Tales from the Trail

Welcome to the new bipartisan Washington, where Obama and the Republicans are not only at odds over tax cuts, they can’t even agree when to have dinner.

Republicans apparently pulled out of the November 18 meeting called by President Barack Obama because of “scheduling conflicts.” Which is about as convincing a reason for not going to dinner as “I have to stay in and wash my hair.”  Apparently some Republican aides had been grumbling that Obama had called the meeting without consulting with their bosses.

In this sort of atmosphere, it wasn’t entirely surprising today to learn that Republican Senator Orrin Hatch poured cold water on the Democrats suggested compromise on taxes, a permanent extension for the middle class and a temporary one for wealthier Americans. Still, there is an element of brinksmanship about all of this, and Washington Extra still wouldn’t bet against a deal before year end.

Here are our top stories from Washington today…

Panel urges renewed U.S. pressure on China on currency

The U.S. should name China a “currency manipulator” and take on trade-distorting Chinese policies in the WTO, a congressional advisory body said. U.S.-China Economic and Security Review Commission Chairman Dan Slane said the report “reflects the commission’s conclusions that China has failed in some notable areas to fulfill the promises it made nine years ago when it joined the World Trade Organization.”

For more of this story by Paul Eckert, read here.

Republicans will block tax compromise: Sen. Hatch

A top Republican in the Senate said his party would block any Democratic deal on extending Bush-era tax cuts if rates for the middle class and wealthy are not extended together. “Are you kidding, of course we would,” said Orrin Hatch, who sits on the Senate Finance Committee. The Utah Republican was responding to a deal floated by the White House and some Democrats in which lower rates would be extended for the first $200,000 of income on a permanent basis, while additional tax cuts for wealthier Americans would be renewed for a shorter period.

Congress returns next week for that peculiar order of business known as a lame-duck session. It’s a post-election gathering where lawmakers who lost re-election get to take any final votes, while newcomers who won in the Nov. 2 midterms have to sit it out.

The hot item to watch will be whether extending the Bush-era tax cuts will fly, but don’t expect any Peking duck, as legislation on China’s currency is unlikely to be on the menu. (Hey, it’s Friday).

All the duck talk got us to revisit the origin of the phrase “lame duck.”

Republicans have emerged from the political wilderness and they’re wasting no time laying down markers.

Senate Republican Leader Mitch McConnell particularly sounds like he’s looking for bear, not mincing words in his speech at the Heritage Foundation today.  

Never mind that his party is still  in the minority in the Senate and would need support from Democrats and the president to get anything enacted, McConnell appears ready to lay down the law.

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.

We hear the White House is not wildly pleased with former budget chief Peter Orszag for abandoning the party line on tax policy this week. Now Democrats in Congress are beginning to distance themselves from President Barack Obama’s push to let taxes rise for the wealthiest Americans. We are unlikely to see this resolved before the mid-terms anyway, and there are still several different ways this could pan out. One possible compromise would be a short extension of the tax cuts for the rich and a longer extension for the middle classes, keeping any crucial decisions as far away from the 2012 campaign season as possible.

More today on the potential for a reshuffle in Obama’s inner circle after the November elections, especially if Rahm Emanuel departs for Chicago. Democratic sources tell us Larry Summers, never that happy in his role, might be among those who leave, but that Treasury Secretary Tim Geithner is likely to stay the course.

One administration official who is flagging his own retirement is Defense Secretary Robert Gates. As we report from our Aerospace and Defense Summit in Washington this week, Gates used to be viewed by the defense industry with apprehension, but these days many industry executives see his efficiency drive as both sensible and as the best way to protect the overall defense budget. It seems he will be missed.

A smart move by Republican leader John Boehner today, or a nicely laid trap if you prefer. Boehner echoed yesterday’s call from former White House budget director Peter Orszag, for a two-year extension to the Bush-era tax cuts for all Americans. Boehner appealed for both parties to “do this together” to “show the American people that we understand what is going on in this country.” There was, of course, one big difference between Boehner’s and Orszag’s suggestions – the Republican leader conveniently left out the all-important promise to let  all the tax cuts expire at the end of that two-year period. Not surprisingly, President Barack Obama swiftly rejected the offer, insisting that the country could not afford to extend tax cuts for the rich. “This isn’t to punish folks who are better off — God bless them – it is because we can’t afford the $700 billion price tag,” he said in Ohio. You get the feeling this partisan battle isn’t going to be settled easily or early, and the lingering uncertainty this creates is probably not good news for the economy. Expect the blame game to continue.

