Washington Extra – Painful choices
When it comes to framing economic policy, it looks increasingly as though Republicans are winning the debate. Not only have they made “stimulus” almost a dirty word but there seems to be a growing feeling that deficit-financed spending is not a great way to pull the economy out of a recession. Forget the conclusions of the bipartisan Congressional Budget Office about how the bailouts and stimulus of 2008 and 2009 saved millions of jobs. Forget the global consensus around the need for coordinated stimulus after the financial crisis. The American public is simply not convinced.
The Reuters/Ipsos poll released today found 57 percent of Americans believe that, when economic times are tough, cutting the deficit is a better way to create jobs than deficit-financed stimulus.
With the U.S. congressional elections just six weeks away, this finding is bad news for President Barack Obama as he struggles to convince people that Republicans drove the economy into a deep ditch and Democrats are hard at work pulling it out.
But there could be a silver lining, if broad public concern about the deficit forces Americans to confront some tough choices after the Nov. 2 election.
Right now, Democrats and Republicans seem to be miles apart on economic policy. But there is at least a chance they may find common ground in 2011 over the need to get government spending under control. Tough choices mean politicians are going to have to be honest about economic realities and about the need for shared sacrifices because, as Bruce Josten of the U.S. Chamber of Commerce told the Reuters Washington Summit, “it’s not going to be a pain-free exercise.”
“At some point you’re going to move beyond these kinds of sound bite throwaways, pull the pin out of the grenade and throw it across the table and scare the bejeezus out of everybody — and get real,” Josten said.
Finally today, as predicted by Washington Extra a couple of weeks ago, Larry Summers is on his way out. Summers will step down from his job as director of the White House National Economic Council at the end of the year and return to his position as professor at Harvard University, officials say.
The departure of Summers would mark a major shakeup in Obama’s economic team after the departure of budget director Peter Orszag in July and Council of Economic Advisers Chairwoman Christina Romer at the beginning of this month.
There will be more on this story as it unfolds tonight on www.reuters.com.
Here are our top stories today…
Momentum grows for tackling U.S. deficit
Broad public concern about the budget deficit and big election gains for Republicans on November 2 could boost prospects for agreement on ways to slash spending, speakers told the Reuters Washington Summit.
For more of this story by John Whitesides, read here.
Americans want deficit cut even in tough economy
A majority of Americans prefer cutting the deficit to increasing government spending as a way to improve the tough economy and believe a more balanced budget would help create jobs, a Reuters/Ipsos poll showed. The poll results could bolster Republican calls for spending cuts and put pressure on President Barack Obama and Democrats to work with Republicans to reduce the $1.47 trillion deficit after the November 2 congressional elections.
For highlights of the Reuters/Ipsos poll, click here.
For an analysis by Steve Holland of what it means for the Democrats, click here, and for an analysis by Alister Bull about what it means for economic policy, click here.
TARP cop sees fraud cases rising
The top bailout cop said that evidence of fraud among banks that sought taxpayer funds was on the rise, and some of his investigations involve hundreds of millions of dollars. Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, told the Reuters Washington Summit that his office has 120 open investigations of banks that “reflect the full array of banks that applied for and received TARP funding.”
For more of this story by David Lawder, read here.
Envoy: Slow Afghan progress doesn’t alter exit plan
Afghanistan is stabilizing more slowly than expected, the chief envoy for the region said, but that is unlikely to keep President Barack Obama from moving ahead with his pledge to begin combat troop withdrawals next year. Richard Holbrooke, the U.S. special representative to Afghanistan and Pakistan, said “the only conceivable thing to me is that the president will do what he said he would do” and begin withdrawals in a “careful, responsible manner based on conditions.”
For more of this story by David Alexander, read here.
For Holbrooke’s comments on the Pakistan floods and U.S. military aid to the region, click here.
South Korea to buy more weapons to counter North
South Korea will buy more U.S. weapons to strengthen its military and try to deter North Korean provocation, Seoul’s ambassador to the United States said. Ambassador Han Duk-soo said the U.S. government regarded South Korea as one of its highest-ranking military allies — on a par with NATO — which would allow Seoul to buy more advanced military equipment from the United States.
For more of this story by Andrea Shalal-Esa, read here.
