Is Sanity Returning to the GOP?, Taking Stock of Obama's First Term

GOP Offers Debt Ceiling Sanity....for a few months
Coming out of the House GOP retreat, where they are presumably discussing their strategy and vision for the next 2 years and specifically how they are going to hold on to the House in 2014, comes word that the GOP will offer up a more or less "clean" increase of the debt ceiling to ward off default.

It comes with a few strings attached.  The extension would only be for 3 months, meaning that we would be having the same discussion again in May or June.  It would require both houses of Congress to pass a budget by April 15th or forfeit pay, something that the Senate has not done in several years, a fact that has been a talking point for the GOP.

It is possible that President Obama and the Democrats will have some issue with the proposal.  The 3 month extension falls far short of the kind of extension or even elimination of the debt ceiling that the President had sought, hoping to avert having to deal with debt ceiling issue again in his Presidency.  And Senate Democrats might balk at needing to pass a budget resolution.

But it seems like a savvy move for the GOP.  It would be a tough sell for Democrats to vote against the debt ceiling increase they asked for.  And I don't know very many people who would be too concerned about the possibility of Representatives and Senators not getting paid for a little while.

1 Term Down, 1 To Go
President Obama's will celebrate his second inauguration on Monday.  It will be a more subdued ceremony than the celebration four years ago, when the country was less divided and we hadn't endured such a long economic malaise.  But it will be a unifying moment for supporters of the President and a day of patriotism for all.

While the inauguration is on Monday, the official start of the President's second term is at noon tomorrow, as dictated by the constitution and the President will privately retake the oath of office then, before going through the ceremony on Monday.

Being at the end of the President's first 4 years, I thought it would be a good time to take stock of how the President has done.

(1) Did He Keep His Promises?
Politifact.com (run by the Tampa Bay Times) has did a great job of tracking all of the promises that the President made in the 2008 campaign and how they have turned out.

There were 508 documented promises made and of those, 239 were fully kept, 130 were partially kept and 139 were not kept.  Those not kept were not kept for a variety of reasons - either the President changing his position (closing Gitmo, for instance), simply not pursuing something he promised to do (giving a State of the World address, for instance) or his desired policies changing as a result of negotiation with Congress (extending the Bush tax cuts for upper income limits for instance.)

Giving the President 100% for promises fully kept and 50% for those partially kept, the President gets 304 points out of a possible 508 or a score of 60%.

I said at the beginning of his term that it would be an A-worthy performance if the President could do half of the things he promised to do in 2008.  A score of 60% certainly qualifies.

Grade: A

(2) Did He Achieve His Major Policy Goals?
The President had articulated six clear policy goals for his first term at the outset:
a. Implement a meaningful stimulus
On this issue, the American Recovery and Reinvestment Act achieved almost all of what the President set out to achieve.  It provided aid to states, funds for infrastructure improvements and targeted tax cuts.  Couple this with the (just expired) temporary Social Security tax rate reductions that the President was able to get in 2010 and you have to say the President basically implemented what he set out to implement.  There is much debate on the effectiveness of those policies, but here we are grading whether he did what he set out to do.

Grade: A

b. Implement Health Care Reform That Achieves Universal Coverage
The coverage is not quite universal (2% are excluded), the plan doesn't contain a public option, it does contain a mandate (something he opposed on the campaign trail) and the President gave up very early on including abortion coverage in the plan (another thing he campaigned on.)  Still, President Obama was successful where Presidents Johnson, Nixon, Carter and Clinton failed (President Reagan and both Presidents Bush were not advocates for such a program.)  The carefully negotiated program was passed through congress narrowly and was narrowly upheld as largely constitutional by the Supreme Court.  It is the law of the land and will roll out over his second term.  We will all get to see how successful it is or isn't.

Grade: B+

c. Repeal the Bush Tax Cuts for Those Making Over $250K
The President completely punted on this once, agreeing to a 2-year extension in late 2010, in exchange for some other goodies, such as the Social Security Tax deal.  The President did better recently, at the end of his term, cutting a deal that let the rates rise on individuals making over $400K and couples making over $450K, about half of the population the President was targeting to contribute more.

Grade: C

d. Pass Meaningful Legislation to Deal with Carbon Emissions
A Cap and Trade bill passed the House in 2009 but was never even taken up in the Senate and there has been virtually no leadership from the President on making this stated priority happen.  There were smaller steps that did happen, such as tax credits for energy efficient homes and appliances and extensions of wind and solar subsidies.  But all-in-all, the President hasn't made much progress here.

Grade: D+

e. Provide for Comprehensive Immigration Reform
Perhaps it will be a second term issue.  But the President never even proposed a package of immigration reform, something which he had stated he would do in his first year in office.  He took some action by executive order, such as the regulatory version of the Dream Act, but these actions were taken very late in his term and fall far short of comprehensive reform.

