had the 2008 primaries turned out differently, we’d be looking at a fourth Clinton term. Instead we’re looking at the possibility of historic, long-term reform, which began this week.

Write to henninger@wsj.com