This is a winning political move for Obama. He misread the dynamic of last year's election, has moved to the right as a result, and his approval rating has fallen as a result of that move.
A lot of people made that mistake, buying into the false narrative of a Democratic majority that overreached to the left and provoked a backlash. No such thing occurred. Instead, the Democrats in 2009-10 under-reached, passing an inadequate stimulus, a health-care reform act giving too much to the medical insurance industry, and a consumer-protection act far too friendly to the big banks, and failing to do anything about the campaign finance corruption that is central to the nation's political problems. On top of this were failures of Obama himself at the executive level: Guantanamo is still running, the objectionable parts of the Patriot Act are still law, and our troops are still in harm's way in Iraq and Afghanistan.
Very few people who voted for Obama in 2008 also voted Republican in 2010. But quite a large number of people who voted for Obama in 2008 didn't vote at all in 2010. The Democrats lost the election because they lost the votes of their supporters -- who are to the left of the Democrats, not to their right.
Since the election, until now, Obama has acted on the assumption that the overreach narrative was true, and tried to move to the right to court centrist voters. Since the overreach narrative was false, however, this has worked against him. He has alienated his supporters more, and his approval rating shows it.
The election is a little more than a year away. There is still time -- barely -- for Obama to salvage this. But in order to do so, he has to move to the left, adopt a populist line, and stand firm against big business and the rich. This is a good first step.