Grade: D

f. End the War in Iraq and Provide Additional Troops, on a Timetable in Afghanistan
The President basically did everything he said he would here.  We are out of Iraq.  We did surge in Afghanistan, but are now winding down our involvement, in line with the time table the President set.

Grade: A

Overall Grade on Priorities: B-

(3) How Did We Fare Economically?
This is a quite complicated question, given the deep recession that was underway at the start of his term. By some economic measures, the President doesn't make the grade, by others he does.

Average Annual GDP Growth During His Term: 2.1% (average 20 years prior to Obama = 3.8%)
Average Unemployment Rate During His Term: 9.0% (average 20 years prior to Obama = 6.0%)
Stock Market Return During His Term: 12.1% (average 20 years prior to Obama = 9.9%)

By the standards of economic growth and unemployment, the last 4 years have not been among our better ones.  Following a deep recession, we have had slow growth with sustained high unemployment over several years.  While unemployment is now falling, it is doing so painfully slowly and at least in part due to less people in the workforce.  By these measures, President Obama doesn't rate well.

However, putting those numbers in proper context is difficult since anyone could have predicted following the financial crisis that unemployment would be elevated and growth depressed, at least for a period of time.  This is where the stock market return comes in.  The stock market price reflects both present economic circumstances and expectations around future economic performance.  On this measure, the President is doing great, far exceeding normal market returns and, given that those are nominal returns and inflation has been very low, real returns exceed by an even greater margin.

Of course, stock market expectations can be wrong.  The stock market was wildly over-priced in 1999 and wildly under priced in 1982.   So while some of change in expectations can be due to averting crises or sounder policies, some is also due to mean reversion or, in common language, irrational panic or optimism abating. 

So, it is difficult as we stand here today to judge the President's economic performance.  We didn't fall off a cliff and into a depression, something that seemed like a real possibility in 2008.  But we also haven't had a "V-shaped recovery" where the economy grows quickly after purging the less efficient elements in a recession.  It is a mixed bag.

Grade; C

The President has a lot to tackle in his second term.  The deficit is still out-of-control, with no path to balance in sight.  Immigration and climate change remain unsolved issues.  The economy, while not in crisis, is certainly not healthy, particularly for the lower-middle class.

I wish him luck as he begins his second term, for all our sakes.

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An In-Depth Look at Obama's Numbers Heading Into 2010, Terrorism Back in Focus, What To Look For In The Coming Weeks and Months, Predictions for 2010

Taking the "Long View"
It has become conventional wisdom in Washington that President Barack Obama is known for "taking the long view", virtually ignoring the short-term political ramifications of decisions and focusing instead on building a portfolio of policies that he believes will lead him to success over time. Sticking by Tim Geithner, expending massive political capital seeking health care reform, defending a stimulus plan that did little to defray unemployment in the near term are all part of the President's bigger plan, which will pay off over the long term, we are told.

You may believe or not believe that the President's policies will ultimately be successful in achieving their goals. And, frankly, you may agree or disagree with the underlying values that are implied by those goals. But one thing is for sure - while the President himself may have the luxury of taking a long view as he is not on the ballot again for almost 3 years, many of his Democratic partners in Congress do not have the same luxury, as all of Democratic House seats and 19 of the 58 Senate seats controlled by Democrats face elections this year.

So what can we glean of the President's current numbers? Let's start by grounding ourselves in them again. Below is the trend from his past month in his approve minus disapprove. As you can see, the President has remained in the channel between the zero line (an equal split between approval and disapproval) and the 7.2% margin of victory he achieved in 2008. Please note that the recent trends (since December 20th) have been impacted by a lack of available polling data. Gallup and Rasmussen both suspended their polling for a few days each around Christmas and New Year's and no other major national polls have come out in the past two weeks. So, the next few weeks will show if these numbers are still good, but below is what we have as of now.



Looking at the President's monthly numbers, he finished December with at +4.5%, his lowest number to date, down 42.4% from his massive numbers when he took office. This means, essentially, that 21.2% of the population or more than 1 in 5 people have changed their view of the President's performance from positive to negative since early in his term. This is a concerning, but not yet damning trend.



In total for 2009, the President averaged +23.1%, which would be an above-average year for a new President. But that was impacted, obviously, by his very high numbers early in his term and we are nowhere near those big numbers now.

In total, being +4 to +5% wouldn't be too horribly bad under ordinary circumstances. I'm sure that the President would be happy to take a 4 or 5 percentage point win in 2012. But, these are not ordinary circumstances. These are circumstances where Democrats have to defend massive majorities in both houses of congress.

Bear in mind, the House that is up for re-election in 2010 was elected in November 2008, when the President won by a 7.2% margin. Therefore, any Presidential approval numbers below that 7.2% spread imply losses in the fall for Democrats in the House. And there were a number of very close races in 2008 -- 6 within 1 percentage point, 11 within 2% and 23 within the President's margin of victory of 7.2%. Worse yet, Congressional Democrats, while they actually outperformed the President in total in 2008 (their aggregate vote margin in the House was about 9%) are underperforming him in current polling.

