Friday, December 18, 2009

Will President Obama Get His Christmas Wish?, Polls Stabilize, What Are We Going to Do About the Deficit?

Race to 60 -- It's All About Senator Nelson

Amazingly, after months of protracted debate, ugly town halls, tea parties, negotiation, accusations and discussion the fate of health care legislation in the US Senate, one of President Obama's top two domestic priorities (the economy being the other) appears to rest completely in the fate of classically moderate Senator Ben Nelson (D-NE). Sure, there are other variables. Olympia Snowe (R-ME) could jump back in the fold with the public option gone and support passage. Jim Webb (D-VA) could jump ship and torpedo things. Joe Lieberman (I-CT) could get unhappy all of a sudden again. Heck, Robert Byrd (D-WV) is still very ill and could be unable to vote.

But by far the most likely scenario is: 57 Democrats and 2 Independents support the bill, 40 Republicans oppose it, Ben Nelson casts the deciding vote on whether or not to break the filibuster. And he knows it.

Senator Nelson's primary concerns have been #1 abortion and #2 the cost of the bill. My sense is that a favorable CBO opinion could solve #2, but I'm not sure Senator Nelson is in the mood for anything less than absolute victory on #1, which would mean a full extension of the Hyde amendment to any government-subsidized program, essentially barring abortion coverage on subsidized policies. The Democrats will probably have to give him what he wants to get a bill passed.

Meanwhile, the GOP is becoming more brazen with their delay tactics. It looks like we are in for a lot of out loud bill reading as they continue to use every available legislative tactic to delay, torpedo, pick your word, the bill. The GOP is bolstered by polls that the public doesn't support the plan (although, they appear to support almost all of its provisions, in yet another example of the "we don't understand, so we fear" dynamic in American politics) and is already smelling blood in 2010.

My odds on passing a bill by Christmas? 2:1 against. But I'm not taking or placing any bets...the situation is too fluid.

President Obama Stabilizes

The slide in President Obama's approval numbers appears to have been arrested, at least for now. This is a continued pattern of what we have seen in the past 11 months, periods of declining popularity followed by periods of stability. For now, he has stabilized with slightly more people approving of his job performance than disapproving. Honestly, if an election were held today, this means he would probably win. But his slide has been massive since early in his Presidency and he has yet to show any capability to regain "disapprovers" once he has lost them.

The pattern actually looks quite a bit like Bill Clinton's numbers in 1993, which has to strike fear in Democratic hearts as to the potential results of the mid-terms.

Little movement in the monthlies from my last post, but when you stand back and look at the path over the past 11 months, you do get the sense that the President needs to get in better control.

Deficits Galore

Okay, myself and most major economists would give the President a pass on the deficit last fiscal year and this fiscal year. We were in a risky economic situation, which is exactly the time that you should be running large deficits to stimulate the economy. But the budget that passed out of Congress contains huge increases in discretionary spending, entitlements are increasing at massive rates on their own as the baby boomers start to retire and defense spending is likely only to increase as we escalate in Afghanistan. The President doesn't get a free pass in Fiscal 2011, so what should he do?

#1 Let the Bush tax cuts expire. All of them. The tax cuts for those over $250K will no doubt expire, but President Obama has ruled out rolling back the other tax cuts.
#2 Freeze discretionary spending. Probably not going to happen
#3 Accelerate exit from Iraq -- saves big money. Could happen.
#4 Lift the income cap on Social Security taxes. Odds are against, but could happen.
#5 Raise the retirement age for both Medicare and Social Security by 3 years. Zero chance of happening.

These 5 things alone would put us on the path to stability, but as I handicap above, few of them will happen. What is far more likely is very modest deficit reductions based on an improving economy and the piece of the Bush tax cuts that do expire that cause President Obama to declare we are on the right path, when in fact we will still be headed for wreckage.

Times like these make me appreciate the courage of President George Herbert-Walker Bush who did the right thing (raised taxes) even though it infuriated his own party, alienated moderates and probably cost him re-election. He did it because he knew it was best for the country. That's a real leader. Anybody can promise more spending and lower taxes. Courage is making the tough calls to raise taxes and cut spending. And we haven't seen much courage in the past two administrations.

President Clinton also had the courage to raise taxes...on upper income earners, on gasoline. He, combined with a GOP congress that didn't want to give him a dime for social programs, balanced the budget. Pretty powerful stuff. Maybe we'll get to a good dynamic like that in 2010 if the GOP takes back or makes major inroads into the House. The 90s weren't so bad, I'd take a do-over. Heck, I might even vote GOP in 2010 if I don't see a credible, serious deficit reduction plan from President Obama that makes real sacrifices (I'm not holding my breath.)

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