James Pethokoukis

Politics and policy from inside Washington

The new Era of Big Government … is not popular

Oct 29, 2010 20:06 UTC

I think this Gallup chart is pretty stunning, especially when higher economic insecurity was supposed to push Americans toward a greater embrace of government. And it did for a bit, but that effect has more than reversed itself:


What the polls are saying about Obama

Oct 29, 2010 19:32 UTC

First some recent polling data:

– 68% think the money the federal government has spent on the economic stimulus has been mostly “mostly wasted.” (ABC News/Washington Post Poll. Sept. 30-Oct. 3.)

– 61% “don’ t think” Barack Obama’s policies have made the economy better. (CNN/Opinion Research Corporation Poll. Sept. 21-23.)

– 78% trust government only “some of the time or never.” [Same as in 1994 and 20 points higher than when Reagan was election in 1980. The 11% saying “never” is an record high.] (New York Times-CBS Oct. 21-26.)

– Between 55% to 36%, respondents says they would rather have smaller government providing fewer services than the opposite. (New York Times-CBS Oct. 21-26.)

– 21% percent say cutting government spending is the most important issue to them. 66% say it is important but so are other issues. (New York Times-CBS Oct. 21-26.)

– A recent CBS poll had “economy/jobs” as the top priority of 54% of voters. No other issue had a double digit percentage vote. “Federal deficit, spending” had 27%.

– A variety of polls show TARP and the automaker bailout to still be wildly unpopular by 2-to-1 or worse.

–77% favor extending the Bush tax cuts for those making less than $250,000 a year, while 15% oppose extending them. (Schoen)

– Half favor extending the Bush tax cuts for all Americans, including those making $250,000 or more a year, while 40% oppose this. (Schoen)

– 52% favor repealing the new health care law that was passed earlier this year, while 38% oppose repealing it. (Schoen) A Pew Poll puts that number at 51-41.

And now a few observations:

1.  Americans don’t blame Obama for the economy, but blame him for not fixing it — which is what he was hired to do. Mission Not Accomplished.

2. The Obama agenda is unpopular,  and Americans see it as a distraction from dealing with unemployment.

3.  Americans are worried about spending and deficits, but have not made the mental leap to restricting entitlements.

4. Americans may not think government is necessarily the problem, but they are pretty sure  it’s not the solution.



what kind of country gives a man 8 years to run everything into the pooper – and another man 2 years to flush it all down!? where was the teaparty when bush was eating up the surplus clinton left him? this country truly borders on the ridiculous – it’s like the fall of the roman empire to me. a bunch of morons trying to stop a good man from doing everything he can to keep the united states afloat.

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Reviewing the midterm election pre-mortems

Oct 29, 2010 18:32 UTC

Let’s assume the Republicans take the House and the Democrats hold the Senate. What will it all mean and what will happen next?  My two cents: I think it will be response by voters who think Obama hasn’t done enough to boost the economy and that the stuff he has done has been ineffective and off-point at best, harmful at worst.  Here’s what are some other folks saying:

1. Passage of unpopular Obamacare represented the high-water mark of progressivism and helped lead to huge midterm losses.

2. Republicans will go to war with White House and not cooperate as they did after 1994 election blowout.

3. With economy weak, there could be agreement on infrastructure spending, payroll tax cut or a unilateral homeowner bailout.

4. Gridlock means U.S. needs to depend more on the Fed to lift economy.

5. Congressional gridlock for next two years other than regulatory action. Obama’s social democratic agenda was rejected by center-right body politic.

6. Public worried about deficit but not ready to accept massive cuts to entitlements.

7. This is a referendum on the Obama agenda. Voters just won’t eat the dog food.

8. GOP will suffer lots of turmoil thanks to Tea Party and fiscal challenges. Gridlock.

Rich Lowry, National Review: Blame Pelosi and Obamacare.

