James Pethokoukis

Politics and policy from inside Washington

The real message of the Scott Brown victory

Jan 29, 2010 17:48 UTC

Via John Ellis:

The answer, I think, is that whatever pivot is made will be irrelevant. The fact is President Obama doesn’t have the luxury of proposing an agenda. Agendas (or at least, agendas as we have come to think of them) are for people who have money. The United States is broke. And the debt gets worse by the day.

Therefore, President Obama’s job is to get us out of debt (or start us down the path toward that end). This job would be difficult in the best of times. President Obama has to do it in the midst of the worst recession since the 1930s. He has to do it in the midst of two wars in regions perpetually hostile to foreign influence. And he has to do it in the midst of a global recession so severe that it now threatens what erudite commentators call the “social cohesion” of our allies and trading partners around the world.

That being the case, and I think it is inarguably the case, President Obama will never be successful until he accepts the assignment that history has given him. No one (anywhere) believes for one moment that he can add 30-35 million people to the health insurance rolls and not increase (sharply) the cost of health insurance. President Obama has been peddling this fable for months now and it has only served to make him look either (a) naive, or (b) utterly cynical. No one believes that “cap and trade” legislation is anything like an urgent priority at this time. No one believes that securing the Olympics for Chicago in 2016 is an urgent use of the President’s time. No one believes that President Obama deserved or should have accepted the Nobel Peace Prize. The reason that Obama has seen his approval rating fall sharply is that people think he’s not doing his job.

His job is to get the country on a path to fiscal sustainability and to defeat (as much as humanly possible) those who seek to put nuclear weapons in our cities and detonate them in time for the evening news. His job, more accurately, is to cut costs, delay benefits, right-size government programs, rethink military and diplomatic strategies, re-focus our war efforts, all while rebuilding (or expanding) intellectual and physical infrastructure for the years ahead. And he must do all this while devising new strategies for jump-starting wealth creation. It’s more than enough agenda for anyone, even someone with President Obama’s admirable self-confidence and perhaps grandiose self-esteem.

“Stop spending money you don’t have” was the real message of the Massachusetts Senate election that vaulted Senator-elect Brown from the back benches of one of the most useless political institutions in America (the Massachusetts State Senate) onto the front page of The New York Times. “Do your job,” was the other, direct message to President Obama.

COMMENT

Dear friend,
After some long spell, i am reading and listening of your thoughtful writings from our famous news provider website.
What you said is just come out of his own shelf.
Just he entered to White House,People had more confidence,man of vision,thats why, Americans, irrespective of many inhibitions, racial mix, some ever long problems on their day today life,they have voted him as a President of America.
Historically,scientifically speaking ,that was a new chapter in American political and to world history by democratic means.
Back to your insight thoughts, you have mentioned what others said about his ruling parties suffer in recent senate election results.
Thats are all common in any democratic systems.
For example, i and we expected some drastic plans will emerge to clear recessionary obstacles, job losses, vast disparity in income,supply, distribution of income,bonuses, banks failure to deliver their goods and services in times to Americans and to boost American economy and bring America to back to mainstream of life in forthcoming months/years.So,American voters,middle classes,some business new tycoons, policy changers, some intelligent sections,some upcoming management gurus had voted to Mr,Obama as a American President.
In the mean while, many industries were closed, banks went to black list, deposit holders, employees,senior citizens were slightly on road.
So,he brought some drastic changes in banking,financial sectors by bail out measures,pumping government money to them to get back their business, some loans modification procedures,and it had produced real economic results.
Side by side, Iran!s nuclear programs, some democratic protests in Iran, mis handling Afghan!s issues from time to time and all related bad,tough matters had made Mr.Obama had sleepless nights for so many days.
Some time,some days have taken to study,organize new systems of governance to his subordinates, and to do some vital things for further halt in bad events.
He had attempted it to correct it,It had produced some minimum results.
As a general welfare, New Health Insurance schemes are much advantages to working class,organized labors,senior citizens and to others.
In the meanwhile, what all news medias,experts and other elite groups had initially supported his new health insurance schemes.Later on wards, lot of comment on his new health care proposals, some strong opposition from Republican senators and from his own party!s senators had started questioning about his latest proposal on health reform.
The above ups and downs events are new to Mr.Obama as a head of A vast country.
This had started back fire and created some ripples,confusions to hold it for some time.
Many Americans thought that, he wanted to bring some new ways of bringing legislations on health care,education, bonus,perks to top management,bank groups ,some new taxes for nations prosperity had a new fear phobia among many strong capitalist thinking persons.
To sum up, peoples expectations are too high.They want to get maximum benefits from government, industrial sectors, for more wealth generations by quick,existing and by easy ways.
That is not possible by any world famous thinker, or head of states of by any well knowledge sects of from any living personality.
Heaven will not fall us like water comes from heavy water falls or from any dams or from any oceans.
We can try to get heavenly ideas and try to implement it by one by one brick like constructing houses,malls,enterprises.
Still, many miles to go to get fruitful results and smiling,contended life from Americans and rest of the world.
But roads are not very far away to get our dreams into reality.

