Tales from the Trail

Republicans stand poised to gain substantial influence in Congress, putting at stake billions of dollars in investment as a shift among power brokers throws legislative initiatives old and new into doubt. Reuters Washington Summit will bring together an influential line-up of insiders just weeks before Americans cast their votes, promising a must-read stream of exclusive news on the outlook for Congress and President Barack Obama's agenda. Editors and correspondents from the Reuters Washington bureau are sitting down with senior lawmakers, including GOP heavyweights in line for leadership, and regulators whose implementation of Wall Street and healthcare reform could be complicated by a change in control on Capitol Hill.

The Summit will generate exclusive stories, investable insights, online videos and blog postings, which will be immediately available only to Thomson Reuters clients during the Summit. Key interviews will air live exclusively on Reuters Insider - a new multimedia platform delivering relevant news, analysis and trade ideas presented through a personalized video experience. Visit http://etv.thomsonreuters.com/

Here’s something for members of Congress to contemplate in the weeks leading up to the November mid-term elections: a lot of people want to send you packing.

That’s according to a new CBS News/New York Times poll that finds 55 percent of registered voters don’t think their own members of Congress deserve to be re-elected. That up from 47 percent in 2006 and 27 percent in 2004.

When asked about “most members of Congress,” a whopping 78 percent said they want someone new.

As a Brit I never like to write too much about the Tea Party, but today I have no choice.

Every week that goes by the movement seems to gain more momentum. On Tuesday, our poll showed Democratic heavyweight Harry Reid clinging to a narrow lead in Nevada against Tea Party insurgent Sharron Angle. That night, Republican establishment favorite Michael Castle was knocked off his perch in the Delaware primary by upstart Christine O’Donnell. Today, our Reuters/Ipsos poll shows one of the Tea Party’s most well-known favorites, Marco Rubio, opening a clear lead in the race for a Senate seat from Florida. With just six weeks to go until the elections, Rubio leads state Governor Charlie Crist, now running as an independent, by 40 percent to 26 percent, with Democrat Kendrick Meek trailing behind.

But who is going to benefit?

Republicans are hoping the surge in enthusiasm for a right-wing agenda will get their supporters to the polls, and right now there is a definite “enthusiasm gap” between Republicans and Democrats in terms of their likelihood to vote.

Democrats are still hoping that “Tea Partiers” will simply be too right-wing for voters to accept in many states. The contest in Nevada is a critical one, with Reid hoping he can cling to his slight lead against Angle, a lead he might not have against a more centrist candidate. More to the point, some Dems could scarcely contain their glee this morning after O’Donnell’s victory, calling her an “ultra right-wing extremist” who will be rejected by Delaware voters, and arguing they might now just keep control of the Senate as a result.

Perhaps it will become known as a tale of two Reids.

Senate Majority Leader Harry Reid is barely ahead of his Republican opponent Sharron Angle in the Nevada race for U.S. Senate, and his son Rory Reid is slipping against Republican Brian Sandoval in the governor’s race, according to a Reuters-Ipsos poll.

Looking at likely voters, Reid is up 46-44 percent against Angle. Among registered voters, Reid is up 46-38 percent and among independents, he is up 29-15 percent. 

When it comes to Nevada voters views of the Tea Party, which supports Angle, 51 percent of registered voters, 56 percent of Republicans and 57 percent of independents said it would make no difference on whether to support or not support Angle.

On Friday, President Barack Obama threw down the gauntlet to Republicans on taxes, effectively daring them to vote against a tax cut for the middle classes, just so that they can give an average of $100,000 in tax cuts to millionaires.

Over the weekend, Republican leader of the House John Boehner seemed to shirk the challenge, but on Monday, Senate minority leader Mitch McConnell picked up the gauntlet and threw it right back. McConnell has promised to introduce legislation “today” to ensure that “no one in this country pays higher income taxes next year than they are right now.” There are no Republicans who support a tax hike, he said, effectively daring Democrats to vote for higher taxes when the economy is in the mire.

Washington Extra is not sure who will blink first. But whichever side you take in this debate, one thing is for sure: this “wrestling match,” as Obama called it, or game of high-stakes political poker if you prefer, does the economy no good at all.

Political maneuvering is in full bloom as positions are being staked out in the battle over tax cuts to the wealthy and for the hearts and minds of the Middle Class ahead of the November election.

President Barack Obama on Friday had his say: Congress should pass what everyone agrees on — extend Bush-era Middle Class tax relief for families earning up to $250,000.