Pelosi needed to flip key moderate Democrats who initially voted “no” on the health bill to “yes.” She might as well have asked them to quit on the spot. The Washington Post finds that in the eight districts where a Democrat switched from “no” to “yes,” a Democrat is favored to win in only one. In the five districts where a Democrat switched the other way, the Democrats look stronger.

She’s been the kind of speaker you’d have expected — indomitably and heedlessly progressive. Moderate and conservative Democrats were her enablers, and she returned the favor by making them cannon fodder. Pickett’s charge reached the Union lines on Cemetery Ridge before falling back. It’s called the high-water mark of the Confederacy. Pelosi’s charge established the high-water mark of progressivism, and she’ll have the bodies to prove it.

Paul Krugman, The New York Times:  GOP will worsen deficit though tax cuts, try to destroy Obama.

After all, that era of partial cooperation in the 1990s came only after Republicans had tried all-out confrontation, actually shutting down the federal government in an effort to force President Bill Clinton to give in to their demands for big cuts in Medicare. … But the lesson current Republicans seem to have drawn from 1995 isn’t that they were too confrontational, it’s that they weren’t confrontational enough.

We might add that should any Republicans in Congress find themselves considering the possibility of acting in a statesmanlike, bipartisan manner, they’ll surely reconsider after looking over their shoulder at the Tea Party-types, who will jump on them if they show any signs of being reasonable.

Right now we very much need active policies on the part of the federal government to get us out of our economic trap. But we won’t get those policies if Republicans control the House. … They’ll refuse to do anything to boost the economy now, claiming to be worried about the deficit, while simultaneously increasing long-run deficits with irresponsible tax cuts.

Noam Scheiber, The New Republic: There are compromises out there if Rs and Ds want them.

Still, a deal on infrastructure spending may not be entirely out of reach, at least if the White House is ruthless enough. One idea along these lines comes care of David Shulman, a senior economist at UCLA’s Anderson Forecast center. Shulman proposes a several-hundred-billion dollar infrastructure package in which the administration agrees to suspend Davis-Bacon, the law requiring contractors for government-funded construction projects to pay locally prevailing wages, as deemed by the Labor Department.

Strike a grand-bargain with Republicans on tax cuts. One obvious basis for discussion here would be a proposal by Larry Lindsey, George W. Bush’s first White House economic adviser. Lindsey has spent the last 20 months urging a two-year halving of the payroll tax for both workers and businesses. This would save each of them about $1,200 on average, and cost about as much overall as the Obama stimulus.

Launch a massive, unilateral homeowner bailout.  The good news is that the administration could do it without congressional approval. Fannie Mae and Freddie Mac basically have an unlimited credit line with the U.S. Treasury, and the government has controlled Fannie and Freddie since it seized them in 2008.

Peter Orszag, The New York Times: U.S. needs more stimulus, delayed deficit reduction and less Washington-business hostility.

To bolster the economy, we need a three-part shift in policy:

· more fiscal expansion (read: more stimulus) now;

· much more deficit reduction, enacted now, to take effect in two to three years; and

· an improvement in the relationship between business and government (the current antagonism, even if not the primary explanation for slow hiring and sluggish investment, does seem to be affecting hiring and other business behavior).

Unfortunately, the necessary shifts in fiscal policy are extremely unlikely to happen, and the strains between business and government are now so deep that they will take time to address. So we’re left relying on monetary policy — and in particular a much-anticipated second round of quantitative easing by the Federal Reserve — which may create more problems than it solves.

Charles Krauthammer, The Washington Post: Obama’s social democratic agenda was rejected by center-right body politic.

Over the next two years, Republicans will not be able to pass anything of importance to them – such as repealing Obamacare – because of the presidential veto. And the Democrats will be too politically weakened to advance, let alone complete, Obama’s broad transformational agenda.

