Sunday, January 27, 2013

Obama Focuses on Status Quo, Not Left, in Battle With G.O.P.

For all the talk that President Obama has shifted leftward, much of his early second-term energy seeks simply to preserve the status quo.

 Mr. Obama’s Inaugural Address last week celebrated the role of “collective action” in creating conditions for a modern economy, expanding individual opportunity and assisting the poor. He rejected Republican arguments that government benefits create “a nation of takers.”

That partisan gibe was telling. He defended two programs, Medicare and Medicaid, begun nearly a half-century ago, and a third, Social Security, that dates from the Great Depression. The federal welfare commitments that Mr. Obama praised in observing that “a great nation must care for the vulnerable” also date back to President Franklin D. Roosevelt’s time.

Yet all those benefits are in the cross-fire of the president’s continuing fiscal battle with Republicans in Congress. That is not because of a shift in philosophy by Mr. Obama or his party, but rather because of the looming cost of the retirements of baby boomers and of the persistent ideological boldness of partisan foes.

Mr. Obama expanded the scope of federal obligations during his first term through short-term stimulus programs and the new health care law. Encouraged by his second popular-vote majority in November and hardened by his confrontations with Republicans over the past two years, he has taken a feistier stance toward his adversaries.

None of the president’s economic initiatives, however, represent a departure for Mr. Obama himself, or for his party. If President Bill Clinton set out to build a “bridge to the 21st century,” said Simon Rosenberg, the president and founder of the New Democrat Network, Mr. Obama is walking across it.

John D. Podesta, an Obama adviser who served as chief of staff in the Clinton White House, called the president’s second-term economic agenda “consistent with where he’s been, consistent with where Clinton was.”

Indeed, since World War II both parties have accepted a substantial measure of federal activism “as American as apple pie,” said Kenneth Baer, a former Obama budget aide.

Mr. Obama’s problem is that postwar America could afford more pie than a post-baby-boomer America will be able to. And in the era of the Tea Party, Republicans have proved increasingly willing to challenge once-settled assumptions about Washington’s role.

In another political moment, Mr. Obama’s attempt to preserve old governing assumptions might be labeled conservative. But Republicans, even after shifting tactics in the wake of a bracing November defeat, say he will have to fight nonstop to advance his agenda.

“His entire second term on fiscal issues is going to be essentially defensive,” said Representative Tom Cole, a veteran Republican from Oklahoma. “He’s trying to defend not just the New Deal legacy, but also Obamacare.”

Mr. Cole added, “The problem he has is, those programs can’t be defended in their current forms.”

But Republicans also have not made their case for the “structural reforms” that they say have been made urgent by trillion-dollar deficits. In fact, they have failed to do so repeatedly.

In the 1990s, Speaker Newt Gingrich’s attempt to rein in Medicare and Medicaid spending helped Mr. Clinton win a second term. President George W. Bush, after adding a prescription drug benefit to Medicare in 2003, could not persuade a Republican Congress to pass his plan for a partial privatization of Social Security.

In last year’s campaign, the Republican presidential nominee, Mitt Romney, and his running mate, Representative Paul D. Ryan, backed a plan to overhaul Medicare through spending limits on each beneficiary. But their plan pushed such savings 10 years into the future, while they attacked Mr. Obama for having cut Medicare spending to help finance the health care law.

When it comes to Republicans pushing for structural changes in benefit programs, “the record there is not good,” said Peter Wehner, a former Bush White House aide. And the Republican argument will not soon get easier to make.

Mr. Obama acknowledges the need for some cuts in entitlement spending, but he campaigned successfully on higher taxes for affluent Americans as an alternative to the deep cuts that Republicans want. By refusing to negotiate this month over raising the nation’s borrowing limit, Mr. Obama forced Republican leaders to set that cudgel aside without accepting the spending cuts they previously insisted on.

To swing rank-and-file Republicans behind that capitulation, House leaders promised that Mr. Ryan’s new budget plan this spring would eliminate the budget deficit within 10 years. Doing so, however, will almost certainly require limiting Medicare spending much sooner than 10 years from now — a step that Mr. Wehner said “I’m not sure I’d recommend,” because it could bring more political pain.

Yet fiscal pressure on the White House will not let up even if Mr. Obama marshals public opinion against that budget. Absent a negotiated deal to reduce spending, Mr. Cole said, Republicans say they will let $1 trillion in 10-year across-the-board budget cuts take effect under the “sequestration” provision both parties agreed to in 2011. That would squeeze defense and domestic government functions alike.

A deal remains possible. In earlier, unsuccessful talks with Republicans, Mr. Obama embraced what Mr. Podesta calls “sensible reforms” to major entitlement programs, including reduced spending for affluent beneficiaries and more modest inflation adjustments.