For higher incomes, Obama said the country can’t afford extending tax cuts, but he is willing to talk about it . “We can have a further conversation about how they want to spend an additional $700 billion to give an average of $100,000 to millionaires. That I think is a bad idea.” 

President Barack Obama has come face-to-face with the reality of change (his campaign slogan) and found it is slow moving when the economy is involved.

“My analysis is that we came in with great excitement and people hoping that we could turn the corner really quickly. And we couldn’t,” Obama said in an interview with ABC’s “Good Morning America.”

“This is a hard set of problems that we’re facing. And so, folks have now seen a year and a half of unemployment above 9 percent. And long-term unemployment at record levels. And so, people are hurtin’ out there. And they’re anxious and they’re fearful,” he said.

On Wednesday, President Barack Obama plans to announce his latest package of plans to stimulate the sagging U.S. economy, most of which are already known. It was hardly a surprise to see Republicans quickly positioning themselves to block the plans, but more disappointing to the White House must have been the cautious response even from the president’s fellow Democrats on the Hill, who simply said they were looking at the proposals. Even more damning, perhaps, was the verdict from the financial markets, which greeted the news with a big yawn. Both the Dow and the S&P indices ended the day more than one percent lower, dragged down by fresh growth worries in Europe. Economists on Wall Street said the plans would not do enough for small businesses or to solve the Democrats’ biggest economic and political problem: finding work for the 14.9 million unemployed. There are big questions, too, about how the plans will be paid for. “If he chooses to take away a corporate tax break to pay for this proposal, the net gain is zero,” said Andrew Busch at BMO Capital Markets. “This is likely why U.S. stocks are not seeing much of a bounce on the news.”

Last week White House economic adviser Christina Romer left town with a plea for a new deficit-financed economic stimulus. Today it was the turn of former budget chief Peter Orszag to go public with his prescription for the economy and taxes, views which differ from those of his former boss. Orszag suggested that the Bush-era tax cuts should be extended for all Americans for another two years in an effort to spur the economy, with a promise they will be allowed to expire altogether at the end of 2012. It is a view which makes some economic sense, but is unlikely to get much traction with a president likely to be campaigning for re-election that same year.

Some interesting interviews on the first day of the Reuters Aerospace and Defense Summit here in Washington. The CEOs of Lockheed Martin and of Boeing’s defense wing said both companies were well aligned for the new reality of huge fiscal deficits and tight defense budgets. Both men expressed strong support for the administration’s recently announced export control reforms, as well as new plans to extend and expand tax credits on research and development. Lockheed Martin’s Robert Stevens said he also saw the global security environment changing significantly in coming decades: withdrawals from Iraq and Afghanistan, coupled with threats from the Korean peninsula, Iran and China meant resources were likely to be shifted away from land and towards air and naval defense systems.

Republicans have the momentum going into Election Day for the U.S. Senate seat held by Arlen Specter for three decades in Pennsylvania.

A Reuters/Ipsos poll  of likely voters showed Republican Pat Toomey with a 10-point lead, 47-37 percent, over Democrat Joe Sestak. That gap narrowed among a broader pool of registered voters to 40-37 percent.

Sestak beat Specter in the Democratic primary after the senior senator from Pennsylvania turned Democrat in April 2009 ahead of his battle for re-election to the Senate seat he first won as a Republican 30 years ago. President Barack Obama had backed Specter.

We travel the Karakoram Highway from China to Pakistan on today’s edition of Washington Extra.  Driving the agenda for Reuters today is news that the United States could be heading for another trade row with China, after it announced plans to toughen rules against what it sees as unfair trade practices. A number of the proposals are likely to irk Beijing and could provoke retaliation.

It is all part of the Democrats’ “Make it in America” agenda to save manufacturing jobs at home. Critics will no doubt see it as more evidence that President Barack Obama is a closet protectionist. Others argue that this is a shrewd move from the administration to head off still more damaging moves from Congress.

Over at the IMF, Pakistan’s finance minister is in town seeking more help to salvage his country’s economy in the face of the devastating floods. The mood so far seems hopeful. Abdul Hafeez Shaikh said Pakistan wanted to keep pursuing an $11 billion IMF loan program and demonstrate its resolve to take tough economic decisions, dismissing reports that it might abandon the program. The IMF, for its part, is already urging donors to give grants, not loans, for rebuilding projects, to avoid adding to Pakistan’s heavy debt burden.