Over the next two years, the real action will be not in Congress but in the bowels of the federal bureaucracy. Democrats will advance their agenda on Obamacare, financial reform and energy by means of administrative regulation, such as carbon-emission limits imposed unilaterally by the Environmental Protection Agency. … The direction of the country will be determined in November 2012 when either Obama gets a mandate to finish building his “New Foundation” or the Republicans elect one of their own to repeal it, or what (by then) remains repealable.

Democratic apologists would prefer to pretend otherwise – that it’s all about the economy and the electorate’s anger over its parlous condition. Nice try. The most recent CBS/New York Times poll shows that only one in 12 Americans blames the economy on Obama, and seven in 10 think the downturn is temporary. And yet, the Democratic Party is falling apart. Democrats are four points behind among women, a constituency Democrats had owned for decades; a staggering 20 points behind among independents (a 28-point swing since 2008); and 20 points behind among college graduates, giving lie to the ubiquitous liberal conceit that the Republican surge is the revenge of lumpen know-nothings.

William Gale, The New Republic:  Voters worried about deficit, but are unsure of what to cut.

Three surveys released in the past week—Pew, Bloomberg, and CBS/New York Times—illuminate what the American people want from the new Congress that convenes next January. Taken together, these polls offer a warning to a new Republican majority: If you push your limited government agenda too far or refuse to cooperate with Democrats and the White House, you’ll pay a price.

So what of the Republicans’ agenda? Will it jibe with what the public wants? The people’s message for the Republicans in these responses: We don’t like how Obama has expanded spending, but we don’t like all your plans for shrinking it either. There are parts of government we like, and you’d better leave them alone. Granted, in the CBS/New York Times poll, 55 percent of respondents said they would rather have a smaller government providing fewer services than a bigger government providing more services, while only 36 percent said the opposite.

The new conservative majority will contain up to 80 members who are in sync with the Tea Parties or who owe their seats to Tea Party support, making many of them among 21 percent who think that cutting spending is the single most important thing they can do in Congress. (Some of them have already said that they won’t even vote to increase the debt limit next year.) GOP leaders are going to have to balance this reality on the Hill with the opposing reality of a public that wants more than just budget-slashing—including compromise with the other side of the aisle.

John Podhoretz, The New York Post:  Voters  are simply rejecting the Obama agenda.

This is an election about Barack Obama. It’s a referendum on him and his party. It isn’t about the Republicans. They’re not being anointed. Obama and the Democrats are being scourged. Analogies abound — to the 1994 election, to the 1964 election, to the 1894 election. The appropriate analogy, though not in scale, is to the 2002 election. Only this year is the mirror image of 2002.

In 2002, voters went to the polls after something of great consequence (9/11) had taken place to which George W. Bush and his party had responded. The question was whether voters believed what had been done had been good or bad for the country and for them. … Candidates ran with Bush and ran strongly against Bush. Quickly, the midterm election in 2002 became “nationalized,” unlike most midterms — meaning that voters weren’t only making judgments on individual races but were using their vote to express their support or opposition for the general response of their government to 9/11.

When the dust cleared, in a surprising reversal of historical trends, the Republicans had improved their position in the House and won seven seats in the Senate, which restored the control they’d lost the previous year.

In 2010, Democrats went to the American people with a potent record of accomplishment undertaken in the wake of an event of great consequence — the financial meltdown of September 2008. The difference is that in 2002, Bush and the Republicans ran on their record. In 2010, Obama and the Democrats are running away from theirs. It’s not that they don’t believe in what they did. It’s that the voters don’t believe in it, and they know it.

Bruce Bartlett, Fiscal Times:  GOP will suffer lots of turmoil thanks to Tea Party and fiscal challenges. Gridlock.

Another difference is that the House Republican leader in 1994, Newt Gingrich, had vastly more power over his caucus than his counterpart today, John Boehner, is likely to have. The reason is that every Republican owed Gingrich very heavily for achieving majority status, something many probably never expected to live to see. Therefore, as Speaker, he could get away with doing things and impose discipline in a way that Boehner cannot hope to duplicate

Among the things Newt was able to do once he took control was effectively neuter the committees. The committee chairmen’s roles were diminished, their staffs were slashed, and virtually all power in terms of policy and legislative initiatives was centralized in the speaker’s office. … There’s no way Boehner can hope to get away with that sort of thing. It’s clear that the Republicans in line to be committee chairmen are not prepared to be potted plants.