So-so growth for 2010?

Jan 29, 2010 15:26 UTC

That is how IHS Global calls it:

The fourth-quarter GDP surge was produced by a sharp turn in the inventory cycle. Firms still cut inventories in the fourth quarter, but much less severely than in the third. That led to increased production, which boosted GDP. Final sales growth, a better guide to the underlying path of the economy, was much more sedate, at 2.2%, but that was still an improvement on the third quarter’s 1.5% pace.

The best news in final sales was on exports and business spending. Exports surged 18.1%, their second strong increase in a row. And there was a 13.3% increase in business spending on equipment and software (two-fifths of which came from computers). The improving trend in capital goods orders suggests more gains in equipment spending ahead. If firms are feeling confident enough to raise their equipment spending, they’re probably confident enough to start hiring again. That will support consumer spending, which showed a moderate 2.0% gain in the fourth quarter.

The weakest spot was business structures spending, down sharply again as the commercial real estate crisis took its toll.

We must be careful in drawing implications for the future from today’s release. There’s more help to come from the inventory cycle, since inventories were still falling in Q4. But we won’t see a boost as big as 3.4 percentage points again. And we’re doubtful that foreign trade can continue to be a plus for growth, as we expect imports to rebound.

The Q4 GDP surge doesn’t change the view that growth is likely to be subdued by historical standards, in the 2.5-3.0% region for 2010.

COMMENT

1. the economy turns around when enough businesses reduce enough costs to become profitable again
2. the GDP includes government spending, and Obama bucks have flooded the economy. So no surprise GDP went up. But what will happen when the Obama bucks have to be paid back?
3. the underlying problems of a horrible economy are still there: huge debt, looming taxes, looming inflation, government interventions for the sole purpose of expanding government, a new bubble in the stock market, huge uncertainties resulting from an economically illiterate administration.

They can force the GDP up by spending borrowed money, but the economy won’t get better until the criminals in Washington are washed away.

Posted by proreason | Report as abusive

Dems might be in worse trouble than 1994

Jan 28, 2010 17:09 UTC

If Mike Barone thinks so, so do I:

I have not seen a party’s fortunes collapse so suddenly since Richard Nixon got caught up in the Watergate scandal and a president who carried 49 states was threatened with impeachment and removal from office.

The victory of a Democrat in the special election to fill Vice President Gerald Ford’s House seat in February 1974 was a clear indication that the bottom had fallen out for the Republican Party. Brown’s victory last week looks as if something similar has happened to the Democratic Party.

Many people ask me whether the Democrats are in as much trouble as they were in 1994. The numbers suggest they are in much deeper trouble, at least at this moment. Back in 1994 I wrote the first article in a nonpartisan publication suggesting that the Republicans had a serious chance to win the 40 seats necessary for a majority in the House. That article appeared in U.S. News & World Report in July 1994.
Read more at the Washington Examiner: http://www.washingtonexaminer.com/politics/Democrats-fall-as-fast-as-Nixon-Republicans-in-1974-82731837.html#ixzz0dvZU4EpA

COMMENT

Barone says worse than 1974.

And Obama’s State of Me address didn’t help the statists’ cause.

Posted by proreason | Report as abusive

A limited speech by a constrained president

Jan 28, 2010 15:55 UTC

The White House political team loves comparing Barack Obama to Bill Clinton and Ronald Reagan, predecessors who easily won second terms despite early stumbles in their first ones. But the economic and fiscal pincers which constrain Obama are much tighter. None of the president’s proposals in Wednesday’s State of the Union speech can do much to free him.

Obama said high unemployment would be his number one focus this year. No wonder, as it is the issue of most concern to voters, and the biggest reason their support for the president and Congress is falling.

