James Pethokoukis

Politics and policy from inside Washington

Like the economy, Obama is kind of stuck

Dec 22, 2010 19:54 UTC

Jay Cost thinks Obama, like the economy, is kind of stuck:

The macro trend, I would say, has essentially been flat for the last few months — as Americans have developed fairly stable opinions of the 44th president by this point that probably are not easily dislodged. In the long term, the way the president gets his numbers up will be to convince the country that he is a good steward of the economy, a view most of his fellow citizens do not hold at the moment.  This is why the tax cut deal was such a sensible compromise for President Obama to make, despite the criticism he received from his left flank.

rcp1

COMMENT

Kyle Ate: Sorry, but its working. Huge financial crisis that barely dodged the bullet in 9/08 isn’t coming back instantly. However, swift, capable gov’t action (by both parties ) averted collapse and we’re on the road back. Fix you character and ditch your instant gratification stuff.

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Blaming the American public

Nov 8, 2010 17:43 UTC

If the Obama wants to be a one-termer, he should pay attention to people like Hendrik Hertzberg:

Part of the Democrats’ political problem is that their defense, confusingly, depends on counterfactuals (without the actions they took in the face of fierce Republican opposition, the great slump would have metastasized into a Great Depression), deferred gratification (the health-care law’s benefits do not kick in fully until 2014), and counterintuitive propositions (the same hard times that force ordinary citizens to spend less money oblige the government—whose income, like theirs, is falling—to spend more). Another part of the problem, it must be said, is public ignorance.

Me: And none of that is likely to change substantially over the next two years. There will be no second acts for The Stimulus, healthcare reform will still seems off-point as best, and Americans will still think Washington should mimic the austerity of U.S. households. Messaging and optics isn’t going to cut it.

20 reasons Democrats are the walking dead

Nov 1, 2010 02:56 UTC

The final numbers are almost beside the point. Whether Democrats lose one or both houses of Congress, the 2010 congressional midterms will almost surely be an epic rebuke to the party and President Barack Obama. Two years ago, Democrats actually thought they would probably gain seats during these elections, just like Republicans did in 2002. What happened? This, politically and economically:

1. Americans still think the country is headed in the wrong direction. According to a new Washington Post poll, 71 percent of registered voters think the United States is on the wrong track. That’s the same as it was in February 2009 when the economy was shrinking and hemorrhaging jobs.

2. Sustained high unemployment. Ouch. 17 straight months of an unemployment rate of 9 percent of higher, 20 straight months of underemployment of 15 percent of higher. Both numbers are twice as high as what Americans are accustomed to during the past generation.

3. A moribund housing market. According to the S&P/Case-Shiller index of property values covering 20 cities, housing prices are 28 percent below their July 2006 peak.

4. A devastating loss of wealth. Households are 19 percent — or $18 trillion — poorer than they were right before the recession in 2007 thanks to the housing collapse and falling investment portfolios. Household wealth in the U.S. fell another 2.8 percent in the second quarter of this year.

5. The infamous Bernstein-Romer chart. Back in January 2009, White House economists Jared Bernstein and Christina Romer released a report that included a chart predicting the American Recovery and Reinvestment Act would keep the unemployment rate below 8 percent. That forecast created a metric that has come to define whether the stimulus plan is considered a success of failure. The current White House forecast, by the way, assumes the rate will not fall below 8 percent until 2013.

6. Americans think the stimulus has pretty much failed. Some 68% of likely voters 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.)

7. Obama’s unpopular and off-point agenda. Democrats love to say how productive Congress has been. But apparently it has been passing stuff Americans don’t really want. They don’t like healthcare reform (56 percent to 39 percent), bank bailouts (61 percent to 37 percent), or the auto bailouts (56 percent to 43 percent), according to Gallup.

8. The astounding budget deficit. Politicians are usually dubious about whether Americans really care about the deficit. The Tea Party movement showed otherwise. Numbers in the trillions are so mindboggling ginormous that they undercut confidence in the economic progress that has been made. Americans know such debt levels are unsustainable.

9. A collapse in the belief in government efficacy. Obama was from the government and he said he was here to help. He represented a swing back in the pendulum toward faith in what Uncle Sam can do. But a Gallup poll finds that 59 percent of Americans think government has too much power, up from 50 percent when Obama took office. And 78 percent trust government only “some of the time or never.” That’s the same as in 1994 and 20 points higher than when Ronald Reagan was elected in 1980. (New York Times-CBS Oct. 21-26.)

10. A rise in the belief that government is too meddlesome. The new WaPo poll also asked “what do you think is the bigger risk — that the Democrats will put in place too many government regulations, or that the Republicans will not put enough government regulations in place?” 52 percent said Democrats, 35 percent Republicans.

