Published August 05, 2011
Economy, Obama’s 2012 Prospects Teeter on Taxes
“It’s now impossible to deny the obvious, which is that we are not now and have never been on the road to recovery.”
-- Liberal economist Paul Krugman writing in the New York Times.
It wasn’t the collapse of Wall Street in 1929 that caused the Great Depression. The crash was rather a symptom of the underlying sickness in the economy.
The crash did lead to a panic that deepened those underlying problems, which led to panicky responses in Washington and then a deepening of the systemic ailments.
So it will be if the United States’ economy is going now from treading water to sinking. The terrible week for Wall Street since anemic quarterly GDP numbers last Friday (with fears stoked by Europe’s ongoing fiscal collapse) is a symptom of uncertainty and a bad economy, but could actually push the flailing economy deeper underwater.
The July jobs numbers out today beat the meager expectations of economists, adding 115,000 jobs instead of 75,000, but the number is still far below the 200,000 needed just to hold the line and a long distance from the kind of numbers needed to start shrinking real unemployment.
While the top line rate wiggled from 9.2 percent to 9.1 percent, the internals and long-term outlook remain unchanged. Markets may reclaim some of the ground lost in the past seven days as bargain hunters buy in, but there is no optimism in capitalist quarters. The outlook is for a long slog.
And now, unlike the Dow disaster of 1929, America is a nation of investors. Rather than just playing havoc with the big banks and blue chips before trickling down to Mr. and Mrs. America, the folks at home are now heavily dependent on markets for retirement, college funds, etc. and watch stock charts with alarm.
As a nation of middle-class investors watch their gains of the past two years wiped out amid fears of a global meltdown, consumers will be more inclined to sit on their cash and companies will remain leery about hiring.
The question looming for President Obama is that having been forced to abandon his stimulus strategy, will he now embrace the idea of tax stimulus?
Part depends on whether Fed Chairman Ben Bernanke is ready to start another cash bombardment. If the Fed will tune up the printing presses again, it might spur some growth, but it also might knock out the already weak dollar.
If Bernanke balks at the idea, Obama may have no choice but to use the upcoming battle over debt and taxes to try to juice the economy. Most economists agree that broad corporate and personal rate reduction offset by closed loopholes would add certainty and liquidity to markets that currently fear Obama will succeed in his threat for big tax hikes.
Obama will be very tempted by the idea since it’s now clear that his administration has misunderstood the economic trajectory. He needs something new.
That leaves two questions for Obama to answer on taxes: Will his base allow him to take another step towards the right? Would Republicans trust him enough to try again at striking a grand bargain?
FAA In Crisis, No End in Sight… Oh, Wait, Never Mind
“House Republicans made it clear they would continue to hold the entire aviation system hostage. I deplore those tactics, but ultimately the stakes for real people are too high.”
-- Senate Commerce Chairman Jay Rockefeller, D-W.Va., in a statement on the Senate accepting a House-passed FAA authorization bill.
After launching some of the nastiest rhetoric yet in their long battle with House Republicans, Senate Democrats surrendered on a bill to keep the Federal Aviation Administration running through September.
Power Play observes that the louder lawmakers howl the closer they are to caving in, and it was true this time too.
What made the collapse possible was two things: First, the belief that Transportation Secretary Ray LaHood can use executive fiat to shield subsidies for rural airports near and dear to powerful politicians and second, that the Senate Democrats couldn’t pass a bill of their own.
The greatest power of the House is that legislation is usually easier to pass there and never has that been more true than in the Boehner House, where Republicans keep bombarding the gridlocked Senate with legislation.
House Republicans passed an FAA extension without the usual subsidies for airports in the home states of powerful senators, including Majority Leader Harry Reid of Nevada and Commerce Committee Chairman Jay Rockefeller of West Virginia.
That was an insult to the old bulls but there was a larger issue.
The Senate and House can’t come to terms on a permanent extension because the House wants to roll back a new Obama regulation to ease union formation at airlines while the Senate wants to protect it. By sitting on the House-passed temporary extension, the Senate believed it could force House Republicans to strip out the union language.
But the House did not oblige and left town with the matter dangling. After sever days of “hostage taking” accusations and much gnashing of teeth and rending of garments, the Senate Democrats had to acknowledge that their bluff had been called. Despite inflated claims of job losses and dire safety warnings, the House Democrats just flew away.
