Debt Forecast Downgrades Obama Re-Election Chances

Debt Warning Hinders Obama Campaign Launch

“We have a very serious debt problem, most of it resulted from the last 10 years: big tax cuts, two wars, prescription drug plans – none of which were paid for.”

-- President Obama in an interview with WRAL of Raleigh, N.C.

President Obama is having trouble getting his 2012 campaign off the runway.

On Monday, the president was set to take the fight to red states he wants Republicans to worry about in 2012 with interviews with television stations from Colorado, North Carolina, Indiana and Texas.

This is the fourth round of local affiliate interviews the White House has granted since December. The 20 interview recipients have followed a similar pattern – first Democrat-leaning swing states like Wisconsin, then deep purple spots like Florida and then red states where Obama hopes to again be competitive.

But instead of being able to stay on the attack against a proposed Republican budget and lay out his talking points on a debt reduction plan that would raise taxes and decrease Medicare and Medicaid payments to doctors, Obama instead found himself on the defensive over a warning shot fired by bond rating house Standard & Poor.

While past local interviewers have nuzzled the commander in chief with tender, beseeching questions, including one who invited Obama to her house for lemon martinis, S&P’s cannon fire drowned out the happy patter of local anchors looking for a little presidential repartee.

The agency, one of two main evaluators of governments’ creditworthiness, said that the American political situation makes it unlikely that the looming debt crisis will be averted in the next two years. Every year that passes makes the fixes more painful, which in turn, makes them less politically feasible. Then one day you wake up and your government is paying 20 percent to borrow money, like the Greeks, instead of the current rate of 4 percent.

In his interviews on Monday, Obama vindicated that forecast by denouncing Republican austerity measures as unfair and downplaying his and his party’s responsibility for the crisis.

Obama restated in starker terms his argument that $14.3 trillion debt is mostly the fault of Republicans during the Bush era, blaming the wars in Iraq and Afghanistan, a Republican program to give free prescription drugs to senior citizens and tax cuts for “most” of the $14.3 trillion debt.

It’s true that some $10 trillion of the $14.3 trillion national debt was incurred in the years between 2001 and 2008, but it sounds kind of odd to be blaming the wars (total 10-year cost of $1.2 trillion, about $500 billion less than one year’s deficit at current rates), the drug benefit (cost estimates differ widely based on savings to the rest of Medicare but projections run at about $40 billion a year), and the tax cuts for high-income earners (estimated to reduce federal receipts by about $80 billion a year).

Obama and his team added more than $4 trillion to the debt in two years and Obama’s own, quite optimistic, budget forecast has trillions continuing to pile up each year for another decade.

The biggest driver of the debt has been a lousy economy that drives down federal receipts and government interventions to either attempt to rescue the economy or mitigate its effects on individuals – two efforts enthusiastically challenged by the president. For Obama to play the victim on the debt is a bit churlish.

Obama will head to Virginia today -- another reddish swing state – to continue his attack on the Republican austerity plan and to reiterate his broad-strokes proposal for higher taxes and lower payments to doctors who treat Medicare and Medicaid recipients. He will make his first campaign swing to the West Coast – including a Hollywood fundraiser on Thursday.

The president, though, continues to sink in the polls and gets notably bad marks on the question of deficits. A tough way to begin a reelection effort.

Obama Has Conflicting Political Goals on Debt Battle

“Today is a big day. The Obama presidency was downgraded today.”

-- Former Gov. Mitt Romney, R-Mass., on “Hannity” discussing Standard & Poor’s downgrading of America’s debt outlook for the first time in 70 years.

President Obama’s increasing political vulnerabilities on debt and spending are complicating the negotiations over the looming increase to the federal debt ceiling.

Depending on how the Treasury Department handles the books and how tax revenues flow, the government will exceed its $14.3 trillion borrowing limit sometime in the next three weeks.

The administration warns of a global financial catastrophe if Congress does not provide an increase before that happens. This is based on the argument that the U.S. would default on its loans because the government could not spend what its spending and still pay interest on its existing debts without continuing to borrow money.

Republicans say that instead, reaching the debt ceiling would mean shutting down parts of the government in order to save the 40 cents of each dollar spent that the treasury borrows. That partial shutdown, say many in the GOP, could persist until a long-term debt solution could be reached.

President Obama has tasked Vice President Joe Biden to again lead the negotiations over this long-term arrangement and the White House is also leaning heavily on a bipartisan group of six senators working on their own plan based on the recommendations of a previous blue-ribbon panel appointed by the president.

