Thursday, February 12, 2009

Gregg Withdraws, Geithner Bombs, No Room for Error on Stimulus Compromise, Israeli Stalemate

Buy That Man Some Flip-Flops
Sen. Judd Gregg (R-NH), after actively lobbying both Senate Majority Leader Harry Reid and President Obama for the Commerce spot just a short couple of weeks ago, has suddenly and unexpectedly withdrawn his nomination. Sen. Gregg was gracious to Obama but basically said that he had realized that he couldn't be himself and 100% on board with the Obama administration.

Let's see: You saw his other nominees, you saw his stimulus package, you saw his proposals in the campaign and you still lobbied for the job and NOW you withdraw?

Graciousness aside, I think this reflects very poorly on Sen. Gregg and his judgement. I questioned his commitment to the administration when he insisted on a deal for a Republican successor and then recused himself from the stimulus vote. President Obama never should have appointed someone who had such ambivalence.

Which brings me to two central points:
(1) Bipartisanship has its limits
President Obama, attempting to keep true to his campaign themes, has made a lot of effort to be bipartisan. He appointed Republican Rep. Ray Lahood to Transportation Secretary. He retained Republican Robert Gates at Defense. He reached out aggressively to Republicans about the stimulus package. He broke bread with conservative commentators.

So why isn't all this working?

Because people join opposing parties for a reason. Republicans have a different governing philosophy than Obama does. Bipartisanship in the sense of seeking ideas broadly, listening to opposing viewpoints and trying to incorporate good ideas is a good way to go. Bipartisanship in the sense of giving the opposition veto power over your agenda is not. Obama needs to learn the difference.

Honestly, at least for the next two years, he doesn't need broad Republican support. He needs a few moderate Republicans to break fillibusters (expect Senators Specter, Snowe and Collins to have a lot of power in the months to come), but that's it. He should lay out his agenda, maintain dialogue and open communication with Republicans, but not count on or expect their support.

Incidentally, I'm extremely disappointed in the behavior of Republicans thus far. Remember a few years ago how Republicans were so righteous about the overuse of the fillibuster? Remember how they were even talking about abolishing it? Funny thing is, there wasn't even a question about whether they would fillibuster the stimulus package. Expect a lot more of that digging in.

The Republican problem is that they are likely to be on the wrong side of things come the next election. If the economy improves significantly by 2010 and 2012, do you really want to be in the group that tried to block the President's agenda?

Obama's problem is that it is starting to look like ameatur hour in the cabinet department. Richardson, Daschle, now Gregg. Solis nomination in limbo. Two key vacancies almost a month in with no resolution in sight. All will be forgotten if he gets his team in place, gets the stimulus legislation signed into law and puts forward a real plan around the credit markets by the end of his 100 days. But he is expending a lot of political capital putting forth and withdrawing nominees.

I think this development also puts Sen. Gregg cleanly in the crosshairs in 2010. He may not run, but if he does, he is likely to be target #1. This race probably rates as a toss-up now.

"My Treasury Secretary Will Present a Plan in Great Detail"
In his first big event as Treasury Secretary, following a bruising confirmation fight about tax indiscretions, Timothy Geithner absolutely bombed. Just the night before, in his primetime press conference, President Obama had committed Geithner with the quote above. It had been widely publicized for weeks that this was the day that Geithner would roll out THE PLAN for the remaining $350 billion in TARP funds. What we got was nothing close to that.

Geithner laid out some broad principles about how he believed the TARP money should be spent. He clearly had no detail and no functional implementation plan, only a vague promise that details would be developed in the weeks to come.

The market reaction was swift and severe -- the major indices lost in excess of 5% in the aftermath of his press conference, it's worst loss of the year.

Okay, 5% is not the end of the world -- after all, the S&P and Dow are both down about 40% since the recession began. But this is an ugly start for Geithner. I was left wondering, did we really just say a couple of weeks ago that we should overlook tax indiscretions because this guy is so brilliant? He looked like an academic hack.

