To get re-elected in 2012, Obama has to take drastic action. If he allows the congress to continue to be Democrat controlled, and Nancy Pelosi to continue as Speaker, they will drive the US economy so far into the crapper that Obama would not even get the Democrat nomination in 2012.
No, he needs a Republican sweep of congress in the Fall. Then he can say to his union masters, "Look, my hands are tied. I can no longer give you the payback you earned." If he can count on a Republican congress forcing gridlock, and Washington doing no further damage to the economy, perhaps real unemployment will fall low enough by 2012 that Obama can engineer a Bill-Clinton style re-election.
In furtherance of this strategy, Obama has to appear as weak and incompetent as possible. Great job so far.