Another important difference between 1994 and today is that presidents George H.W. Bush and Bill Clinton and Democrats in Congress had already done the heavy lifting of getting the federal budget onto a sustainable path.  … Under these circumstances, gridlock was just what the doctor ordered.

It should be remembered also that Republicans had the very good fortune to take power right on the brink of the 1990s technology boom, which raised the real gross domestic product 4.7 percent in 1995, 5.7 percent in 1996 and 6.3 percent in 1997 — which sent  tax revenues cascading into the Treasury. But today the situation is quite different.  … I hope I am wrong, but I don’t see any prospect of meaningful action by a Republican Congress that would reduce the deficit, and much reason to think it will get worse if they have their way by enacting massive new tax cuts while protecting Medicare from cuts.

Will Obama triangulate?

Oct 29, 2010 16:50 UTC

National Journal’s Ron Brownstein’s chat with President Obama last week:

It was clear that Obama has started to think seriously about how he will navigate a Washington with many more Republicans in it. But nothing about him suggested that he viewed the impending arrival of those Republicans as evidence that he needed to radically rethink his presidency. Obama sounded neither shell-shocked nor defiant. He seemed entirely focused on the practical: where he might work with Republicans, and where he expects confrontation (education, infrastructure, and energy in the first group; taxes, health care, and Social Security in the second).

Will Obama triangulate like Bill Clinton did after the 1994 midterm elections?  I dunno. My guess is that in the end, Team Obama will try to win ugly, betting that a recovering economy, massive fundraising and a weak GOP presidential field will allow a narrow 2012 victory


I do not even know how I ended up here, but I thought this post was great. I don’t know who you are but definitely you are going to a famous blogger if you are not already Cheers!

Will 2011 be the year of the tax cut or tax hike?

Oct 29, 2010 14:53 UTC

There’s a brewing debate among conservatives over whether they should favor some tax increases to close the budget deficit. Some Republicans on Obama’s deficit panel are talking about cutting various tax breaks for individuals. Possible presidential candidate Governor Mitch Daniels of Indiana recently spoke favorably about a value-added tax and an energy tax.  And here is Kevin Williamson of the National Review Online’s Exchequer blog:

Here’s the problem: The deficit is, by my always-suspect English-major math, about 36.3 percent of federal spending ($1.29 trillion deficit out of $3.55 trillion spending). For comparison: Defense accounts for about 18 percent of federal spending. So you could cut out the entire national-security budget, and another Pentagon-sized chunk of non-military spending, and not quite close that deficit. You could cut the Pentagon to $0.00 and eliminate Social Security entirely and just barely get there.

Don’t get me wrong: In a perfect world, Exchequer would love to see the budget balanced and some tax cuts enabled through spending reductions alone.  … Not going to happen. So, our choices are this: 1. Hold out for the best-case scenario, in which a newly elected Speaker Boehner gives President Obama the complete works of Milton Friedman and everybody agrees to cutting federal spending by more than a third. 2. Keep running deficits and piling up debt. 3. Raise taxes. My preferences, in order, go: 1,  3, 2. And No. 2 is not really acceptable.

Like it or not, taxes are going up: If not today, then in the near future. Even once the deficit is under control, that debt is still going to have to be paid down, lest debt service alone overwhelm the federal budget, necessitating even more tax hikes.

