James Pethokoukis

Politics and policy from inside Washington

2010 outlook for Democrats

Nov 13, 2009 17:58 UTC

Nate Silver on 2010:

My 30,000-foot view is that between the pressures of the jobs situation and the health care debate, the Democrats are in fairly bad shape. But, there’s a long way to go before next year, and their situation does not seem to be quite as bad as it was in August.

Certainly, if I were the Democrats, I’d be adopting a fairly defensive posture, putting money into defending seats — especially those held by non-Blue Dog incumbents — rather than getting cute and trying to pick off more than a handful of potentially vulnerable Republican seats. I’d also be thinking about policies — like a jobs package and financial regulation — that tap a little bit into the populist spirit and might result in somewhat awkward Republican positioning.

So, should the Democrats be panicking? Yeah, maybe a little. But the fundamentals — particularly the poor labor situation and the Republican enthusiasm advantage — should be the reasons for their concern, rather than the results of any one particular poll.

COMMENT

Guys, I’m sticking with my forecast of the Dems losing 65 house seats in 2010. Call me a hero if I’m right or a dummy if I’m wrong. I don’t think it will matter if the economy improves significantly or healthcare passes. The numbers so far look that way on rasmussen (which has been very accurate so far), and the historical relationship has been about a 10 seat change in the margin per every 1 percentage point change in the marginal popular vote.

Posted by T | Report as abusive

Obama, trade and the echoes of 1929

Nov 13, 2009 14:04 UTC

This is the most disturbing thing I have read in a while (via AP):

Trade agreements with South Korea, Colombia and Panama won’t be put before Congress until it grapples first with President Barack Obama’s pressing legislative goals, the U.S. commerce secretary said Friday. Commerce Secretary Gary Locke said Obama has an ambitious high-priority legislative agenda focusing on health care, financial regulation and alternative energy. “Trade agreements are going to have to wait,” he said at a luncheon hosted by the American Chamber of Commerce in Singapore. “Right now, the administration is focused on a very aggressive and very tight legislative agenda.”

Me: This sounds like Hillary’s “time out” from free trade during the campaign.

COMMENT

Time for a reality check here. In 1929 the US raised tariffs on over 20,000 imported items, sparking retaliations by all its major trading partners. Can you explain how putting a few minor bilateral free trade agreements on hold equates to that disastrous situation? The situation today is nowhere near as disturbing as you make out.

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Maybe not a jobless recovery?

Nov 13, 2009 13:41 UTC

Some interesting analyst from the St. Louis Fed:

What was unique about the jobless recoveries, say DiCecio and Gascon, is that the preceding recessions were structural ones. 75% of jobs lost in the 1990-91 recession and 50% of the losses in the ’01 recession were suffered by the manufacturing sector. That number is down to 25% during this recession. The assumption here is that it’s easier for service workers to find jobs in the growing service economy than for former manufacturing workers to make the shift into the service sector. And that makes sense to me.

COMMENT

Kind of sounds like grasping at straws to me. Or putting lipstick on a pig.

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Stan Collender takes issue with me over TARP. Aieee!

Nov 13, 2009 13:26 UTC

Budget guru, raconteur and helluva nice guy Stan Collender takes issue with my recent TARP post over at his must-read Capitol Gains and Games blog. I wrote that

First, as the WSJ story says, the White House is talking about the current fiscal year — 2010 — and it has already made an estimate of the spending that will occur and the revenues that will be collected.  What the administration is saying now is that some of the spending it projected might not be needed and, if so, that it is planning not to find some other use for the funds.  As a result, the projected deficit and the amount the government was expected to borrow could be lower, in this case at least $100 billion or so lower, than was originally assumed. … You definitely can reduce the projected deficit and the debt by not spending funds that were projected to be spent.  That, in fact, is how you do it.  Spending that has occurred has already increased the deficit and the only way to reduce it in the future is not tto continue to spend the dollars again.

On these issues, my default mode is to defer to Stan. (I am waiting a reply from my source.) But then he adds this interesting nugget:

A question should be asked about whether the Obama administration deliberately overestimated how much TARP would cost in 2010 so that it would be able to claim savings later in the year.  This has been a favorite tactic of Office and Management and Budget directors in the past.  Indeed, everyone from David Stockman to Dick Darman to Leon Panetta liked, and it was clearly something that the G.W. Bush administration used with impugnity. But regardless of whether it was intentional or fortuitous, not spending TARP money that had been projected to be spent will in fact lower the deficit and the amount of government borrowing compared to what otherwise would have been spent.

Sinking Dem polls force Stimulus 2.0

Nov 13, 2009 12:31 UTC

Get ready for Stimulus 2.0 — Extreme Jobs Edition. Yes, the U.S. labor market is slowly healing. The declining number of monthly job losses and weekly initial unemployment claims show that. Yet President Obama still felt the need to announce a ‘jobs summit’ at the White House next month.

That’s compelling evidence that the White House doesn’t believe the job market is mending nearly fast enough to keep unemployment from trending higher — or Democratic electoral prospects in 2010 from trending lower.

The summit is likely a table setter for Obama to announce Stimulus 2.0 (though he surely won’t use the word ‘stimulus’) at his State of the Union address in January. Indeed, Harry Reid is already cooking up a plan in the Senate.

How much money are we talking about? Alec Phillips of Goldman Sachs calls $250 billion over three years a “conservative” estimate. And what might be in the bill? Look for more highway spending, more aid to state and local governments and some sort of business hiring tax credit.

All this represents a sharp departure in message from the White House, which has previously counseled patience. Let the $787 billion American Recovery and Reinvestment Act work, Team Obama kept saying. Even as the unemployment rate blew past 8 percent — a level of joblessness that the stimulus was supposed to prevent — the White House stuck to its guns and dismissed the need for significant new job creation efforts.

On the political side, there were fears that a new package would be tantamount to admitting Stimulus 1.0 was a failure and that it would distract from healthcare reform. On the economic side, many advisers wanted Obama to pivot toward deficit reduction as soon as possible and not spend more on stimulus.

(Indeed, the summit news came as the idea was floated that the administration might use unspent TARP funds for deficit reduction. Obama may also use the January address to announce a commission to deal with the long-term fiscal deficit as well as near-term limits on discretionary spending. Not only is the White House trying to appease bond vigilantes, but also moderate Democrats.)

But economic anxiety and impatience proved lethal for Democrats in the New Jersey and Virginia gubernatorial races, and may cost the party again in the 2010 midterms. That and the surge to double-digit unemployment changed the White House calculus. And don’t think David Axelrod didn’t notice that Republicans have overtaken Democrats 48-44 in the generic congressional ballot.

The new emphasis on jobs might be too late. Indeed, “new” is the appropriate word since the first package was not geared toward creating jobs so much as increasing economic output, as Lawrence Summers recently clarified. Temporary income tax cuts and credits, for instance, have a poor record of generating jobs.  As it is, some economists are looking for unemployment to hit 11 percent in 2010. David Rosenberg of Gluskin Sheff doesn’t see 13 percent as out of the question.

But better for the White House, from its perspective, to take the initiative and adjust their 2010 agenda now — so long cap-and-trade –  than have Speaker John Boehner do it for them in 2011.

COMMENT

The economy will heal faster if they just leave it alone.This is not a standard, run-of-the-mill recession, caused by routine business cycle oversupply and under-demand. I wish they would stop treating as one.This recession is a restructuring, driven by excessive debt… personal, business, and government; both here and abroad. And since all of this “stimulus” is borrowed money, the positive effects of the spending cannot exceed the negative effects of the new debt.After all, if the problem is too much debt, how can more debt fix it?

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