Friday, August 14, 2009

Health Care Scuffles Continue -- Is This Summer the Time the Wheels Come Off the Democratic Wagon?

Health Care Protests Continued
It's sort of a perfect storm. Congress is in recess, so there is very little of the ordinary political news -- no bills passed, no new laws signed, etc. Conservative anger has been growing over the passing months as President Obama first signed into law a large stimulus, then has continually proposed greater government involvement in both big ways (health care and the environment) and small ways (regulating the tobacco industry, promoting fair pay practices, etc.) The town halls of congressional Democrats were a natural ground to release that anger. Couple that with careful organization by conservative groups and you have 24/7 news cycle after 24/7 news cycle devoted to the "town hall protests".

President Obama was already reeling from an awful July before the August congressional recess and has suffered from slumping poll numbers (more on that later), and now this. It isn't that the protestors themselves represent a large cross-section of society -- to my eyes they are all largely conservatives who weren't inclined to support Obama in the first place. No, the President's problem is that independents watch the news too, and after seeing days of angry protests, many, especially those more passively involved in the political process, will surely assume that where there is smoke, there is fire.

So what should the President do? As I recently noted, he is going to have to give some ground -- probably give up the formal "public option" in favor of either creating co-ops for the uninsured or allowing the uninsured to buy into the privately-run government health insurance program. This should bring some moderate voices along to speak to the merits of such a proposal.

The President also needs to re-establish control of the dialogue. The sanitized, heavily screened town halls may be a start to that, although I think the public is inherently suspicious when they see Representatives and Senators getting grilled and Democratic-friendly crowds coo-ing to the President. This tactic was ineffective when President Bush attempted to use it around Social Security and likely won't help President Obama too much either.

What the President really needs is national forums. Go on Meet the Press. Hold primetime press conferences. Show up on the Daily Show. Talk where people are listening and where you have some control of the tenor of the discussion.

Finally, grit it out. Congress will be back in session after Labor Day and these town halls will stop. The story will fade. Get ready to get back to the negotiating table. Invite Republicans to the White House to form a compromise.

Most of all, understand that you probably won't get everything that you want.

About Those Slumping Poll Numbers....
The decline in the President's popularity has continued into August. It isn't that he is unpopular, every point on the line since he was sworn in through today show him more popular than he was on election day. It's that his trend continues to be in the wrong direction:

By poll type we see:
Adult Americans: +17%
Registered Voters: +14%
Likely Voters: +5%

The President's monthly averages (which smooth out the noise), show three distinct periods in his term so far:
January through March -- the wear-off of the post-election euphoria that the nation was feeling. Obama's numbers feel from somewhere in the heavens (+48%) to at least our known atmosphere (+33%)
March through June -- relative stability as the President slips slightly from +33% to +27%
June through now -- a rapid, concerning decline from still-very-popular (+27%) to reasonably popular (+15%)

So what does the future hold? Probably nothing good in the near-term. The President's numbers have fallen in 8 out of 14 days so far in August, with his latest numbers (+13.6%) lagging his month average. Whether this decline continues or is abated largely depends on the fate of health care legislation and public perception of the economic recovery.

Stimulating That Economy
Clearly getting unemployment down is something that would help the President greatly. There is still a lot of muscle yet to be used in the stimulus bill.

Of the spending provisions:
Authorized: $200.0 billion (40.1%)
Spent: $77.1 billion (15.5%)

With 84.5% off the spending left to do, the stimulus still has the chance to do a lot of good towards improving the employment situation -- but they have to get going. Of the spending to-date, the tilt is definitely still more towards stabilizing activities (transfer payments to states) than to employment-building activities (such as construction and energy efficiency spending). My benchmark -- the Department of Transportation infrastructure spending has just crossed the $1.5 billion threshold, out of about $51.2 billion authorized in the bill or about 3%. These construction projects are really just getting going, so hopefully there will be an impact in the coming months.

On the tax side (keep in mind $288 billion in the bill was for tax cuts), all have been in effect since May. Many extend through 2009 and 2010 including:
The $400 "Making Work Pay" Tax Credit
Expansion of the Child Tax Credit
Expanded College Credit
Increased Earned Income Tax Credit
Home Energy Efficiency Credit
Deduction of Sales Tax for Car Purchases
Various Business Tax Credits

Some Other Provisions are for 2009 Only:
Alternative Minimum Tax Adjustment
First-Time Home Buyer Credit
Unemployment Benefit Tax Exemption

In total, about $86 billion of the tax cuts are for 2009 only, whereas the remaining $202 billion stretch over at least 2 years. Since the cuts have been in effect by May, this means that about 25% of the impact of the tax cuts have ocurred already, a pace ahead of the spending.

More to come as I continue to assess the state of the economy and unemployment.

Is the President starting to age in front of our eyes already? It looks that way to me.

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