Fed lays groundwork for possible further stimulus
The Federal Reserve inched closer to fresh steps to bolster a sluggish U.S. recovery, saying it stood ready to provide more support for the economy and expressing stronger concerns about low inflation. The central bank’s policy-setting panel opened the door wider to pumping hundreds of billions of new dollars into the economy, although it made no policy shift at the end of a one-day meeting, keeping overnight interest rates near zero.
For more of this story by Mark Felsenthal and Pedro da Costa, click here.
For a factbox on Fed officials’ views on more easing, click here.
Housing starts at 4-month high
Groundbreaking for new homes jumped in August to a four-month high, a tentative sign of stability in the housing market after steep declines brought by the end of a homebuyer tax credit. Analysts said the data, which came as Federal Reserve policymakers met to assess the economy, further allayed fears that the recovery from the worst recession since the Great Depression was at risk.
For more of this story by Lucia Mutikani, read here.
Obama chides liberal critics to “wake up”
President Barack Obama had some friendly advice for liberal Democrats who say he has not achieved everything on their wish lists — quit complaining. Making a whirlwind fund-raising tour of Philadelphia to rally support for his embattled Democrats before congressional elections in November, Obama offered a hint of his exasperation with parts of the liberal base that helped sweep him to power in the 2008 election.
For Matt Spetalnick’s full story, click here.
Geithner, Warren seek more mortgage disclosure
Treasury Secretary Timothy Geithner and special advisor Elizabeth Warren said they intend to make mortgage language simpler so consumers can make better choices as they opened a forum on the topic.
For more of this story by Glenn Somerville, read here.
Exclusive: Cyber bill would put new regulation on critical firms
Proposed cybersecurity legislation circulating on Capitol Hill would give the president the power to declare an emergency in the case of big online attacks and force some businesses to beef up their cyber defenses and submit to scrutiny. The draft bill, a copy of which was obtained by Reuters, allows the president to declare an emergency if there is an imminent threat to the electrical grid or other critical infrastructure such as the water supply or financial network because of a cyber attack.
For more of this story by Diane Bartz, read here.
Analysis: Offshore drilling delays may persist after ban
Before BP’s record Macondo oil leak, regulators approved about a dozen permits a month to drill in the shallow waters off the Gulf. Since then, they’ve barely managed one a month, even though a six-month moratorium only affected wells in much deeper waters. Now, with only two months or less until operators are able to resume drilling new wells in one of the most prospective oil frontiers in the world, many fear that the newly tightened reins of regulators may choke investment for months longer.
For more of this story by Ayesha Rascoe, read here.
Stem cells, obesity finding lead Nobel predictions
Researchers who discovered stem cells and the appetite hormone leptin, who proposed that dark energy is helping the universe expand and who developed “gene chips” are named in the 2010 Thomson Reuters predictions to win Nobel Prizes for medicine, physics and chemistry.
For more of this story by Maggie Fox, read here.
UBS Americas backs infrastructure bank funded by U.S.
UBS Americas threw support behind the Obama administration’s proposal for a infrastructure bank, but warned against creating a quasi-government agency like housing finance enterprises Fannie Mae and Freddie Mac.”Creating a national infrastructure bank is an idea whose time has come,” Robert Wolf, chief executive of UBS Americas, told at a Senate Banking Committee hearing called to explore alternatives for financing infrastructure projects.
For more of this story by John Crawley, read here.
Medicare Advantage premiums to dip in 2011
Elderly Americans enrolled in private Medicare health insurance plans will see their premiums fall slightly in 2011 while gaining more benefits from recently passed healthcare reforms, health officials said. The plans, called Medicare Advantage, are offered by health insurance companies as an alternative to traditional, government fee-for-service Medicare.
For more of this story by Susan Heavey, read here.
What we are blogging…
If Democrats hold House, Pelosi seen concentrating power-lobbyist
If Democrats are able to hang on to the House of Representatives in the November 2 elections, Speaker Nancy Pelosi will likely be able to concentrate her power because there will be fewer conservative Democrats giving her a hard time on critical votes, according to top senior lobbyist for the U.S. Chamber of Commerce.
For Jeremy Pelofsky’s full blog, read here.
No wine cellar? Sotheby’s opens retail wine shop
Always wanted a wine cellar, but never had the room? Sotheby’s auction house has a solution. It opened a retail wine shop..
For more of this story, read here.
For more stories from our Washington correspondents visit www.reuters.com and stay informed.
Photo Credit: REUTERS/Robert Galbraith (A man looks over employment opportunities at a jobs center in San Francisco, in Feb. 2010 file photo)