11. Lots of vulnerable House Democrats. There are 48 Democrats in seats won by both John McCain in 2008 and George W. Bush in 2004. After big Democrat wins in 2006 and 2008, it was time for some mean reversion.

12. The Greek debt crisis. Debt problems in Greece and other European countries have provided a vivid warning that high government debt levels can lead to financial crisis. Budget hawks no longer have to make theoretical arguments. They just have to point to the business pages.

13. The stimulus was poorly designed. The infrastructure spending took too long, and the tax credits were saved at an even higher level than the Keynesian rebates in the 2008 Bush stimulus plan, 13 percent to 25 percent. And sweeping cuts to marginal income and investment tax rates were never considered.

14. Americans are ready for Washington to be downsized. By 55 percent to 36 percent, respondents say they would rather have smaller government providing fewer services than the opposite. (New York Times-CBS Oct. 21-26.)

15. The Gulf oil leak was no Hurricane Katrina, but it was pretty bad. Not only did the environmental disaster cut against Obama’s image of technocratic competence, but distracted from the administration’s “Recovery Summer” tour.

16. White House overconfidence. As recently as last spring, the White House was confident that the economy was turning its way and would help Democrats keep control of Congress. So no final effort was made for fiscal action to boost growth. This same unfounded optimism led them to create a stimulus in 2009 that was as much about rewarding interest groups (public employee unions, greenies) as boosting growth.

17. The creation of toxic levels of business uncertainty. American companies are sitting on $2 trillion in cash. They don’t know what’s going to happen with the deficit, Bush tax cuts or how the new healthcare and financial regulations are going to play out. They also think the president doesn’t quite understand their role in the U.S. economy. Said Intel CEO Paul Otellini recently, “The decisions so far have not resulted in either job growth or increased confidence. When what you’re doing isn’t working you rethink it and I think we need to rethink some plan.”

18. Obama misunderstood his mandate. Americans voted for Democrats to get the economy fixed, not to use the crisis to redistribute wealth and implement the Mondale-Dukakis-Kerry agenda of nationalized healthcare and industrial policy.

19. The Internet. It allowed thousands of average Americans to organize and network into what became the Tea Party movement.

20. America is a center-right, aspirational nation. Democrats thought the financial crisis and near-landslide 2008 election meant it somehow wasn’t anymore. So they attempted to graft an essentially artificial, elitist (especially cap-and-trade) agenda onto the body politic. It didn’t take and is in the process of being rejected.

COMMENT

can we please fast forward to the next election so we can completely vote the democrats out and get back to work already?

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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.

pollster

COMMENT

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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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

COMMENT

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!

Heck of a job, Larry (Summers)

Oct 28, 2010 14:23 UTC

This, to me, is the money exchange from President Obama’s appearance last night on “The Daily Show” with Jon Stewart:

Stewart: I remember thinking well that seems like the exact same person and why would you … so in some respects I get your frustration with this idea that ‘Well jeez, are you never satisfied?’ But again, the expectation I think was audacity going in there and really rooting out a corrupt system and so the sense is has reality of what hit you in the face when you first stepped in caused you to back down from some of the more visionary … like bringing a guy like Larry Summers …

Obama: First of all … if you look at how we have handled this financial crisis — if you had told two years ago that we’re going to be able to stabilize the system — stabilize the stock market, stabilize the economy — and by the way — at the end of this thing it, will cost less than 1% of GDP … I’d say we’ll take that because we saved taxpayers a whole lot of money. And in fairness, Larry Summers did a heck of a job trying to figure out how to …

Stewart: You don’t want to use that phrase dude.

Obama: Pun intended. Larry was integral in helping to think through some really complicated stuff.

Me:  Liberals like Jon Stewart really loathe the outgoing White House economic adviser. They blame him  for, in their view, a too small stimulus and for financial reform that wasn’t much harsher on the banks. And as Stewart alluded, they despise Summers role as part of  of the pro-market, pro-deregulation, anti-deficit Clinton Gang.  In fact, they view pretty much the entire Obama economic team as way too centrist and a betrayal of his campaign promises. No wonder Republicans are way more enthusiastic going into the midterm elections.

COMMENT

I blame “Heckuva Job Summers” for his antipathy to infrastructure investment. Even when he claims to support it, he limits that support to projects which can be completed, from conception to ribbon-cutting, within one year.

At least Brownie seemed to recognize he was failing and felt bad about it.