The president made some proposals — money for small business lending and a tax credit for hiring — which may help at the margins. But the new initiatives would probably cost around $100 billion, a fraction of the $300 billion or so in stimulus spending so far, which has not prevented the unemployment rate from climbing to 10.0 percent currently from 7.7 percent at the start of 2009. Good luck finding an economist — even inside the Obama administration — who has great expectations from the proposed new spending.

On unemployment Obama is falling behind his comeback predecessors. As it is, the Congressional Budget Office predicts unemployment will remain close to 10 percent heading into 2011, a forecast echoed by many private economists. By contrast, the first full year of the Reagan recovery in 1983 saw unemployment fall by 2.5 percentage points, while Clinton inherited a growing economy and a falling jobless rate.

And don’t forget the moribund housing market. A new piece of analysis from Goldman Sachs concludes that “recoveries from post-bust recessions tend to be more sluggish than normal and substantial excess capacity generally remains for some time.”

Looking at the political damage caused be high joblessness, Obama would no doubt have preferred to announce something bolder. The liberal Economic Policy Institute has a $400 billion plan that takes in everything from tax credits to government make-work positions. (And major cuts in investment and corporate taxes are out of the question with this administration.)

But that price tag doesn’t go with the double-digit deficit, which spooks financial markets and independent voters. Obama nodded in their direction with a proposed idea-seeking commission and a very limited three-year spending freeze. While not exactly a frugal Hooverite response, it’s not exactly New Deal II, either.

In the end, it was a limited agenda outlined by a constrained president — constrained by the loss of a Senate supermajority, constrained by the Scott Brown win in Massachusetts, constrained by his own falling popularity and constrained by investors whom he fears are reaching their debtload tolerance.

So not a reboot but a slow retreat. The reboot may come next January if the sour economy costs Democrats their dominance of Congress. I didn’t even think Obama’s heart was really in the no obligatory bit of Wall Street bashing. There was also an interesting moment in the televised Frank Luntz focus group after the speech. Those folks hated when Obama talked about the economy having turned the corner. They think the recession continues.

So forget Reagan and Clinton.  Given Obama’s economic challenges, one-term Jimmy Carter might be the better historical comparison.

COMMENT

The only constraint on this guy is his radical ideology.

Every time Amerca gets a glimpse, we recoil in horror.

Posted by proreason | Report as abusive

Obama SOTU speech

Jan 28, 2010 14:50 UTC

It was a limited agenda outlined by a constrained president, constrained by the loss of a Senate supermajority, constrained by the Scott Brown win, constrained by his own falling popularity and constrained by investors whom he fears are reaching their debtload tolerance.

Not a reboot but a retreat. The reboot will come NEXT January. I didnt even think his heart was really in the Wall Street bashing. There was also an interesting moment in the Frank Luntz focus group after the speech. Those folks hated when Obama talked about the economy having turned the corner. They think the recession continues.

CBO paints nightmare scenario for Democrats in 2010

Jan 26, 2010 18:06 UTC

According to the new CBO economic and budget forecast,  the US economy will grow at just 2.2 percent next year, keeping unemployment above  10 percent. In fact, it has the jobless rate averaging 10.1 percent vs. 9.3 percent in 2009. As the CBO puts it:

First and most important, output is expected to grow fairly slowly in this recovery. Following the two previous severe recessions in the postwar period, output rebounded particularly rapidly, as did employment. Real GDP grew by 6.2 percent in the four quarters following the 1973–1975 recession and by 7.7 percent in the same period following the 1981–1982 recession. In both instances, all of the jobs lost during the recession were regained within four quarters. In contrast, GDP rose modestly and employment remained much weaker following the two most recent recessions.

Employment changed little during the four quarters following the 1990–1991 recession, when real GDP rose by 2.6 percent. And employment fell by more than 1 million in the six quarters following the 2001 recession, when real GDP grew at an average annual rate of 2.1 percent.

COMMENT

4 ways to grow GDP close to 6% and to decrease unemployment by 4 pts

1. Capital gains tax cut to effective rate of 10% on all asset classes
2. Incentivize promising job growth industries such as healthcare. Instead of crippling healthcare with burdensome regulation and government control, enable the industry by offering incentives for creation of self funded, self directed medical savings accounts. Other promising sectors are energy – export natural gas and other commodities to developing nations.
3. Dramatically reduce non-critical federal spending. Cut most foreign aid other than spending that is critical to national defense.
4. Across the board sustained coordinated income tax cut

Posted by dutchboyinvestor | Report as abusive

The Obama Freeze

Jan 26, 2010 15:58 UTC

A few thoughts on the Big Budget Freeze:

1) Estimated annual savings of $25 billion over the next decade aren’t much when annual budget deficits will likely average a trillion dollars.