The Senate will return today and sweep through the House plan, and LaHood, a former Republican who served in the House, will grant waivers to some of the 13 subsidized airports (annual cost: $200 million).
You can bet that Reid and Rockefeller will each get to protect one.
Perry Presidential Hopes Hanging by a Prayer
"I mean, when you talk about the religious right, this is the fringe of the fringe here.”
-- Dan Quinn, communications director of the liberal Texas Freedom Network, talking to National Public Radio about a day of prayer initiated by Texas Gov. Rick Perry at a Houston football stadium.
Saturday is a make-or-break moment for the presidential hopes surrounding Texas Gov. Rick Perry.
Polls show Perry in a tie with former Massachusetts Gov. Mitt Romney after just a matter of weeks of presidential flirtation by the three-term Texas Republican. But Perry has yet to officially enter the race, and how he does so will determine his chances and change the trajectory of the GOP race.
Perry is following an unconventional path to his candidacy. Rather than facing Romney head on in the FOX News/Washington Examiner debate on Thursday or vying for organized evangelical support at the Iowa GOPs Ames Straw Poll on Aug. 13, Perry is focusing on a massive prayer meeting scheduled for Saturday at Houston’s Reliant stadium.
The big names in the evangelical movement, James Dobson of Focus on the Family, Richard Land of the Southern Baptist Convention, and Tony Perkins of the Family Research Council, will be there to call on attendees to pray for “a nation in crisis.”
Perry isn’t scheduled to speak, but is listed as the event’s “initiator” and faced a federal lawsuit for endorsing, as governor, the explicitly Christian event. No “creator” stuff here, folks. There’s going to be lots of Jesus talk at the home of football’s Houston Texans.
Evangelicals are learning to love Perry because he is unapologetically one of them. Preppy John McCain moved from Episcopalianism into a more evangelical faith, as did George W. Bush, but Perry has been steeped in the culture since childhood on Paint Creek in the Central Plains. At a time when many socially conservative Republican continue to have misgivings about the Mormon faith of frontrunning Romney, Perry’s very public faith is helpful.
But by dodging Iowa and making the largest show of public faith in his political career, Perry is taking a huge risk.
The New York Times, Washington Post, National Public Radio and nearly every other establishment media outlet has taken a probing look at the rally and concluded that there are some troubling trends there. Atheists, mainline clergy and gay rights groups have all thundered against the gathering, which they claim is somewhere between exclusionary and hateful.
The big change when it comes to such public expressions of Christianity has been the shift in mainstream thinking on gay issues. To hold that homosexuality is sinful or a lifestyle choice is considered by many to be discrimination and by some as hate speech. And the folks leading the event are certainly not of the “marriage equality” bent.
Perry’s fellow governors, save the potential appearance of a vacationing Sam Brownback of Kansas, have steered away from the event and poor early registration numbers raise the specter of a nearly empty stadium. The gay thing has become too hot for many Republicans and even some evangelicals to handle.
If the event is a bust, Perry will risk alienating the establishment Republicans whose help he will need to clinch the nomination, and simultaneously undercutting his reputation as the favorite son of the religious right.
And, while Perry is fighting the new moral equivalency down in Texas, Michele Bachmann and Tim Pawlenty, both evangelical Christians, will be fighting Mitt Romney directly in Ames, Iowa. For Perry to win the nomination, he needs to beat Romney in a head-to-head matchup, not be splitting conservative votes with another evangelical.
The first prayer for Perry fans should come well before Saturday’s event begins: Lord, may the buses roll.
And Now, A Word From Charles
But the second one and I think the more important one is the panic in Europe over the status of Spain and Italy. This is not a Greece or Ireland, which is, you know, kindergarten. Italy is too big to bail -- the eighth largest economy in the world. The worst is the prime minister did not tell us Wednesday, they thought he'd announce austerity measures, but he announced nothing and declared that the fundamentals are strong. And that I think sent a panic. This is Europe living 60 years over its head in the entitlement state and it's running out of money in a disastrous way. And I think that was the number one factor.
**Today’s “Power Play w/Chris Stirewalt,” drills down on the issues dragging down the economy and job creation and the Washington Examiner’s Byron York checks in to talk Iowa politics and Thursday’s Fox News/ Washington Examiner GOP presidential debate. Don’t miss a minute of Power Play at 11:30 Eastern at http://live.foxnews.com**