What all this misses is that 2011 will more likely be the Year of the Tax Cut than Tax Hike. The Bush tax cuts will be extended, various business tax breaks passed, maybe even a payroll tax cut — all to do something about a slow growth, high unemployment economy. Here is how voters see things, according to Rasmussen:

When faced with a budget crisis, most Americans think “it’s always better to cut taxes than to increase government spending because taxpayers, not bureaucrats, are the best judges of how to spend their money.” A new Rasmussen Reports telephone survey finds that 59% of Americans agree with that statement, while 26% disagree. Fifteen percent (15%) are undecided. … That’s down just slightly from August 2009, when 62% agreed that taxpayers are better judges of how to spend money. However, in January of 2009, just 53% agreed with that statement.

Fifty percent (50%) of Adults now say a dollar of tax cuts is always better than a dollar of public spending, up nine points from January of last year. Twenty-nine percent (29%) disagree, and another 21% are not sure. Just 27% think public spending provides “more bang for the buck” than tax cuts when it comes to economic policy and creating jobs. Forty-nine percent (49%) disagree, a seven-point increase from the beginning of 2009. But 24% are not sure.

5 questions for CNBC’s Michelle Caruso-Cabrera

Oct 29, 2010 14:05 UTC

I’m a big fan of Michelle Caruso-Cabrera’s analysis and insight on CNBC, so I was delighted to hear she was writing a book. And “You Know I’m Right: More Prosperity, Less Government” doesn’t disappoint. It’s a straightforward, highly readable argument in favor of fiscal conservatism and limited government. Like me, she spent her childhood in the 1970s and 1980s and experienced firsthand the impact of economic policy gone awry and economic policy done right. During Ronald Reagan’s presidency, she writes:

In the simple way a child views the world, my family’s life got a lot better. Happier. Once my parents felt they had control of their money – and their lives and livelihood – they were so much more relaxed. I wasn’t conscious of it at the time, but I learned implicitly how much economic policy matters to our everyday lives. Ronald Reagan taught me that.

Well put. Here is a bit more on how she views the world:

1. Do Americans need to pay higher taxes to deal with the budget deficit?

Nope. Americans do not need to pay higher taxes. What we “need” is for the government to spend less money. There are entire departments that can be eliminated, like the Department of Energy. It was created under the Carter administration to end our dependence on foreign oil. Obviously, it has failed. I have an entire chapter about every department that can be completely erased.

But the big blob eating the federal budget is Medicare, and to a lesser extent Social Security, In my book I spend a lot of time about what should be done on those fronts. We face some tough choices, but they are easier to deal with now, rather than putting them off into the future. First and foremost: personal accounts. I am tired of the federal government spending social security taxes on everything but.

2. Do you think there is a difference between being pro-market and pro-business?

In theory there shouldn’t be a difference between being pro free-markets and pro-business, but increasingly there is. I find that many in the business community think we ought to gum up the tax code with all kinds of special breaks and credits and blah blah blah. That is the government picking winners and losers. One low corporate tax level is all we need. You need a government subsidy to survive? Than you shouldn’t exist. I have a lot of fun in the book pointing out the silly things that happen when government decides to pick winners, such as alternative energy. I explain how the federal government passed an alternative energy tax subsidy that actually INCREASED the use of fossil fuels? Only Congress is capable of such a thing.

3. How do you deal philosophically with the TARP bank bailout since it was government coming to the rescue of the private sector?

This is a tough one. In the end I come down to the payments and settlements system, which appeared to be under threat at the worst moments of 2008. I was reporting from Europe when some merchants there started to decline credit cards. The modern-day version of money supply was shrinking fast. As Milton Friedman showed us all, it was the decline in the supply of money that dramatically worsened the depression in the 1930s. (I dedicate my book to him by the way, because he viewed economics through the prism of liberty.)

4. What do you make of America’s tilt toward protectionism such as the China currency bill?

Our tilt toward protectionism is sadly consistent with weak economic periods in history. It is self-defeating.

5. How would you boost the economy right now? Austerity, tax cuts, infrastructure spending, something else?

Best way to improve the economy: A clean tax code, with low marginal rates. And a Congress that stops making new regulations.