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Will GOP midterm win help reelect Obama in 2012? Maybe not

Oct 21, 2010 18:07 UTC

The Washington consensus is that if the GOP takes at least the House, it will give Obama a political foil and give his 2012 election hopes a big boost. And, the media tell us, the GOP presidential field is weak:

Sniping from the sidelines will be potential Republican challengers to Obama in 2012. The road to the presidential proving grounds of Iowa and New Hampshire is already well-trod by more than a dozen possible Republican candidates. The group ranges from Tea Party champion Sarah Palin to former Massachusetts Governor Mitt Romney and Minnesota Governor Tim Pawlenty. Experts believe Obama would match up well against any in this group — if the economy is on the mend and the jobless rate is trending downward from its current 9.6 percent.

But political analyst John Ellis paints a different potential scenario:

What might be an alternative story line? One answer would be: increased volatility. A darker answer might be: political instability and unrest.

As a nation, we are struggling with overwhelming debt at every level of governance and across a vast swath of the electorate. There are at least (at the very least) 15 states and countless municipalities that are functionally bankrupt. The states that are bankrupt, by any real accounting, include New York, New Jersey, Massachusetts, Connecticut, Illinois, California, Nevada, Arizona, Colorado, Ohio, Wisconsin, Louisiana, Missouri, Oregon, Washington and Michigan. They can’t (literally can not) meet their pension obligations. They won’t be able to pay for their ever-rising health care costs. Education costs are eating up too much money (although this will abate somewhat as the echo boom generation matriculates) and virtually every state (and municipality) has huge bond obligations, the proceeds from which papered over previous shortfalls. Oh, and one other thing, the economies in all of those states are stagnant, at best.

Once the last infusions of stimulus money run dry, what remains is a vast desert of debt. The idea that an over-leveraged electorate can be called upon to make up the shortfall is a non-starter. They can’t pay down their own debt and municipal debt and state debt and federal debt. The math simply doesn’t work. They end up with no take home pay.

This is the real avalanche that is about to hit American democracy. The avalanche in two weeks results in Nancy Pelosi no longer being the Speaker of the House. The avalanche of debt that hits beginning in 2011 and keeps on coming will shake our political system to its foundation. That’s the avalanche that matters.

President Obama can either get ahead of this avalanche by proposing a vast restructuring of government debt and obligations while aggressively promoting a venture-based economic growth agenda or he can be consumed by the rubble. The same holds true for the next Republican presidential nominee. He or she needs to be ahead of the avalanche to survive its inevitable onslaught.

Me: Austerity won’t sell. Growth and prosperity will. Whoever gaffs that, wins.

COMMENT

The reason that state budgets are completely decimated? Because the lion’s share of their booty was from property taxes! The states that are listed above are the one’s where the housing market was hit hardest, upwards of 40-50% declines. Show me ANY place (govt or business) in the world where a 40-50% drop in the biggest source of revenue doesn’t lead to big trouble. But, of course, it’s Obama’s fault. You… just… don’t… get it! AT THE STATE LEVEL no less! Sigh…

If people are disenfranchised with the current president it’s not because the MSM has given him a free pass, it’s because they don’t know their asses from a hole in the ground and continually misinform the public (both sides of the MSM.) They completely obfuscate the real issues and turn it into something completely different. Then the public gets mad because they think that the President is either lying or oblivious because the media presents everything incorrectly. Political spin is what’s helping destroy America because the public is never properly informed – one has to look outside the America media sphere to find informed journalism that weighs facts.

And let’s also be frank in saying that the old normal of the last 25 years has been fueled almost exclusively by debt. Complaining that growth that is not supercharged by increasing the debt load is poor or bad and Obama’s fault is so ridiculous as to be laughable and should be ignored outright. I find it so deplorable that people can be so duplicitous as to say that we can achieve growth in the short term by cutting debt – NO! that is NOT true as the 70s proved. We’re in for a long ugly period of adjusting our balance sheets, govt, business and consumers.

I’m sure you’d blame the 70s on Carter, but Nixon/Ford set up the conditions that were met by Carter. And while Carter had his share of missteps, none were quite as badly received as the economy being in a low growth, high inflation environment. So he inherited a shite economy and didn’t improve it fast enough because he wasn’t willing to open the pandora’s box of rampant debt accumumlation and deregulation. Now, if you want to stand for cutting debt/deficits – sure, I’ll be on board, but you can’t expect that growth will suddenly double by spending less. It’s really simple math.

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The Obama recovery vs. the Reagan recovery

Oct 13, 2010 19:52 UTC

Expect to see this chart from the Heritage Foundation all around the blogosphere. I don’ t think it is completely fair given the different flavors of the two recessions. But I certainly don’t think the current recovery is a robust as could possibly be expected. I think even the POTUS would concede that.

recovery

COMMENT

I agree with James Pethokoukis and CND I guess it’s too naive to judge two completely different recessions with a simple graph line without undertanding the context.