President Obama desparately needs credible voices in his administration to be able to speak for him. He has been carrying all the PR load so far and that won't work. Geithner is the most critical of those voices with the economic needs being so pressing. Geithner MUST do better for the administration to be successful.

Zero Error Margin Stimulus
Since the Senate passed the stimulus package on Tuesday (with an identical 61 yea votes to the cloture vote), there has been rapid-fire bargaining to produce a conference report that can pass both houses -- most critically retaining at least 2 of the 3 Republican senators that voted for the bill on the first pass (Specter, Snowe and Collins.) Now we have word that due to his ongoing health concerns, Sen. Ted Kennedy (D-MA) will be unavailable for the final vote. What this means is that the bill needs all 3 of those Republicans to invoke cloture. But still has to retain enough of the content to keep all the Democrats on board. Add to this that the Republicans have expressed that they do not want to cast the decisive 60th vote (understandable, given likely primary challenges from the right), but it is tough to see another pass unless Harry Reid can win over another Senator -- want to make some amends, Sen. Gregg?

The deal that has been announced is a smaller bill than either the House or Senate version ($780B vs in the $820-$830B range) in part to appease those Republicans. Some Democrats are griping about some of the cuts, but they are likely to remain onboard.

The final text of the conference report is still being written, but it is likely to go to a vote in the House tomorrow -- expect a cloture vote in the Senate over the weekend. The Senate is rushing to get to its President's day break starting Monday and this one is likely to go down to the wire. It is another week's delay if it doesn't pass before the Senate adjourns.

I think the real hero in all of this is Senator Arlen Specter. Of all the supporters of the bill, he is taking the most political risk. He faced a tough primary challenge from Rep. Pat Toomey (R-PA) in 2004 and likely will face another in 2010. It would clearly be in his self-interest to vote against the bill, as he is a virtual lock to win the general election if he wins the nomination. But, he has taken a stand on principle and worked with Democrats to craft a compromise. As I mentioned in a previous blog, I voted for Sen. Specter in 2004 when I lived in Pennsylvania. Glad to have my vote validated and I am strongly inclined to endorse his reelection as well.

So what's in this bill anyway?
It's about 35% tax cuts, including a working tax credit of $400 for most individuals and $800 for most couples. There is a fix to the alternative minimum tax, which was originally designed to impact only high income individuals, but due to inflation and lack of revision, was slated to impact many middle income families. There are also first time home ownership tax credits.

Of the 65% that is spending, the highest categories of spending are: #1 Infrastructure, #2 Direct Aid to States, #3 Upgrading Public School Facilities, #4 Alternative Energy Investments and #5 Extension of Unemployment benefits.

Will it all work? I am hopeful but I don't know. But I know doing nothing surely won't. This is nothing resembling a perfect stimulus bill -- there is too much spending in out years and not enough money that gets quickly and directly into the economy. But it is a lot better than no stimulus and there are many components that will have an immediate positive impact on the economy.

Israeli Election Stalemate
Neither the right wing Likud party or the centrist Kadima party came anywhere close to winning the Israeli elections outright, meaning a coalition government will need to be formed for either to rule. It appears more likely than not that Likud, despite winning one less seat, will prevail, as the third place winner in the elections was the nationalist Beiteinu, who is more likely to join a Likud government.

Have right-wingers in charge in Israeli will make the middle east peace process a lot harder and likely further entrench the already perilous situation in Gaza.

Stay tuned.

It's Not So Bad, Mr. President
I've been pretty tough on President Obama over the last few weeks. I've criticized the continuing drama in his cabinet picks, his lack of early assertiveness on the stimulus bill and the poor performance of Tim Geithner. But, here's some perspective: Obama is well ahead both in terms of legislation and executive action of any of his predecessors. His start has been a lot less bumpy than Bill Clinton's (remember how Clinton could get a $17 billion stimulus package passed 3 months into his term?) and certainly more effective than either George W. Bush's or George H.W. Bush's.

So why all the criticism? Expectations are a lot higher this time. There is no time for OJT, we need action. Fair or not, Obama has to deliver. But he isn't off to a bad start -- he's just hit some bumps along the way.

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