The Senate is a more complicated situation. Certainly Democrats are being hurt by the drag on their polls in close, open races such as Ohio and Missouri. But they are also a victim of individual failings, such as Chris Dodd's situation with AIG which may cost them a race that they should be winning easily, even in a down year, in Connecticut or the Blago/Roland Burris scandal, which has made a race in Illinois that should be a no-brainer a pick 'em. Republicans have also drafted some good candidates, such as Rep. Mike Castle in Delaware, a true Northeastern moderate, who has a real chance at claiming that seat for the GOP.

So, circumstances are conspiring against the Democrats. But all is not lost. If you look at how much ground the President lost in year one, amidst bloody battles on the stimulus bill and health care and while the economy continued to sag, it could all reverse just as quickly if unemployment turns upward, which it appears poised to do. The problem that they will face is that public perception about the economy tends to lag reality -- just ask former President George Herbert-Walker Bush, who got destroyed, receiving only 38% of the vote right as the economy was roaring back to life in 1992.

It seems inevitable that the Democrats will lose seats, certainly in the House and most likely in the Senate in November. Whether it is simply a minor correction (say 3 or 4 seats in the Senate and 20 or 25 seats in the House) or a 1994-style blood-letting (say 10 seats in the Senate and 40 to 50 seats in the House) remains to be seen. The best thing the Democrats can do is get healthcare down fast and move on to other issues, mainly the economy.

The National Security Dialogue Resumes
For a while in 2009, you could have forgotten that we were fighting two wars in Iraq and Afghanistan and that the focus of the political world from 2001 through the first half of 2008 had been all about terrorism, radical Islam and Al Qaeda. The focus of the political world was on the economy and health care. Two things have brought this issue back to being front and center: the President's decision to commit additional troops to Afghanistan and the attempted bombing of a Northwest / Delta flight from Amsterdam to Detroit.

We have been reminded again that people are still trying to kill Americans. We are also reminded of just how tricky fighting Al Qaeda radicals is. They were based out of Afghanistan. Now, while they are still there in small numbers, they are based in Pakistan but also operate camps in Yemen, Somalia and many, many other pockets throughout the middle east and Africa. Clearly, we can't win this by fighting them country by country, as we have been more or less attempting.

Nor can we realistically put in place security protocols that preclude a future attack. Sure, we are stepping up procedures in response to the attempted bombing. But, once again, we are chasing what Al Qaeda has already attempted, not what they will attempt next. Who is to say that the next attempt won't be on a train? A chemical factory? A nuclear power plant? A hazmat truck? How good do you feel about the security in these places?

The simple truth, that nobody wants to hear, but that I've said many times is that you CANNOT prevent terrorist attacks while retaining a free society. The shear volume of people that move through commercial airports, trains and roads precludes it. Not that we shouldn't attempt to put common sense security protocols in place, but let's not give the false sense that we can ever be in complete control. And let's not overplay the risk....on September 11th, the worst day in aviation history, you were still more likely to be killed driving a car a mile than flying a mile.

Things to Look for Upcoming
Health Care -- negotiations between the House and the Senate get kicked off in earnest in about a week. Look first to what process is going to be used -- a formal conference committee or something less formal. Also, look to see how the pressure from other states on the sweetheart deal Ben Nelson got for Nebraska impacts the final deal, keeping in mind that the Dems must retain Nelson in order to win final passage. If you don't see a vote by early February, the bill is in trouble.

State of the Union -- look for the President to focus on two themes -- the economy and terrorism. He has to. They are what is on everyone's mind. Also, look to see if he signals a willingness to drop Cap and Trade this year or if he forges ahead with another ambitious year.

Special Election in Massachusetts -- looks to see if it is closer than expected. Nobody seriously expects the GOP to win, but if they are within 15 points, it is a dangerous sign for the Dems heading into November.

Predictions for 2010
I've been known to get these horribly wrong, but I'll try anyway:

(1) President Obama will sign a health care bill into law in late February that looks a lot like the version the Senate passed on December 24th.

(2) A Cap and Trade bill will NOT pass the Senate before the mid-term elections, despite a push from the White House.

(3) President Obama's numbers will bottom out in February or March and then rise modestly the rest of the year as unemployment falls, ending the year between 8.5% and 9.0%

(4) Republicans gain ground in both the House and the Senate, but retake neither, picking up 30 House seats and 5 Senate seats. The Blue Dogs gain even more clout and talk the White House into a monthly breakfast to discuss their issues as they now hold the key swing votes.

(5) Tim Pawlenty, Mitt Romney and Sarah Palin all announce their candidacy for President. Palin leads with a plurality in early polling.

(6) Gitmo is still not entirely closed on December 31st.

(7) The President shows that his "deadline" for drawdown in Afghanistan is more flexible than we all thought.

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