2) The freeze would use current spending levels, elevated to fight the recession, as a reference point. The stimulus gets locked in!

3) The 2011 budget deficit, according to the Congressional Budget Office, will be $980 billion, or 6.53 percent of GDP. With the Obama freeze, the deficit would be 6.43 percent of GDP.  Rounding error!

And while I am on the topic, instead of a budget commission, I would prefer a commission on how to boost economic growth.

COMMENT

The “freeze” is the latest scene in the Impressionist Lanscape.

We will see dozens of similar ploys, all designed to hazily paint the marxist as the people’s friend. Meanwhile, he will continue to undermine the country by leveraging the most powerful position in the world for 7 more years.

They no doubt are angling to keep their majorities in the November elections, but it isnt likely they think that is critical. No matter what happens with legislation, they will be working their magic with executive orders and by stocking the bureaucracy with true believers.

But don’t worry, Lenin afficionadoes!! They won’t make the mistake again of praising Mao in public.

Posted by proreason | Report as abusive

The case against Bernanke

Jan 25, 2010 15:33 UTC

From AEI’s Desmond Lachman:

Bernanke’s sole claim for a second term rests on the masterful and bold way in which he prevented the U.S. economy from falling into the abyss following the Lehman debacle in September 2008. However, this begs the question as to who led us to the abyss in the first place. Throughout 2006, when the worst of the sub-prime lending was taking place, Bernanke was conspicuously silent in sounding the alarm about the dangers of the U.S. housing bubble. Similarly, he was painfully slow in recognizing how severe the fallout from the bursting of the housing bubble would be and he displayed the poorest of judgments in allowing Lehman to fail in as disorderly manner as it did.

If there is one more item that should sink Bernanke’s bid for a second term it has to be his recent statement that the Federal Reserve’s extraordinarily low interest rate policy between 2001 and 2004 contributed little to the creation of the largest U.S. housing market bubble on record. The Senate would do well to ask itself whether the economy’s interests would be best served by again choosing a Fed chairman who seems to have learned so very little from the Federal Reserve’s past monumental mistakes.

COMMENT

Bernacke was singing the praises of the economy in June 2008, along with King Paulsen.

Three months later they were in Bush’s office declaring the world as we know it would end if Bush didn’t immediately grant them the power of gods.

Maybe Ben isn’t as brilliant as people would have you believe. Or at the very least, he either isn’t a very good forecaster or he’s an outright liar.

Posted by proreason | Report as abusive

Yup, the Senate may be in play

Jan 25, 2010 14:22 UTC

New polling by Rasmussen shows Evan Bayh in danger. Remember, one of the big impacts of the Scott Brown victory was a boost to recruitment. RealClearPolitics has the details:

Indiana Rep. Mike Pence (R) leads Sen. Evan Bayh (D) by 3 points, according to a new Rasmussen poll. Pence, the third ranking Republican in the House, is considering a Senate bid but hasn’t indicated publicly which way he is leaning.

Bayh leads two other Republicans, ex-congressman John Hostettler and State Sen. Marlin Stutzman, but still polled below 50% — not a good sign for an incumbent.

Bayh 44 – Pence 47

Bayh 44 – Hostettler 41

Bayh 45 – Stutzman 33

UPDATE: It now looks like Beau Biden isn’t going to run in Delaware. With Mike Castle in for the GOP, there is a good chance of a Republican pickup of Veep Biden’s old seat.

COMMENT

If a State Senator with youthful vigor and grassroots determination can win in Massachusetts, I think State Senator Marlin Stutzman can defeat Bayh in Indiana as he displays those same characteristics. Hostettler got in too late and is too bland to woo the independents. Behney uses too much rhetoric. And Bates seems a little too slick. They’re all good conservatives, but Marlin is a common sense conservative, who has a proven record.

After meeting State Senator Stutzman at a local event, I’m convinced about him and I signed up at http://GoMarlin.com/team51.aspx to donate $20 and volunteer.

You should, too.

Posted by Thomas | Report as abusive

Bernanke Confirmation Watch

Jan 22, 2010 19:38 UTC

I would not say his support is collapsing, but it is eroding. He is going to need some GOP help to make it. Keep an eye on the “yes” votes from the Banking Commitee to see if they start wavering and how much Obama supports him in the next few days. BB is on the wrong side of the populist wave.

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