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Obama on CNBC

Sep 20, 2010 19:26 UTC

The president participated in a town hall meeting earlier today on CNBC. A few thoughts on the event:

1. He noticeably dodged a question about whether, in the name of fiscal prudence, all the Bush tax cuts should eventually be left to expire. That is the position of his former budget chief, Peter Orszag, as well as that of many deficit hawks. It does seem strange for him to say America cannot afford the upper-income tax cuts, but also support the lower-income tax cuts which cost far more, according to the Congressional Budget Office.

2. He seems to think the Tea Party crowd is a “Party of No” manifestation with no real agenda other than to complain about his policies. But that is not how I read them at all. For instance, many activists are big fans of the Fair Tax and  Paul Ryan’s budget-cutting Roadmap for America’s Future.

3. The POTUS said tax rates were as low as they were under Ronald Reagan. When Reagan left office, the top marginal rate on ordinary income was 28 percent. Today it is 35 percent, and Obama wants it to go to 40 percent. More evidence the White House thinks America undertaxed.

4. More evidence the economic New Normal may create a political New Normal. The first question was telling. It was from an Obama supporter who was very frustrated by the pace of the recovery:

I’m one of your middle class Americans. And quite frankly I’m exhausted. I’m exhausted of defending you, defending your administration, defending the mantle of change I voted for, and deeply disappointed with where we are right now.

Obama stuck to his guns, arguing the measures he had undertaken since taking office in January 2009 were slowly pulling the country back to health:

My goal here is not to try to convince you that everything’s where it needs to be — it’s not. That’s why I ran for president. But what I am saying is … that we’re moving in the right direction.

5. Overall, the crowd seemed anti-bank, anti-China, pro-Obama.

6. Certainly the big quote of the day was when he said his economic team had done an “outstanding job.”

COMMENT

James, I enjoy your commentary on CNBC. That “Town Hall Meeting” was a sham. 1) The audience was packed with progressive democrats as evidence by the overwhelming applause after the President’s comment about how”assuming Sen. Boehner would be Speaker of the house was premature”. 2) Scaramucci obviously made some deal with the administration to be publically but gently chided by the POTUS in return for a shameless, “rubbing me on the back with a soul brother handshake photo-op” after the meeting. Can you say Shiela Jackson Scarramucci? I mean, seriously. And 3) why can’t the administration start these things on time? I mean, really….how far ahead was this scheduled? If it is supposed to start at 12:00, why make the American people wait. Obama has had….oh I quit counting….up-teen press conferences and I don’t believe even one has started on time.

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Obama polls continue to melt during Recovery Summer

Jul 29, 2010 13:20 UTC

President Barack Obama’s “recovery summer” has become a summer swoon. GDP growth has downshifted, as have his poll numbers. And with Democrats likely to suffer big losses in November’s elections, the president will have to rethink his economic agenda or face gridlock in 2011.

A new Reuters-Ipsos survey puts Obama’s job approval at 48 percent, down two points from June. It’s a number that doesn’t bode well for Democrats in the congressional midterms. Since 1962, the party of a president with an approval rating under 50 percent lost an average of 41 seats in the House of Representatives. Republicans currently need 39 seats to retake the lower chamber, and thereby regain control over the initiation of tax and spending bills. (Other polls are even more discouraging. The RealClearPolitics poll aggregator has Obama at 46.0 approve, 48.7 disapprove.)

Drill a bit deeper into the poll and the danger for congressional Democrats appears even more acute. In the poll, 46 percent said they would vote Republican for Congress against 44 percent who preferred Democrats. In 2008, Democrats took 55 percent of that vote. For now at least, Republicans are also much more determined to vote in November’s polls than Democrats.

Meanwhile, 31 percent of respondents said they “strongly disapprove” of Obama’s performance, a five point jump. The economy is draining his popularity more and more every day. The Reuters poll suggests it is his weakest issue, and voters are gloomier about America’s direction than they were last summer. That’s not an unreasonable assessment. Though the U.S. economy is expanding, the annual growth rate is probably now closer to 2 percent than 3 percent — not enough to chip away much at the 9.5 percent unemployment rate before the elections come around.

A change of control in Congress might seem a harbinger of gridlock next year. The dark scenario would involve battles as Republicans try to repeal parts of recent healthcare and financial sector legislation. But with greater numbers, the GOP might in fact feel more secure and thus more willing to haggle — as it did during Bill Clinton’s presidency.

Hashing out compromises would, however, also require Obama to shift toward the Republicans on key issues like taxes and regulation. Doing so would be a much better option than spending his next two years defending the sweeping reforms passed in his first two.

COMMENT

Great website you have here but I was curious if you knew of any message boards that cover the same topics discussed in this article? I’d really love to be a part of online community where I can get feedback from other knowledgeable individuals that share the same interest. If you have any suggestions, please let me know. Thanks a lot!

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