Elsewhere today, a lovely special report on the Tea Party and how the upstart is growing up and going back to school, determined to shed its amateur status. If it succeeds, the movement’s influence could well extend beyond November and into the 2012 presidential race, although who that might ultimately benefit is very much an open question. Take a look also at our exclusive report on how the Pentagon’s top watchdog has abandoned efforts to do in-depth audits of defense contracts, leaving billions of dollars of taxpayer money at risk from  overpayments and fraud.

Meanwhile, another blame game continues over the Gulf oil spill, with BP’s own investigation not impressing Democratic congressman and critic Edward Markey. “This report is not BP’s mea culpa,” he said. “Of their own eight key findings, they only explicitly take responsibility for half of one. BP is happy to slice up the blame as long as they get the smallest piece.”

In the past few days we have seen the president and the chairman of the Federal Reserve both standing up and insisting they had more cards at their disposal to rescue the faltering American economy. In truth, though, both men look like they are holding weak hands, and are reduced, for the time being, to putting a brave face on things.

With short-term interest rates already at zero, Ben Bernanke has few cards he can play, and none of them feel like sure-fire winners. One is to restart an aggressive program of purchasing government securities to drive long-term interest rates down still further, another is to cut the interest rate on reserves, and a third, desperate measure would be to raise the inflation target. None of those cards are likely to be played unless things get significantly worse.

In theory President Barack Obama has more options at his disposal, but it is far from clear what he can actually get through Congress in election season. Today Obama promised that his economic team was “hard at work in identifying additional measures” to support the economy and boost hiring. But he had few new ideas to offer, besides extending tax cuts for the middle class that are set to expire this year, increasing government support for clean energy development, and rebuilding more U.S. infrastructure.

WASHINGTON – Republicans in the U.S. House of Representatives were unapologetic on Friday after not a single one of them voted for the $787 billion economic stimulus package.
 
The Democratic majority pushed the spending and tax cuts measure through the House 246-183 at the urging of Democratic President Barack Obama, who had courted Republican support.
 
Republican leaders insisted the plan may do more harm than good by expanding government and not doing enough to create private-sector jobs.
 
Representative Virginia Foxx went further. “I think it’s a cruel hoax on the American people that they have been led to believe that by passing this bill that there are suddenly going to be millions of jobs out there, particularly for blue collar workers that have lost their jobs,” she said.
 
Through weeks of debate, the two parties stuck to their ideologies, with Republicans favoring tax cuts and Democrats leaning toward government spending.
 
Republicans may be hoping their lock-step opposition will help vault them back into majority status in the House. They look longingly back to 1993, when every House Republican voted against a balanced-budget plan by then-President Bill Clinton that accomplished its goal.
 
Nonetheless, Republicans took control of the House in 1994 elections.
 
Asked whether Republicans risked looking bad if the U.S. economy does recover in the near term, House Republican Leader John Boehner said: “I think standing on principle and doing the right things for the right reasons on behalf of your constituents will never get you in trouble.”

For more Reuters political news, click here.

Photo credit: Reuters/Larry Downing (Boehner holds a copy of the stimulus bill, following the passage in the House of Representatives of the stimulus package)

Bipartisanship may be about to take a back seat to political reality in Washington.
 
President Barack Obama sharpened his rhetoric Thursday as he pushed the U.S. Senate to pass his nearly $900 billion economic stimulus bill, hammering Republican complaints that the measure doesn’t have enough tax cuts.
 
The Republican push is “rooted in the idea that tax cuts alone can solve all our problems, that government doesn’t have a role to play, that half-measures and tinkering are somehow enough, that we can afford to ignore our most fundamental economic challenges,” Obama told an audience of Energy Department staffers.
 
“So let me be clear: Those ideas have been tested, and they have failed. They’ve taken us from surpluses to an annual deficit of over $1 trillion. And they’ve brought our economy to a halt,” he said.
 
“Time for talk is over,” Obama said. “The time for action is now.”
 
The president’s shift in rhetorical tone came amid press criticism that the White House has let Republicans win the communications battle over his stimulus plan by characterizing it as wasteful and excessive.
 
White House spokesman Robert Gibbs rejected the notion that Obama was backing away from his pledge of bipartisanship, noting the president hosted moderate Republicans Wednesday at the White House.
 
But asked if it was unfair to characterize Obama’s remarks as showing signs of impatience, Gibbs said: “I mean, I think when he said the time to talk is over, I think it’s fair to read impatience into that.”
 
For more Reuters political news, click here.

Photo credit: Reuters/Larry Downing (Obama speaks at Energy Department Thursday)