As he delivered a major economic speech in Cleveland this afternoon, the stakes for President Obama couldn’t be higher.
With his approval rating at a two-year low, his party facing an almost certain rout in November, unemployment back to nearly 10 percent and Republicans and Democrats alike carping at his fiscal and economic policies, Obama is in real danger of losing control of the national debate over the economy and the future of the country.
His prescription for jumpstarting a persistently lethargic economy -- more tax breaks for business and more spending on highways and bridges – isn’t exciting many on Capitol Hill or average voters and would have no impact on job creation before the election. Moreover, given the political calendar, distractions like the war and Middle East peace talks, and his plummeting popularity, Obama doesn’t seem to have the clout to even push through this modest package.
Even supporters of his proposals sounded underwhelmed today. "This is a symptom of an administration that is desperately looking for ways to do something about the short-term problems we face economically, but something that will be acceptable to Republicans," said Isabel Sawhill, a long-time fiscal analyst at the liberal-leaning Brookings Institution. “So they've had to come up with some proposals that are very business-oriented. They aren't necessarily the best way to stimulate the economy in the short run. They're not terrible proposals otherwise.”
All of this is happening at a time when Obama’s economic team is completely in flux, with some recently departed members arguably undermining the president. And the frosting on the cake: Rahm Emanuel, the gruff White House chief of staff and Obama’s top legislative and political strategist, may be gone by the end of the year to run for mayor of Chicago.
Obama's GOP critics, including Senate Minority Leader Mitch McConnell, R-Ky., and House Minority Leader John Boehner, R-Ohio, have been brutal in blasting Obama’s handling of the financial crisis and recession as a wretched excess of government spending and overly intrusive regulating of Wall Street and the private sector. In a bid to steal Obama’s thunder, Boehner appeared on ABC’s “Good Morning America” today to tout a GOP plan to freeze all tax cuts at current levels for two years and scale back all non-defense and national security spending to fiscal 2008 levels, before the recession struck.
To be sure, Boehner’s plan rang hollow in many ways. His proposed cuts would shave about 9 percent or $100 billion for each of the next two years, compared to President Obama’s proposed budget for non-security discretionary spending next year. But preserving the tax cuts for high-income earners would reduce revenues by more than $60 billion in 2011 and more in each year that followed.
But the Republican assaults have gained traction. Numerous polls indicate that voters don’t believe Obama’s stimulus programs have accomplished anything, despite credible analysis to the contrary.
It’s possible that even more damage has been done to the president’s credibility by two of Obama’s most trusted former economic advisers – Christina Romer, the former head of the Council of Economic Advisers, and Peter Orszag, the former director of the Office of Management and Budget.
It was Romer who conceded in a farewell address at the National Press Club last week that the Obama administration had been largely clueless about the true depth of the recession or why it became so deep – hardly a ringing endorsement of the administration’s competence to manage the economy. (Romer, by the way, was the senior adviser who asserted a year ago that the president’s now much maligned $814 billion economic stimulus package would keep the unemployment rate below 8 percent).
Then earlier this week, Orszag wrote his maiden op-ed column for the New York Times urging Obama to dramatically pivot and endorse a two-year extension of the Bush era tax cuts for all Americans, as Republicans and a growing number of Democrats favor, rather than keeping his campaign pledge to eliminate that tax break for the wealthiest 2 percent of American taxpayers. This act of political mischief has undercut Obama, whose top advisers scrambled on Tuesday to insist that the president was not about to concede on the tax cuts.
"It was a hand grenade lobbed into the middle of a roiling debate among Democrats about how to handle the expiring tax cuts," wrote Ruth Marcus of the Washington Post in an op-ed column this morning.
Obama’s Labor Day speech in Milwaukee seemed like a promising start – including some sharp pokes at the GOP for being the party of “no” -- until he veered from his prepared remarks to complain that Republicans have been talking about him like he was a dog – an unfortunate misstep that gave his political foes and the chattering class a fresh opportunity to bark at him. During his speech this afternoon in Cleveland, Obama reaffirmed his long-held position that the nation cannot afford to extend tax cuts for the wealthiest 2 percent of families. But even this latest pronouncement may have little impact on what Congress chooses to do this fall, because Obama did not explicitly threaten to veto any compromise which extends the upper-bracket cuts.
The president also officially announced proposals for more than $180 billion in fresh spending and business tax breaks - aimed at boosting both the nation's economic recovery and the political prospects of congressional Democrats. But as the Washington Post notes, it’s far from clear whether the provisions -- which White House spokesman Robert Gibbs insisted Tuesday do not amount to another stimulus package -- can accomplish either goal. Economists, business groups and tax lobbyists said they are not enthusiastic about the job-creating potential of expanding a tax credit for domestic research and permitting firms to write off 100 percent of spending on new plants and equipment in 2011.
It would be a huge mistake to underestimate Obama’s political skills and resiliency. He made history as the first African-American to win the presidency, he weathered one of the worst U.S. economic crises ever, he pushed through a major health care overhaul, and imposed unprecedented regulatory controls on Wall Street – all against enormous political odds and with virtually no assistance from Republicans. But all the promise and hopeful signs of an economic recovery have evaporated in the summer heat of Washington, and the president strangely seems to have lost his touch in manipulating the levers of power and politics.
Which is why much is riding on his Cleveland economic speech and all that he and his strategists have planned for the next few crucial weeks.
Edmund L. Andrews and Adam Graham-Silverman of The Fiscal Times contributed to this column.
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