Not even liberal advocates hold out much hope for new expansions in the government’s economic role, or crackdowns on the United States’ trading partners, or stimulus spending to reduce unemployment — notwithstanding Mr. Obama’s second-inaugural swagger.

Upon hearing Mr. Obama’s address, “I was troubled by the assumption that the economy’s in recovery, when for most Americans the recovery hasn’t started,” said Robert L. Borosage, a co-director of the liberal Campaign for America’s Future.

“He spoke to the progressive coalition,” Mr. Borosage added. But in some ways, he said, the speech “sounded like it came from the Clinton years.” 

Tuesday, January 8, 2013

Obama expected to nominate chief of staff Lew for Treasury secretary

White House chief of staff Jack Lew is expected to be nominated to replace Treasury Secretary Tim Geithner, likely by the end of this week, two sources close to the process told Fox News.

"It is all but a done deal," one of the sources said, adding that it would take something "extraordinary" to pop up in the next couple of days to derail that decision.

Geithner has said for well over a year that he would like to leave the administration and spend more time with his family after a grueling time playing key roles throughout the economic and fiscal unease of recent years. His tenure at the Treasury followed previous service as head of the New York branch of the Federal Reserve.

Lew has become an Obama favorite through several top posts because of his sharp knowledge of the federal budget and no-drama style.

Picking Lew is a sign the president knows his next Treasury secretary will be smack in the middle of a series of budget battles, starting with the debt ceiling fight that will be brewing during the expected confirmation process.

A red flag is that during the last debt ceiling fight, in the summer of 2011, Lew served as White House budget director and clashed repeatedly with Republicans, who may want to get a pound of flesh in confirmation hearings.

In fact, advisers to the president say Lew deliberately kept a low profile during the recent fiscal cliff talks so as not to enflame those tensions on the eve of the expected announcement of his nomination for Treasury.

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Wednesday, January 2, 2013

Obama's Bad Deal and Worse Negotiating

I hate to burst the balloon of a New Year's celebration for an apparently bipartisan deal to avoid the badly misnamed "fiscal cliff," but far from affirming a progressive victory in the 2012 elections, which should have protected the legacy of the New Deal for future generations, the deal permanently bakes in Republican "starve the beast" tax levels that enshrine massive economic inequality and will quickly force President Obama and Congressional Democrats to agree to cuts in benefits for Social Security, Medicare, Medicaid, student loans, veterans benefits and other social programs that protect the middle class. 

Flush with his election victory, President Obama started the negotiations asking for $1.6 trillion in tax increases over the next decade and promising he would never negotiate over threats to hold the global economy hostage to increasing the debt ceiling. He quickly caved and agreed to $600 billion in tax increases while enshrining a large part of George W. Bush's tax and estate tax cuts permanently into law. 

At the same time, he agreed that the sequester of $1 trillion in spending cuts would be postponed to coincide with the deadline for raising the debt ceiling, transferring his negotiating leverage to Republicans who, despite Obama's protestations to the contrary, will use it to force significant cuts to "entitlements" and social programs for the poor and middle class while protecting the wealth of the top 0.5 percent. 

Obama either proved that he the world's worst poker player, or just as likely, that his campaign promises to protect the poor and middle class were not very serious and he really wants his legacy to be a not very grand bargain that exchanges small increases in taxes on the richest Americans for large cuts to social programs for the poor and middle class. 

This deal to make George W. Bush's "temporary" tax cuts permanent for everyone making less than $450,000 and protecting low taxes on inherited wealth just wasn't necessary. Obama had all the negotiating leverage and he gave it away. If there were no deal now and all the Bush Tax cut automatically expired on all Americans, financial markets would have tanked, and within a week or two, Obama would have forced Congress to fulfill his campaign pledge to raise taxes to Clinton-era levels on everyone making over $250,000 a year. 

By agreeing to move the tax increases only to those making over $250,000 Obama gave away about $200 billion in revenues that could have helped to pay for social programs. In a political vacuum, an argument can be made that's a viable political compromise, particularly since he got temporary extensions to unemployment benefits and tax breaks for the poor in exchange for permanent tax breaks for the rich. 

But by easily compromising on his central campaign promise that he claimed was a line in the sand, Obama signaled to Republicans that there's nothing he won't compromise on. He may say now that he won't negotiate cuts in entitlements and social programs for an increase in the debt ceiling, but there's not a single Republican who will believe him. This January 1 fiscal cliff never posed a long-term danger. But when Republicans took it hostage, Obama caved in on taxes with barely a fight. 

Failing to raise the debt ceiling does pose a long-term danger to the global economy. 

Republicans learned again that when dealing with President Obama, hostage taking works. It will only embolden them to take the debt ceiling hostage again, knowing full well that Obama will cave on his promises to defend Social Security, Medicare, Medicaid and other social programs that protect the middle class and the poor.