But, as Obama takes increasing fire over the debt, it will be harder for him to push his own small-bore, long-term solution to the problems.

Republicans are warming to the task of battering Obama over spending while Democrats need to downplay the concerns in order to undermine the more ambitious proposals from Republicans. House Majority Whip Eric Cantor blistered Obama all day long on the S&P downgrading while the president’s top economic adviser pooh-poohed the report.

The short term need for Obama is to get the best deal possible on his requested debt hike, best achieved by minimizing the risks. The longer-term demand is to look serious on the subject to 2012 voters, which involves showing that he shares the deep concerns of independent voters on the subject.

The White House will look for a way to get a smallish increase to the debt ceiling (a measly $400 billion or so) through Congress now in order to regroup on the spending subject and reengage at the end of the fiscal year in September. This is not a fight any president wants to make with saggy polls, a weak economy and in the context of his own demand for more borrowing power.

But with the most conservative members of the Senate already promising to blockade any increase in the debt cap without steep, steep spending curbs, the administration may have to fight this battle now.

Obama Reengages on Immigration as Dems Look to Hispanic Voters

“Texas has always been a pretty Republican state, for historic reasons."

-- President Obama in an interview with a reporter from Dallas’ WFAA.

President Obama promised Monday that he would be contesting Texas’ 38 electoral votes in 2012 and Democrats are also touting the candidacy of former Iraq commander Ricardo Sanchez for the Senate seat to be left open by the retirement of Kay Bailey Hutchinson.

While electoral history would suggest that Obama will lose the Lone Star State by at least 20 points and that his poor performance will debilitate a run by Sanchez or anyone else (to say nothing of Sanchez’s part in the Abu Ghraib prisoner abuse scandal), the Obama team is basing its viability on the massive support for the president among Hispanic voters.

While Texas is probably out of reach for Obama and Sanchez, Democrats point to burgeoning Hispanic populations in other legitimate battleground states like North Carolina, Virginia and Iowa.

On Monday Obama repeated his lament that Republicans are using the issue as a “political football” instead of working with him to solve the problem. It’s odd, because Republicans have been deafeningly quiet on the issue while Democrats have brought it up whenever possible.

While Obama has offered general terms for a plan that would grant conditional amnesty to the more than 10 million people already in the country illegally, there isn’t exactly a plan on offer.

Today, the president will welcome supporters of various amnesty proposals to the White House, like New York Mayor Michael Bloomberg, to discuss immigration and presumably lament the silent political opportunism they detect among Republicans.

Egypt Ready to Make up with Iran

"Egypt's role cannot be underestimated. But that role over the last few decades, I think 30 years or so, has diminished. If there's anything happening now, I think that will be regaining that position that we've had for years and years and years."

-- Menha Bakhoum, spokeswoman for Egypt's Ministry of Foreign Affairs, talking to the Wall Street Journal about Egypt’s decision to reestablish diplomatic relations with Iran.

The battle for regional dominance in the Middle East is being fought between the more moderate Sunni Muslims in Saudi Arabia and the more Radical Shia Muslims in Iran.

The great prize in the fight is Egypt – 80 million Muslims at a strategic choke point to the Mediterranean. While Egypt has long been aligned with the Saudis and the U.S., the new government, which is shaping up as a coalition between the military and Islamists, wants the world to know that it is not going steady with the moderates anymore.

By establishing diplomatic relations with the terror state in Tehran, the Egyptians send a clear message to neighboring Israel and the rest of the region that Egypt is playing the field after three decades as a reliable partner for the Saudis and the U.S. in seeking stability in the region.

The Saudis are now openly accusing the Iranians of meddling in the uprisings in gulf states like Bahrain and are looking for the U.S. to offer a little backup in the effort. But with the U.S. now engaged in a war to protect rebels in Libya and citing lots of UN talk about the rights of free people to cast off authoritarian governments, the Saudis make rather uncool friends to have.

As the U.S. Saudi relationship drifts, Iran closes in on nuclear power and Libya turns from kinesis to stalemate, a confrontation (or at least a strike by the Israelis) looks more likely by the day.

And Now, A Word From Charles

“Then there is Trump. Trump is the Al Sharpton of the Republican Party -- provocateur and clown, unserious. I think he will harm the party if he runs for the same reason Sharpton harmed the Democrats. I know you can see the mail coming in. Address it to me, not to Bret. He is not responsible.”

-- Charles Krauthammer on “Special Report with Bret Baier.”